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Starting 2017, there will be no separate Rail Budget in February-end. The Union Cabinet has given its green signal to the Railway Ministry’s move, merging Rail Budget with the Union Budget. Finance Minister Arun Jaitley has assured that the financial autonomy of the ministry will be maintained.

The Cabinet has also decided to do away with distinguishing between plan expenditure (on projects of ministries) and non-plan expenditure (on salaries, subsidies etc). It is also likely to advance the presentation of the Union Budget in parliament by a few weeks in order to ensure better planning and implementation of schemes by various ministries.

The Twitter handle of the Railway Ministry posted: “One Nation, One Budget”. It read: “One Budget will not only result in greater efficiency but also result in better integration of resources towards development of our nation.”

The move will break a 92-year-old tradition of presenting the Union and rail budgets separately. The practice of presenting two budgets was started by the British in 1924 following recommendations of the William M Ackworth Committee. The 10-man panel took the decision, noting the fact that at that point the railway budget comprised 70 percent of the nation’s income-expenditure estimate. Preparing the two separately made for better focus on each plan’s priorities.

That scenario has changed today. The railway budget now equals less than 15 percent of India’s national budget and commands less than one per cent of the government’s revenue receipts and disbursements. Experts contend that there is no rationale for a separate rail budget. Other sectors like oil and defense deserve equal or more importance, and they come under the general budget.

Experts are also of the view that a separate budget is more of a political compulsion than a financial necessity. It is believed that the rail budget has been used by parties in power at the center to appease regional parties. The regional parties, in turn, use it for their political gains. How else can railway ministers dole out freebies for their respective states? They do this by introducing measures such as declaring trains connecting constituencies, starting new trains, carving out zones, locating headquarters in states and making several other vote-catching announcements.

Political parties have been clamouring for a unified budget since 1996. The Manmohan Singh government had deliberated upon the idea but it never materialized. In 2010, the Central Administrative Tribunal directed scrapping of the railway budget saying that there is no provision in Article 266 of the Constitution for the Union of India to provide for a division of the presentation of the public accounts of the central government into two separate budgets.

What are the advantages and disadvantages of having a unified budget? The railway ministry feels that a merger will help the railways better manage its financial liabilities. It will no more have to pay dividends on gross budgetary support to the government. The entire financial burden will be transferred to the finance ministry.

The major disadvantage of the merger is that the stature of the railway ministry will be reduced to that of any other government department. It will be allotted a fixed budget just like other departments. Its expenses and income will be overseen by the finance ministry.  

The move also signals a shift in the government’s priority. The Railways—which was hitherto a preferred mode of transport among Indians and is also the largest employer—no longer holds prime importance in the government’s scheme of things. With the middle class increasingly taking to air travel, there is a growing concern that the Railways will become a poor man’s transport—thus impacting modernization and infrastructural upgradation. Or else, like other basic sectors like health and education, this sector will also be opened up to private sector as the government withdraws.

Responses to the merger:

  • BJP’s Mukhtar Abbas Naqvi tweeted:

Merger of Union & Rail Budget is a major decision of @narendramodi Govt. for economic reforms, it will boost process of economic progress.

  • The Centre for Economic Policy Research tweeted:

Merging #railbudget with main #budget is a great step, but only half. @FinMinIndia need to take @RailMinIndia liabilities too @sureshpprabhu

Other reactions on Twitter:

  • Merger of Rail Budget with General Budget shuts doors on populism in Railways, to help Railways with better financing. @NewIndianXpress
  • Rail Budget One of few functional good things in India, Railways. Now budget starvation & privatization
  • #RailBudget was a British Raj legacy. Now many ministries have more budget than railways.

—Punit Mishra

Lead Photo: Anil Shakya

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