Budget merger: What it means for the Railways

Railways to have functional autonomy, bear salary burden

Railways will no longer have to pay annual dividends to the exchequer and maintain its functional autonomy after merger of Rail Budget with General Budget.

Railways will bear the burden of 7th Pay Commission, besides the regular salary and pension payments for its present and ex-employees.

At present, the wage bill of the Railways is around Rs 70,125 crore and pension bill is about Rs 45,500 crore while the annual fuel bill is more than Rs 23,000 crore.

Railways has to also bear an additional burden of around Rs 30,000 crore on account of implementation of the 7th Pay Commission awards, besides an annual outgo of Rs 33,000 crore on subsidies for passenger service.

In a major budgetary reform, a meeting of the Union Cabinet chaired by Prime Minister Narendra Modi, on Wednesday, approved the merger of the Rail Budget with the General Budget.

However, Railways will maintain its separate identity and functional autonomy, Railway Minister Suresh Prabhu said.

As far as the burden of concessional fare in different categories including sportspersons and patients is concerned, the government will constitute a separate committee to find out a way forward for it.

The existing financial arrangements will continue wherein railways will meet all their revenue expenditure, including ordinary working expenses, pay and allowances and pension from their earnings.

The presentation of a unified budget is expected to bring the affairs of railways to centre stage and present a holistic picture of the financial position of the government.

However, Railways will not have to pay about Rs 9700 crore as dividend from the next fiscal though it will still receive gross budgetray support from the exchequer.

The capital-at-charge of the railways estimated at Rs 2.27 lakh crore on which annual dividend is paid by the national transporter, will be wiped off.

The capital-at-charge represents the central government's investment in railways by way of loan capital and value of the assets thus created.

Railways will continue to maintain its distinct entity -- as a departmentally run commercial undertaking as at present.

The national transporter will retain its functional autonomy and delegation of financial powers as per the existing guidelines.

The merger is also expected to reduce the procedural requirements and instead bring into focus, the aspects of delivery and good governance.

Consequent to the merger, the appropriations for the Railways will form part of the main Appropriation Bill.

Photograph: Reuters