Cabinet clears merger of rail, general budgets

Proposal to present General Budget on Feb 1

New Delhi: Ending a nearly century-long practice, the Cabinet on Wednesday decided to scrap a separate budget for railways and merge it with general budget, presentation of which will be advanced to spur spending and boost economy.
As part of a major overhaul of the budget process, the Cabinet headed by Prime Minister Narendra Modi also decided to do away with classifications of expenditure into Plan and Non-Plan, making the exercise simpler.
Briefing reporters, Finance Minister Arun Jaitley said the Cabinet has in-principle decided to end the colonial-era tradition of presenting Budget on the last day of February and advance it to help complete the legislative approvals for the annual spending plans and tax proposals before the beginning of the new financial year on April 1.
But the actual date of presentation of the Budget for 2017-18 will be decided later keeping in mind the schedule for assembly elections in crucial states like Uttar Pradesh, he said.
The Finance Ministry had proposed to the Cabinet that the annual Budget presentation be fixed for February 1 and complete the budget exercise by March 24.
Presently, the Budget approval process happens in two parts extending to the second or third week of May, hampering early implementation of schemes and spending programmes.
“While we in-principle are in favour of advancing the budget date and finishing the entire financial business before March 31…the actual dates will be decided after consultations depending on calendar of the state elections,” he said.
To facilitate early presentation of the Budget, his ministry had proposed that the Budget Session of Parliament be convened sometime before January 25, a month ahead of the current practice.
Consequently, the preparation for the Budget would start now in early October and GDP estimates made available on January 7 instead of February 7.
The government, he said, is keeping itself in a ‘state of readiness’ to advance the Budget presentation.
A separate Budget for Railways has been presented to Parliament since 1924 even though neither the Constitution nor legal requirements call for a separate Budget.
With the merger of the Railway Budget there would be a single Budget which would holistically depict the financial position of the Government of India.
Rail Minister Suresh Prabhu said the merger of rail and general budgets will not impact the functional autonomy of the railways but help in enhancing capital expenditure.
“One single budget will mean railway and general budget will work in harmony,” he said, adding railways will not have to pay dividend to the government.
It will also lead to a single Appropriation Bill, including the estimates of Ministry of Railways, saving time of Parliament by not having to hold separate consideration and passing of two such bills.
The Cabinet also approved removal of distinction between Plan and Non-Plan expenditure. The classification resulted in excessive focus on the former and neglect of items such as maintenance which are classified as non-Plan.
The Cabinet felt it is total expenditure, irrespective of Plan or Non-Plan, that generates value for the public. Plan expenditure was for the first time presented separately in the budget for 1959-60.
Plan and Non-Plan expenditure in Budget 2017-18 will be replaced with ‘capital and receipt’.
Jaitley said the report of a committee headed by NITI Aayog member Bibek Debroy had observed that presenting a separate railway budget is only a ritual as its size has become very small compared to the general budget.
While the Union Budget deals with expenditure of nearly Rs 20 lakh crore, the expenses through Railway Budget are limited to less than Rs 2 lakh crore.
The panel had suggested that rail budget should be a part of government’s overall fiscal discipline and the developmental approach of the Budget.
He said the government will continue to maintain the distinct identity of the railways and its functional autonomy.
Asked who will decide on passenger fare and freight rates, Jaitley said: “These decisions will continue to be taken by the Railways. But the accounts of railways will be presented to Parliament by the Finance Minister. Presentation of statement of accounts will be consolidated so there will be a horizontal merger of the two accounts.”
With the rollout of Goods and Services Tax, the changes in excise and service tax, which are normally proposed in the general budget, will shift to the GST Council and hence there will be a less onerous Finance Bill for Parliament to debate, sources said. (PTI)

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