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No Rail Budget from Next Fiscal
Sep 05, 2016

The 92-year-old practice of presenting a separate Rail Budget is set to come to an end from the next fiscal, with the Finance Ministry accepting Railway Minister Suresh Prabhu’s proposal to merge it with the General Budget.

  • The idea was recently mooted by a committee headed by NITI Aayog member Bibek Debroy, as part of the restructuring of the Railways.
  • The Finance Ministry constituted a five-member committee comprising senior officials of the Ministry and the national transporter to work out the modalities for the merger. The committee has submitterd its report.
  • According to finance ministry merger of the Rail Budget with General Budget will be in the Railway’s interest and also in the nation’s interest.
  • The public sector enterprise has to bear an additional burden of about ₹40,000 crore on account of implementation of the 7th Pay Commission awards, besides an annual outgo of ₹32,000 crore on subsidies.
  • Besides, the delay in completion of projects resulted in cost overrun of ₹1.07 lakh crore and huge throw-forward of ₹1.86 lakh crore in respect of 442 ongoing rail projects.
  • If the merger happens, the Indian Railway will get rid of the annual dividend it has to pay for gross budgetary support from the government every year.
  • The move to discard the age-old practice of a separate Rail Budget is part of the Narendra Modi government’s reform agenda.
  • With the merger, the issue of raising passenger fares, an unpopular decision, will be the Finance Minister’s call.
  • To merge the Railway Budget with General Budget is in the long-term interest of national transporter as well as the country’s economy.
  • If the merger goes through, the Railways will get rid of the annual dividend it has to pay for gross budgetary support from the government.
  • Currently, the Indian Railways suffers from a massive revenue deficit; the burden of which will be transferred to the finance ministry after the merger.
  • The largest employer in the country with the largest rail network in the world now accounts for a meagre 15 per cent of the total
  • The merger should happen in a way the Railways becomes a part of the overall Budget, and the capital expenditure, revenue deficit, etc, can be taken care of.
  • The Railways was overburdened with Rs 60,000 crore worth of public service obligation.
  • Indian Railways has the potential to contribute around 2-2.5 per cent of the gross domestic product but it needs investment.
  • The rate of dividend of Railways for 2015-16 was four per cent, compared to five per cent in 2014-15.

The rail Budget was separated from the main Budget, following recommendation of a panel headed by British railway economist William Acworth in 1920-21. Every year, the rail Budget is presented in Parliament a few days ahead of the general Budget. British spun it off for a better focus on India’s most important infrastructure network. The Railways then accounted for 70 per cent of the total Budget.


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