Tuesday, Oct 04, 2022

Two in one

Merging railway, Union budgets is a good idea. But much will depend on the degree of operational autonomy to the railways.

Over a decade and a half ago, the NDA government led by Atal Bihari Vajpayee ended the colonial era practice of announcing the Union budget in the evening. NDA 2 headed by Narendra Modi has decided to do away with an over 90-year-old tradition of a separate budget for the Indian Railways by merging it with the general budget from next year. The cabinet has also decided to advance the dates for the presentation of the budget to early February. Broadly, both decisions are welcome.

That’s because even with a separate budget, the current system of accounting of the railways is non-transparent considering that it is difficult to make out the costing under various heads, including staff costs. More importantly, the trigger for the decision may well be the fiscal state of the Indian Railways — which with a wage bill that soaks almost 50 per cent of its working expenses, passenger earnings of just a little over 25 per cent of gross earnings, and a high operating ratio — is hardly in a position to carry out modernisation and upgradation of technology, or invest in new assets and focus on safety too. An expert committee headed by Bibek Debroy had in its report on restructuring of the railways made out a case for jettisoning a standalone railway budget. By subsuming it within the Union budget, the transport services provider may be better equipped to raise funds, including from external agencies, on the strength of the sovereign to invest in projects which yield good returns over time instead of being restricted to the Indian Railway Finance Corporation to mobilise money. Equally, however, it can also be argued that a merger of the two budgets may lead to fuzziness over accounting of items such as pension payments — a huge burden for the railways. What is important, therefore, is the direction of reform. If the merger leads to a structural transformation over the long haul in terms of accounting and operating on commercial principles like corporate bodies, higher revenues, productivity and internal generation of funds and better project implementation based on economic logic rather than political considerations, then this exercise may well be worth it. Much will depend on the operational autonomy provided to the railways and the political will to ensure that a department run commercial undertaking delivers more for the buck.

The government’s decision to advance the budget should lead to better planning and spending outcomes, round the year, by ministries and departments. For, they will no longer be able to take refuge under the excuse that funds weren’t coming in early enough.

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First published on: 22-09-2016 at 12:06:51 am
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