Railway Budget Separation: Why It Was Merged with Union Budget in 2017

This is a landmark moment in India's fiscal policy where the Railway Budget was merged with the Union Budget in 2017 because it would allow better financial management and strategic alignment of railway operations with national economic goals. It was implemented for the first time in the budget year 2017-18, based on the comprehensive recommendations of a committee led by Bibek Debroy, a member of NITI Aayog.

Historical Context

Historically, the Railway Budget was presented separately from the Union Budget. The first Railway Budget was presented in 1924, and the separation allowed focused attention on the unique financial dynamics of Indian Railways. Over time, this practice has become increasingly outdated and inefficient, calling for reform.

Key Recommendations and Features of the Merger

The merger was informed by a detailed examination of the issues involved, culminating in several salient features intended to streamline operations:

• Departmental Commercial Undertaking: The Ministry of Railways will continue to operate as a departmentally run commercial entity, ensuring that it retains its operational autonomy while aligning with broader governmental fiscal strategies.
  
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• Integrated Presentation of Budget Statement: For railways, a standalone statement of estimates of budget demands and a claim for a grant will be given, but collectively presented through one Appropriation Bill by the finance ministry. With this integration comes the objective of presenting an overarching view of financial position in India.
• Exemption from Dividend Payments: One of the most significant changes is that Railways will be exempt from paying dividends to the General Revenues. This is expected to relieve Railways from an annual liability of approximately ₹10,000 crore, allowing for more funds to be directed towards capital expenditure.
• Gross Budgetary Support: Gross Budgetary Support would be given by the Ministry of Finance to the Ministry of Railways to finance its capital spending. It would be important to support the infrastructural investments and enhance the quality of services.
  
• Market Resource Mobilization: After the merger, Railways will still be free to mobilize resources from EBR and not lose its flexibility in funding its capital programs.
• Streamlining Multimodal Transport Planning: Budget merging will help with more streamlined multitransport planning across diverse sectors like highway and inland waterway transport; thus, bringing together a holistic approach to the transport strategy.
• Better Fiscal Efficiency: The mergers will ease better resource redistribution in midyear reviews, with the Ministry of Finance being well-positioned to make decisions that need to be addressed on budget support considering the contemporary requirements and results-based performance.
  
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Financial Impact

This also has considerable financial implications. As an example, Indian Railways had been paying huge dividends on its capital at charge; these were as high as ₹9,000 crores in certain years before the merger. After wiping off this liability with the merger, Railways could stand to save ₹5,000 crores a year with dividend subsidy adjusted.

The merger of the Railway Budget with the Union Budget is a strategic shift toward an integrated approach to fiscal management in India. The elimination of archaic practices and the aligning of railway operations with national priorities will enhance not only operational efficiency but also planning and resource allocation across the vast transportation network in India. This merger in India is now expected to come in handy towards supporting sustainable growth in the economics of the Indian nation while concurrently improving public means of transport service delivery throughout its territories.

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