Yojana:Merger of Rail Budget with General Budget

Athar Imam Raza

Updated: Apr 3, 2017 11:15 IST

Historical Background of separation and merger of the Rail Budget and General Budget

• An East Indian Railway Committee was constituted under the chairmanship of Sir William Acworth in 1920.
• The Acworth committee had suggested the separation of finances, which was done in 1924 by a "Separation Convention".
• To quote verbatim "its reconstruction was done in a form which frees a great commercial business from the trammels of a system which assumes that the concern goes out of business on every 31st of March and recommences de novo on the 1stof April. The general revenues were to receive a definite annual contribution from the Rail which would be the first charge on the new receipts of the Railways".
• The need for continuing with a separate budget was justified because at the time when the Railways were carrying 75 per cent of public transport and 90 per cent of the total freight which is now reduced to 15 per cent and 30 per cent respectively.
• With this background, the present government took the decision of merging the Rail budget with General Budget under infrastructure category.
• Despite merging, the government has assured that the financial autonomy of Indian Railways will not be hampered and the freedom enjoyed so far is retained.

Economic Survey Analysis for IAS Exam 2017

Committees recommended for merger

• The move of the discarding separate Rail Budget is said to be part of the present government’s reform agenda and it was based on the recommendations of the Committee headed by Shri Bibek Debroy, Member, NITI Aayog.
• Initially, the merger was suggested by the NITI Ayog as the Railway budget was being used to dole out favours by way of new trains and projects.

The salient features and benefits of merger

• The Ministry of Railways will continue to operate as a commercial undertaking under a government department and a separate Budget statement, including Demand for Grant, will be created for Railways.
• The Ministry of Finance will prepare and present a single Appropriation Bill together with the estimates of Railways in the Parliament and all other legislative work connected therewith will also be handling the Ministry of Finance.
• The process of payment of dividend to General Revenues and its Capital-at-charge which were earlier done by the Railways would stand wiped off now.
  The Ministry of Finance will provide Gross Budgetary Support to the Ministry of Railways towards meeting part of its capital expenditure.
• Railways still have the authority and can continue its old process to raise resources from the market through the process of Extra-Budgetary Resources as at present to finance its capital expenditure.
• The new unified budget presentation will help Government to assess the actual financial position of the Government.
• The merger of Rail Budget with the General budget would help the Government to chalk out the multimodal transport planning between railways, highways and inland waterways.
• It will help the Ministry of Finance in the financial decision-making process with more precision specifically at the time of mid-year review for better allocation of resources, etc.

Union Budget 2017 Questions

Argument against the Merger

• Merger may be a good initiative, but the autonomy of the railways and the structure of railway board need to be maintained
• In the wake of the idea of corporatisation of Indian Railways the merger of the Railways Budget by which the financial burden of the dividend that has gone off but it could be done without merging the budget with the General budget.      
• As regards Rail budget merger, a more reformative initiative would have been to convert railways into a commercial enterprise which would have enabled it to raise resources from the market on its own financial strength and credit worthiness.
• After merging Rail budget, it will have the ease of passing on the deficit, subsidy burden and capital expenditure to the general budget, but it shouldn't lead to any decrease in the transparency of railway accounts and performance, will the Government guarantee this?
• Goods rotted on the platforms because of insufficient wagons or locomotives to move them, the issue of overcrowding and waiting for days at stations are the common issues for which the responsible reasons are non-availability of funds for expansion, development, and repairs and maintenance. Will the government commit to addressing such issues?

Conclusion

At the time of our independence, the Indian Railways had 54,600 km of tracks, but we could add hardly 11,000 km in the last 60 years of the period. If we talk about China, they had just 22,161 km in 1950 while they have over 1 lakh km. Our high-speed trains like Shatabadis and Rajdhanis and even the latest Gatiman Express run at a maximum speed of 160 km per hour and we are feeling proud of having these trains. At the same time, China has already attained a speed of 300 km per hour with the Beijing-Guangzhou bullet train service. So, at this point in time, the Indian Railways need those initiatives on the part of the government, which makes Indian Railways self-reliant and more transparency in their finances and services.

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