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From next year, India will not witness a separate railway budget. It is set to be merged with the general budget, come 2017. The Union finance ministry has accepted the proposal of the railway ministry for a unified budget. To hasten the process, the ministry has set up a five-member committee of officials to work out modalities. The move will break a 92-year-old tradition of presenting the budgets separately.

Experts are of the view that a separate budget is more of a political compulsion than a financial necessity. It is believed that the rail budget has been used by parties in power at the center to appease regional parties as a nod to the compulsions of coalition dharma.

The practice of presenting two budgets was started by the British in 1924 following recommendations of the William M Ackworth Committee. The 10-man panel took the decision, noting the fact that at that point the railway budget comprised 70 percent of the nation’s income-expenditure estimate. Preparing the two separately made for better focus on each plan’s priorities.

That scenario has changed today. The railway budget now equals less than 15 percent of India’s national budget and commands less than one per cent of the government’s revenue receipts and disbursements. Experts contend that there is no rationale for a separate rail budget. Other sectors like oil and defence deserve equal or more importance, and they come under the general budget.

A scene of heavily crowded train of Indian Railways. (Photo: Anil Shakya)
The Railway is banking on the merger of the Budget to efficiently manage its finances. Photo: Anil Shakya

Experts are of the view that a separate budget is more of a political compulsion than a financial necessity. It is believed that the rail budget has been used by parties in power at the center to appease regional parties as a nod to the compulsions of coalition dharma. The regional parties, in turn, use it for political gains. How else can railway ministers dole out freebies for their respective states? They do this by introducing measures such as declaring trains connecting constituencies, starting new trains, carving out zones, locating headquarters in states and making several other vote-catching announcements.  

It is not for the first time that demand for a unified budget has been raised. Political parties have been clamouring for a unified budget since 1996. The Manmohan Singh government had deliberated upon the idea but it never materialized. In 2010, the Central Administrative Tribunal directed scrapping of the railway budget saying that there is no provision in Article 266 of the Constitution for the Union of India to provide for a division of the presentation of the public accounts of the central government into two separate budgets.

What are the advantages and disadvantages of having a unified budget? The railway ministry feels that a merger will help the railways better manage its financial liabilities. It will no more have to pay dividends on gross budgetary support to the government. The entire financial burden will be transferred to the finance ministry.

The major disadvantage of the merger is that the stature of the railway ministry will be reduced to that of any other government department. It will be allotted a fixed budget just like other departments. Its expenses and income will be overseen by the finance ministry.

Railway minister Suresh Prabhu said in Rajya Sabha recently, “The merger should happen in such a way that the railways become a part of the overall budget and the capex, revenue deficit, all of this can be taken care of. So this is something which should happen in keeping with the long term interest of the railways and the Indian economy.”  

The major disadvantage of the merger is that the stature of the railway ministry will be reduced to that of any other government department. It will be allotted a fixed budget just like other departments. Its expenses and income will be overseen by the finance ministry.  

—Punit Mishra

 

Lead picture: Railway Minister Suresh Prabhu (right) with his deputy Manoj Sinha showing the Railway Budget papers on arrival at Parliament to present the annual Railway Budget for year 2016-17, in New Delhi. Photo: UNI

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