Post merger of Budgets, fund access likely to be hassle-free for Railways

Currently, Railways spends money through what is known as Demands for Grants presented to Parliament to draw funds from Consolidated Fund of India.

Written by Avishek G Dastidar | New Delhi | Published:September 16, 2016 2:01 am
budget. railway budget, suresh prabhu, indian railway, finance minister, arun jaitley, rail budget, union budget, rail revenue, rail salary, heavy borrowing, indian government, niti aayog, indian express news, business Every year there is fierce battle between Finance ministry and Railways to decide the quantum and rate of the dividend.

There may be some bright side, after all, to the merger of Rail Budget with General Budget next year for Railways as its number of Demands for Grants might be reduced to just one from the current 16 — translating into great reduction in parliamentary exercise for Railways to acquire the right to spend every year. Cabinet is slated to take up the merger proposal next week.

Currently, Railways spends money through what is known as Demands for Grants presented to Parliament to draw funds from Consolidated Fund of India. It does not have the right to unilaterally reappropriate money given under one grant to another. For that, too, it has to seek Parliament’s approval each time. Out of the 16 Demands for Grants presented to Parliament, Demands 1 to 15 are

Revenue Demands and number 16 pertains to Capital.

Now, it is learnt that following deliberations for the modalities of the merger of the two budgets, it has been recommended that the number of Demands for Grants for Railways be reduced to just one and let Railways carry out any required reappropriation on its own after that, which means a greater financial rope for the transporter, sources said. Next year will see an early Budget, possibly on February 1, they added.

Simply put, proposals sent in the form of Demands for Grants for voting by Parliament to meet expenditures from the Consolidated Fund of India are known as Demands and when the Demands are granted by Parliament , it is known as Grants.

Another significant recommendation, if the government agrees, is that Railways might not have to pay dividend to the government on the Gross Budgetary Support (GBS) it receives each year for Capital works and National Projects. Gross Budgetary Support is termed as a loan in perpetuity. Parliament’s Railway Convention Committee reviews the rate of the dividend to be paid each year. Currently the committee is headed by B Mahtab of BJD.

The only contention is will the government finally agree to subsume dividends linked to GBS given in earlier years and which comes to a combined amount of Rs 8,000-10,000 crore per year. Every year there is fierce battle between Finance ministry and Railways to decide the quantum and rate of the dividend.

While Railway minister will no longer present a separate Budget, the remaining process of preparing a Budget will remain the same as far as Railways is concerned. Railways liabilities, including pension and salaries will have to be borne by the transporter itself and significant revenue deficit may be bridged by the finance ministry in the form of loans. Railways has in the past taken loans for this purpose from the finance ministry and has repaid them as well. It has been currently negotiating with finance ministry for a non-lapsable Railway Safety Fund to the tune of Rs 1.19 lakh crore.