Budget merger won’t impact govt’s Fisc Deficit

The railways also loses about Rs 30,000 crore every year because of its social obligations

railway-budget-2017Indian Railways will have to pay dividend and fund subsidy on its own even after the merger of rail budget with general budget. This would mean there would be little impact on the government’s expenditure.

The national transporter is required to pay return on the gross budgetary support it receives from the government known as dividend. It forked out Rs 8,495 crore to the government in dividend in 2015-16 and the figure is projected to rise to Rs 9,731 crore this year.

The railways also loses about Rs 30,000 crore every year because of its social obligations.

These range from discounted fares to operation of uneconomical branch lines, a part of which it recovers from freight traffic.

Sources said the proposed merger would not impact the government’s fiscal deficit as railways would continue to pay dividends and would fund their subsidies through operations.

“The financial contract between ministry of finance and ministry of railways would not change due to the merger,” one source added.

Meanwhile, following a suggestion from the Niti Aayog, the railways is considering trimming its subsidy burden by offering passengers a choice to buy non-subsidised tickets along the lines of ‘give up’ campaign on LPG subsidy.

Sources said railways will start selling non-subsidised tickets by the end of this year.

The government is also likely to print subsidy on monthly passes issued to commuters and the latter may be given the choice to buy full-price passes.

A five-member committee comprising senior officials of the ministries of finance and railways has already given the modalities for the merger of rail budget with the Union budget. Its recommendations are under consideration of finance minister Arun Jaitley.

Earlier, a panel headed by Niti Aayog member Bibek Debroy had proposed scrapping the separate railway budget and also suggested that the government should do away with the practice of taking dividends from railways. But it appears that the government has not accepted Debroy panel’s recommendation.

Sources said a proposal is likely to be put up before the Union cabinet for merger of the two budgets by the end of this month. The merger will be effective from the next financial year.

Railways could focus on services, use technology for better passenger experience

Few political circles feel that the proposed merger of the Railway Budget with the Union Budget, will not only bring the curtains down on a near century-old legacy, but it will also set in motion a realignment of political allegiances, both at the centre and the state levels. Railways minister Suresh Prabhu, taking into cognisance the recommendations of the NITI Aayog gave the green signal for the merger last month.

Apart from marking a departure from tradition, the move is likely to turn the political currents in India choppy. Understandably, not all the regional parties are enthused about the government’s move.

A five-member panel comprising officials from the railways and finance ministries are working out the modalities to incorporate the Railway Budget within the scope of the Union Budget. On the other hand, political parties, including the Congress are playing their cards close to the chest, biding time till the panel submits its report to the Centre. Regional parties, which are raging against the BJP’s `corporatisation of the railways’, suspect that the move is an attempt to defang them in future coalition arrangements.

“Look at the list of railway ministers from 1996-2012; they have mostly been members of regional parties. Ram Vilas Paswan, Nitish Kumar, Lalu Prasad and Mamata Baner jee among others, were the ones in charge of the railways, not leaders of national parties. With the merger, this will change,” political sources said.

Though the Congress is yet to make its stand on the proposed merger of the two budgets clear, regional parties have already started mulling over its implications. Trinamool Congress (TMC) is miffed with the move, which it perceives as an attempt to “stifle” smaller parties that have larger ambitions. When contacted, TMC MP and spokesperson Derek O’Brien said, “We have a lot to say on the subject. (We) will express our views strongly at the appropriate time.”

Tamil Nadu’s Dravida Munnetra Kazhagam (DMK) too is sceptical, with some sections within the party feeling that the move aims at securing political interests, and is not for the benefit of the railways. DMK MP TKS Elangovan said, “It’s quite funny if they think they can thwart political opposition from the regional parties in a coalition set-up by scrapping the railway budget. Merging the Railway Budget will only slow down the department. Currently, rail ways is independent and can take decisions on its own – there is flexibility when it comes to changing passenger fares, increasing freight charges, and even platform tickets, to mobilise resources. When merged, railways will have to depend on the Consolidated Funds of India, and may not be on the priority list of the government.”

The other question that has been doing the rounds in the political corridors is this: Will a merger improve the situation for the railway passenger? If yes, why can’t reforms be initiated through an exclusive Railway Budget?

JD(S) leader and former Karnataka chief minister HD Kumaraswamy said, “Railway-related allocation to states, especially those ruled by parties that are not in power at the centre, are unlikely to be fair following the merger. Will political bias be eliminated in allocation and execution of projects to the states?” However, a few regional parties are of the opinion that a merger could turn out to be beneficial for both the country and railways, if done efficiently. Dubbing the separate budget for railways a colonial relic, Telangana Rashtriya Samithi (TRS) MP K Kavitha lauded the NDA government for initiating reforms in the railway board. “A separate railway budget is not required in an era, where other modes of transport, including road and air, are quite strong. Moreover, central government schemes are political and we, the regional parties, have to fight it out to get them for our respective states. Maybe there is a need for a separate agriculture or health budget,” she added.

Railways has come a long way from 1924 when the first budget was tabled and three-quarters of the country’s finances were allotted for the sector. If all goes as planned, with the BJP determined to push through the merger of budgets, we may well have seen the last Railway Budget this year. Hopefully, passengers will benefit from this entire exercise.

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