Rail, general budgets merged, ending 92-year-old practice

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The Narendra Modi government on Wednesday ended a 92-year-old British era practiceby merging the railway budget with the general budget.The government also in-principle decided to advance the presentation of the general budget from the last day of February to the first week of the month.

While finance minister Arun Jaitley told reporters that the budget date will be decided once the time table for assembly elections in Uttar Pradesh, Punjab and Gujarat was known, sources said that February 1 was the tentative date and the Economic Survey will be tabled in Parliament a day earlier.

By advancing the budget, the government is looking to ensure that Parliament cleared the Finance and Appropriation Bills before the end of the fiscal on March 31, enabling ministries to kick off spending from April. It will also help companies and individuals to plan their taxes better. Currently , the budget exercise, which involves parliamentary clearance and notification by the President, is completed around the middle of May and government departments begin spending from Ju ne. Apart from the rates, other service tax changes also kick in from the third month of the financial year.

Though a separate railway budget has been junked, “functional autonomy of the Railways will be maintained. There will also be a separate discussion on railway expenditure each year in Parliament“, Jaitley said. A separate railway budget followed the recommendations of the Actworth Committee in 1924, which had felt that development of the railways was hostage to vagaries of the general budget. A panel headed by Niti Aayog member Bibek Debroy had recommen ded scrapping the practice of a separate railway budget.

The decision came with a relief for the Railways, which will not have to shell out an annual dividend of around Rs 10,000 crore, leaving it with mo re resources to spend on adding capacity and modernising its creaky infrastructure.

Officials said that the move will not impact government finances in any way with the net impact of dividend estimated at Rs 4,200 crore.

The NDA governments have reworked the way the budget has been presented. In 1999, the Atal Bihari Vajpayee regime had moved the presentation of the budget to 11 am instead of the British era practice of 5pm. At the end of a busy day fi nance secretary Ashok Lavasa sat down with TOI for an interview and detailed the way forward for the budget process and the benefits of the merger of the railway budget with the general budget. He also said that the fiscal targets and disinvestment were on track. Excerpts:

When will the actual process for merger and advancing the budget date kick in?

In a couple of days the budget circular will go out and then we will ask the departments to give their estimates.There is a whole process of having consultations with departments, which we will engage in. Normally , the budget exercise starts at the end of October, we will start it in the beginning of October.

How does life change for Indian Railways?

Railways has its own income and receipts. They have been meeting all their operating expenses from their receipts.That is pretty much what will continue. They were getting gross budgetary support for incurring infrastructure and capital expenditure. That will also continue. The extent to which they depend on leasing from IRFC will continue. In addition, they were generating some internal resources, which they would redeploy for capital expenditure. In fact, that should increase.

Will the dividend burden of the Railways go away from this year or next year?

The budget will be merged from next year. The new archi tecture is next year onwards.

How does governance change because of the budget merger?

It will result in integrated financial planning. You will no longer be looking at a budget which is presented separately. Planning will improve as railways is a very crucial transportation which will now be part of the general budget. You can take a comprehensive look at what's happening. Merger of the budgets is only one of the reform measures which had been suggested.There is obviously a further reform agenda which the Railways would pursue.

In terms of the overall fiscal situation, you seem to be behind the asking rate on disinvestment. What is your assessment of the overall fiscal situation?

I wish disinvestment was like run rate per over. It doesn't happen like that. It can happen when the timing is good, when some deal materializes and suddenly the receipts will flow. I don't think ever since the process of disinvestment started there is a predictable pattern and a steady flow which you can project. To read anything at this stage will not be correct.

On the spending side what is the situation?

We have done more than 40% spending (so far) and plan spending has been considerably higher than last year. We have also seen some impact of the 7th Pay commission but in order to get a full assessment, we will have to wait for a month more.

(TOI)