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Budget Merger: Key points and History 

  • In 1924, under British rule first separate rail budget was announced because at that time Railways implicated more fund in total as compared to all other administrative expenditures and therefore it made sense.
  • Today Rail Budget is approximately only 6% of the total budget.
  • The rail budget is presented 2 days before general budget generally.

Present Problem with Railways

  • Railway offers 43 per cent subsidy on a single train journey to its passengers.
  • Railways has incurred a staggering expenditure of ₹ 34,000 crore on ‘social service obligation’ for the year 2015-16.
  • Out of this, ₹ 1500 crore was spent on myriad concessions on train travels and all this is in addition to the free journeys permitted to certain sections like MPs, MLAs and railway officers.
  • The Railways is also facing an accumulated burden of a whopping ₹ 4.83 lakh crore towards execution of 458 unfinished and ongoing projects.
  • The country’s largest employer has to bear an additional burden of about ₹ 40,000 crore on account of implementation of the 7th Pay Commission awards.
  • At present, the wage bill of railways is around ₹ 70,000 crore and pension bill amounts to nearly ₹ 45,500 crore while the annual fuel bill is more than ₹ 30,000 crore.
  • While it spends ₹ 18,000 crore on diesel purchase; ₹ 12,000 crore is the annual cost of electricity purchase. Salary and pension bill along with fuel expenses account for nearly 75 per cent.

Significance and Relief after Budget Merger

  • With the scrapping of the rail budget, the Railways will also not have to pay a special dividend to the government for getting gross budgetary support. The Railways pays about ₹ 10,000 crore as dividend a year after getting about ₹ 40,000 crore.
  • The Budget merger will be a relief for the Railways, since its revenue deficit and capital expenditure will now get transferred to the Finance Ministry.
  • Abolishing the rail budget will give the national transporter an annual breather of ₹ 9,700 crore even if it won’t be able to get out of its social obligations.

What next?

  • All proposals regarding the Railway Budget will be part of general budget, which will have a separate discussion on railway expenditure.
  • The functional autonomy of the Railways will be maintained.
  • Dates for the 2017 budget session of parliament, would be fixed taking into account the calendar for assembly elections in Uttar Pradesh, Punjab and Uttarakhand due early next year.
  • The finance ministry has proposed presenting next year’s budget on February 1, which would mean convening the budget session before January 25, about three weeks early.
  • The Cabinet also approved removal of distinction between Plan and Non-Plan expenditure as it left out the latter in terms of focus. The Cabinet felt it is the total expenditure, which generates value for the public.
  • Plan expenditure was for the first time presented separately in the budget for 1959-60.
  • Part of the capital expenditure will be borne by the main budget, which will help the railways step up spending that is pegged at ₹ 1.21 lakh crore in the current year.
  • The advance estimates for GDP will have to be made on 7 January instead of 7 February and mid-year review of expenditure by various ministries is proposed to be completed by November 15.
  • Once the rail and general Budgets are merged and the date of presentation is advanced, there will be no requirement of separate Appropriation Bills as well as Vote on Account, as is the current practice.
  • The government will form a committee to look into the aspect of concessions to as many as 53 categories, including senior citizens, sports persons, freedom fighters and differently-abled among others.

Future Trends and Conclusions

  • The separate Railway Budget, a 92-year-old tradition, has been scrapped by the centre.
  • The move could lead eventually to the corporatisation of the railways.
  • It is also evident that Indian Railways will now be opened for not only FDI but also for commercialisation and privatisation.
  • Obviously, it will save some precious time of Parliament as now there requires only one Appropriation Bill to be passed instead of two.
  • An advance cycle of processes will ensure better implementation of the schemes.
  • This will help raise capital expenditure in Railways which will enhance connectivity in the country and boost economic growth. Efforts to leverage extra budgetary resources will continue.
  • The merger would also facilitate an integrated and seamless approach towards transportation strategy in the country
  • The information still unknown to us is that whether GST will be part of the budget and what the exact date of budget is.

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