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RIP railway budget: Govt ends 92-year-old practice, only one budget from 2017

The Union cabinet approved on Wednesday the merger of the railway budget with the annual budget, a government source said, ending almost a century-long practice.

business Updated: Sep 22, 2016 00:44 IST
Saubhadra  Chatterji
Finance minister Arun Jaitley speaks at the Taxpayer Felicitation Programme in New Delhi.
Finance minister Arun Jaitley speaks at the Taxpayer Felicitation Programme in New Delhi.(PTI)

The government on Wednesday approved merger of the rail and general budgets from next year, ending a 92-year-old practice of a separate budget for the country’s largest transporter.

The common budget may be announced in the first week of February as the government has also “approved in-principle” advancing the budget schedule.

While the merger will help the cash-strapped Indian railways, an advance budget—in tandem with the targeted roll-out of the goods and services tax from April 1—will give the states and the Centre early access to funds for construction activities in summer.

Financial experts said it will also help people to do better tax planning.

“While we are in favour of advancing the budget date and finishing the entire financial business before March 31, the actual dates (for budget presentation) will be decided after consultations and depending on calendar of the state elections,” Union finance minister Jaitley said after a cabinet meeting.

Five states, including Uttar Pradesh, Punjab and Uttarakhand are scheduled to go to the polls early next year.

The previous NDA government led by Atal Bihari Vajpayee had changed another British-era practice in 2001, advancing the time of presenting the budget to 11am from 5pm.

The union cabinet also decided to do away with the demarcation of planned and non-planned expenses to keep the government accounts simpler and more transparent.

Even as a separate rail budget will cease to exist, the railway will continue to enjoy its functional autonomy, railway minister Suresh Prabhu said.

The common budget will allow a seamless national transportation policy, insulating the railways from political pressures. The idea was first floated by Niti Aayog member Bibek Debroy.

The Indian railways ferries around 23 million people daily, equivalent to the population of Australia and New Zealand put together, on its network of tracks running up to more than 64,000 km.

Railway unions which have been seeking government help to bail out the PSU reeling under fund crunch, welcomed the move.

“The railways will benefit if finance ministry handles its burden of subsidies and pensions and waives off the annual dividend,” Shiva Gopal Mishra, general secretary of All India Railwaymen’s Federation, said.

Every year, the railways spend Rs 8000 crore on pension and Rs 35,000 crore as subsidies. The Indian railway also pays Rs 10,000 crore as dividend in return of the government’s gross budgetary support.

However, the railways no longer constitute a major chunk of government revenues as annual outlays of several public-sector undertakings are far bigger than that of the railways.

While the Centre may not get the net dividends of Rs 4,100 crore from the railways, economic affairs secretary Shaktikanta Das said that since the rail budget will become a part of the general budget, “it is possible for us to absorb the amount.”

Jaitley said the cabinet did not discuss the dates of the winter session of Parliament. The practice of standing committee scrutinising the budget proposals will continue.

Sources in the government said the budget session may start on January 24 and the budget could be presented on February 1, instead of the last week of the month.

“The taxation process will be completed by April 1. For the states, the effective implementation of schemes will start from April instead of September,” Jaitley said.

Read | Rail budget must be done away with? Prabhu agrees

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