Sep 14, 2016

Post merger of Budgets, FinMin won’t take over Railways’ liabilities

The only notable change, therefore, as a result of the merger in 2017 will be that the railway minister will not be presenting a separate rail Budget.

New Delhi: Railways is not going to get a sweetened deal in the upcoming merger of the nine-decade-old Rail Budget with the Union Budget. In the recently-concluded official-level deliberations over the merger between the two ministries, the finance ministry neither agreed to take over the liabilities of the transporter nor change the definition of the money it gives to Railways from “loan” to “grant”.

The only notable change, therefore, as a result of the merger in 2017 will be that the railway minister will not be presenting a separate rail Budget. Other than that, Railways will continue to fend for itself, managing its own revenue and meeting its bills of salary, pension and other liabilities. The report, detailing the process of the merger, is ready with the finance ministry, which will now approach the Cabinet for approval on the same.
According to the report, railway ministry will continue to retain “financial autonomy” — however, officials said this was just another way of phrasing the fact that the government will not take any extra care of the railway finances like it does with other departments even after a separate budgeting exercise ceases to exist. “In the event of a revenue deficit, the gap may be bridged in the form of loans and not grants,” said a senior official in North Block, who did not wish to be named.

What to do with the burgeoning liabilities, especially the external debts, of railways in the event of heavy borrowings for pending works in the past two years, was a point discussed at length during the deliberations by the five-member committee of two from Railways and three from Finance. In any case, the borrowings come attached with sovereign guarantee of the Government of India.

The finance minister will only present the figures pertaining to Railways and will not be bound to elaborate on new projects or services. However, he may, if he so wishes, include a paragraph or two in the Budget speech about railways, officials said, adding, it would be at the minister’s discretion.

Railways will, however, be free to disseminate information about its year-long activities in forms such as annual report or through its website. National projects, like lines in the Northeast, Kashmir and Dedicated Freight Corridor in any case are funded by the government and not Railways. Future tariff-setting exercise will also be steered by the regulator, named the Rail Development Authority.

This, government sources said, was a way to insulate the transporter from future political considerations. Internally the move is also being talked about for robbing the railways of accountability a separate budget presented to Parliament brings.

The merger of the Rail Budget is being done at the behest of Prime Minister Narendra Modi. It was after Modi let his wish known that other procedures followed. A two-member NITI Aayog committee under Aayog’s Member Bibek Debroy had presented a report outlining the salient features of a combined budget exercise.

Railway minister Suresh Prabhu had also written to finance minister Arun Jaitley seeking an end to the age-old practice of a Railway Minister presenting a separate budget. In 2014, however, soon after the new government came to power, the finance ministry’s Budget wing had written to Railways on the need for ending the practice of a separate Rail Budget, after taking cues from the political dispensation. That matter was deferred back then. But this line of thinking was rebooted in the beginning of 2016 following which the whole bureaucratic exercise took over.