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AIR spotlight summary on “Merger of Railway and General Budget”



AIR spotlight summary on “Merger of Railway and General Budget”



  • The Union Cabinet approved the merger of the general budget with the railway budget. In 1924 based upon the recommendations of Acworth Committee, railway budget was separated from the general budget.
  • This year there was lot of pressure because of the 7th pay commission payouts that the railways will have to meet. The Bibek Debroy Committee report suggested there is no need for a separate railway budget and there should be a union budget in which the railway budget should be presented.
  • Railways continue to be the lifeline for Indian citizens because it is a common mass movement transporter.

Highlights of the Merger of Railway and General Budget

  • This is a good development. In 1924 a separate railway budget was necessary because railway budget at that time was almost 5/6th the size of union budget. At present the size of the railway budget is about 6% of the size of the union budget. India’s union budget has become huge. It is now around 290 to 300 billion dollars.
  • Financial autonomy and the extra budgetary resource mobilisation would continue with the railways. Financial burden of dividend has gone off from the Railways so they will now have more resources in hand.
  • Finance Minister will present a single Appropriation Bill, including the estimates of Ministry of Railways, thereby saving precious time of Parliament by not having to hold separate consideration and passing of two Appropriation Bills.
  • Social obligation of the railways
    • Railways bear about 30,000 crore each year to give concessions to different category of citizens like differently abled, senior citizens and those suffering from critical illness.
    • Finance ministry has announced there would be a separate committee to examine the social obligations of the railways. There is a crying need for the railways to reduce the amount of subsidy it gives to passenger traffic which amounts to little over 50%.
  • The railways have to find some ways to bridge this gap by raising fares. The government has raised the fares of Rajdhani express, brought in dynamic prising which needs to be expanded for other trains.
  • In the category of senior citizens concession government has given the option of Give it up like the LPG subsidy. About 94% of the passengers belong to the unreserved category from the sub-urban classes. There has been a rise in India’s per capita income over the previous years along with GDP. But in the past 15 years there is hardly any increase in the fares of general category.
  • Increasing passenger fares by 10% will fetch railways huge amount of money and it helps in bridging the gap to a certain extent. Social equity will be served if the prices of the tickets of higher classes are higher.  
  • Today railways are competing with the roadways and roadways are competing with the shipping. They are all operating under the silos. The freight share of the railways has come down by 30%. The cars manufactured in Chennai are transported to Delhi through trucks even though there are freight trains from Chennai to Delhi. There is a need for integrated transportation solution.
  • Railways basically carry iron ore, steel and fuel oils. It does not transport much of the value added goods which the truckers do.
  • The Cabinet also approved removal of distinction between Plan and Non-Plan expenditure as the present classification resulted in excessive focus on former with almost equivalent neglect to items such as maintenance which are classified as non-Plan.
  • The Cabinet felt it is the total expenditure, irrespective of Plan or Non-Plan, that generates value for the public

Bibek Debroy Committee report

  • Suggested the need for a separate railway budget.
  • Restructuring of Railway Board.
  • The report is about turning the railways into a commercial entity and using advertising space. These are areas which can be implemented very fast and this will augment the railways finances.