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Budget overhaul: FinMin to seek cabinet approval next week

business Updated: Sep 15, 2016 21:27 IST
Suchetana Ray
Arun Jaitley

Finance Minister Arun Jaitley.(PTI)

The government is all set to overhaul the union budget from 2017. With this mission in mind finance ministry is likely to present the proposal to the Cabinet, when it meets next week.

The proposal is to advance the budget presentation by a month to the last week of January from next year, move to “outcome-based budgeting” and merge the rail budget with it.

“The PM has given a go-ahead to the proposals and finance ministry will get it cleared by the Cabinet at the earliest,” said an official in the finance ministry who did not wish to be quoted. He added that the urgency is keeping in mind that there are barely four months to go if the budget has to be presented in January.

Though the budget is presented in February, several tax proposals kick-in only from June after Parliament passes the annual finance bill in May. Income tax changes come into force only after the finance bill is passed, but these are retroactively implemented from April 1.

“By advancing the budget all the constitutional formalities can be finished before the beginning of the new fiscal,” said the source quoted above. It will also allow individuals and companies more time to firm up savings and tax payout plans.

Sources in finance ministry say that parliament sessions will have to be rejigged to allow budget-presentation in January. “The winter session will start in November and the budget session will begin a few days before Republic Day. So far that is the understanding,” said the source mentioned earlier.

By scrapping the distinction between plan and non-plan expenditure and moving to an “outcome-based budget”, the finance ministry is trying to shift from traditional performance-based budgeting by planning expenditure to fixing appropriate targets and quantifying deliverables of each scheme.

Rail minister, Suresh Prabhu told Rajya Sabha on August 9 that he has asked the finance minister to merge the Railway Budget with General Budget in the long-term interest of national transporter as well as the country’s economy.

“If the rail budget is merged then, Railways will not have to pay the annual dividend, for the gross budgetary support, to the government,” said a top source in the government who did not wish to be named.

Discarding the rail budget is a politically sensitive issue. This 92-year old practice has seen it being used as a populist tool to announce new trains and routes by coalition governments to reach out to their constituencies.

Apart from the cabinet nod, the move to advance the budget and merge the rail budget will require bi-partisan political support as it will involve changes in Parliament sessions.

The Congress is not in support of the plan.

“What is the logic behind changing a time-tested method? If the Budget is presented in January, the finances of the country will not be clear by then,” said Veerappa Moily, Congress Lok Sabha MP and a former law and corporate affairs minister. He also alleged that the government should first consult with all political parties before taking a decision on this.