Railways to save Rs 10,000 cr after budget merger

Finance Minister Arun Jaitley will take a final call on whether to break the tradition of presenting a separate Rail Budget, by merging it with the General Budget.

Cash-strapped Railways will save about Rs 10,000 crore (Rs 100 billion) annually as it will no longer have to pay dividend if the separate Rail Budget is scrapped, which is likely to happen from next fiscal.

A joint committee set up to finalise the modalities for the merger of Rail Budget with the General Budget has submitted its report to the Finance Ministry recommending various changes including waiving off of payment of dividend by railways though the practice of getting gross budgetary support (GBS) from the exchequer will continue.

Railways pays about Rs 10,000 crore as dividend a year after getting about Rs 40,000 crore (Rs 400 billion).

The General Budget to be presented by the Finance Minister will also have a separate annexure with details of plan and non-plan expenditures to be incurred by the national transporter, according to the recommendations of the joint committee comprising senior officials from Railays and Finance Ministry.

The recommendations will be placed before the Cabinet which has to decide on the subject, the sources said, adding till then, nothing is final.

The report on merger of Rail Budget and General Budget, which was to be submitted by August 31, was delayed due to some "unavoidable reasons" and it was finally submitted to the Finance Ministry on September 8, sources in the railways said.

Though the sources declined to divulge the committee's recommendations on the ground that the "report is now in the Finance Ministry's domain", it is believed that a detailed framework for a way forward has been worked out for merger of two budgets.

The panel is understood to have advocated that the General Budget should have a separate annexure for the rail budget detailing the grant, expenditure and new projects for the next fiscal.

Since the railways has already given its consent for the merger, it is now for the Finance Ministry and the Cabinet have to take a call on the issue, the sources said.

Earlier this year, a committee headed by NITI Aayog member Bibek Debroy, in a report titled "Dispensing with the Railway Budget", had recommended that the two budgets should be merged to end the 92-year-old practice.

Last month, Railway Minister Suresh Prabhu had said, "I have written to Finance Minister Arun Jaitley for merger of the Rail Budget with the General Budget. This will be in the railways' interest and also in the nation's interest. We are working out the modalities."

The report is believed to have suggested ways for dealing with the railways' huge financial burden, once the Rail Budget is merged with Union Budget.

At present, the railways has to bear an additional burden of about Rs 40,000 crore on account of implementation of the 7th Pay Commission awards, besides an annual outgo of Rs 33,000 crore (Rs 330 billion) on subsidies for passenger service.

The delay in completion of projects resulted in cost overruns of Rs 1.07 lakh crore and huge throw-forward of Rs 1.86 lakh crore in respect of 442 ongoing rail projects.

The report is also understood to have addressed the contentious issue of annual dividend payment by the railways on account of receiving gross budgetary support (GBS).

The railways pays about Rs 10,000 crore a year to the Finance Ministry as dividend for getting the GBS.

Jaitley will take a final call on whether to break the tradition of presenting a separate Rail Budget, by merging it with the General Budget.

However, the merger will have political implications as almost every railway minister, particularly in coalition governments, has addressed his or her constituency by way of announcing new trains and projects.

The much sought after ministry is likely to lose much of its sheen if the merger happens.