Suresh Prabhu writes to Arun Jaitley to discontinue Railway Budget

15 Jul 2016 | Written by Akriti Asthana; Edited by Gaurav
Merging of Railway and Union budgets

Railway Minister Suresh Prabhu has recommended to end the 92 year old practice of formulating a separate Railway Budget.

In a letter sent to Finance minister Arun Jaitley in June, he sought to merge the General and Railway budgets in order to formulate a seamless national transportation policy.

A response is awaited from the Finance Minister so that a final decision can be taken.

In context: Merging of Railway and Union budgets

Origin of the Railway Budget in India

The origin of Railway Budget in India goes back to a report by William Ackworth in 1924 and his 10-member committee. He recommended a separate railway budget, given that most of the infrastructure spending by the British government went towards building railway lines.

Current stateCurrent Status of the Indian Railways

Presently, the railway budget size is quite small at Rs.1.21 trillion compared to India's overall budget of Rs.19.8 trillion.

India has 66,000 km of railway lines, of which only 17,000 km have been added since Independence.

The Railways is facing a Rs.34,000 crore loss in passenger segment and also an accumulated burden of Rs.4,83,511 crore towards completion of 458 ongoing and unfinished projects.

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The world's first ever passenger train

The world's first passenger train, prompted by wool trade, was between Stockton and Darlington in England, in 1825. Whereas for India, it was the trade of cotton that prompted India's first ever train journey.

15 Jul 2016Suresh Prabhu writes to Arun Jaitley to discontinue Railway Budget

Suggestions from the Niti Ayog

InformationSuggestions from the Niti Ayog

The recommendation came from Niti Ayog member Bibek Debroy, after which the PMO sought a reply from the Railways last month.

This move would lessen the financial strain on Railways and that too at the time of the implementation of the 7th Pay Commission, which recommended a 23.6% salary hike.

Also, there is no legal or constitutional requirement for presenting a separate Railways Budget.

15 Jul 2016Positive Outcomes

According to Debroy, lots of resources are wasted in the process of preparing the railway budget, resulting in a very complicated relationship between the Finance Ministry and the Railways, which would be simplified through this merger.

It will also reduce political pressures from MPs demanding new trains and stops for the sake of convenience and increase focus on building the already announced lines.

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21 Sep 2016Cabinet approves Railways, General budget merger

The Union Cabinet approved the merger of the Railways budget and the General budget, putting an end to the separate presentation of the Railways budget in Parliament.

After this move, the budget presentation date would be advanced and the practice of Appropriation Bills and Vote on Account would be done away with.

The Railways will continue being an independent commercial entity as present.

29 Jan 2017No more separate railway budget leaves officials uncertain

The scrapping of a separate railway budget has left the ministry functionaries uncertain about how they will have to redesign the way of doing business.

With this, now the railways will have to "submit proposals to the expenditure finance committee of the finance ministry, like other ministries do.".

R Sivadasan, former finance commissioner (railways) said the processes will be formalized in the coming years.