Why railway budget is separated from the general budget

Following the merger of Union Budget with Railway budget, the Railways does not have to pay dividend to the central government though it would still get gross budgetary support from the exchequer.

As far as the salary and pension bill of Railway employees is concerned, it remains the responsibility of the national transporter as there is no change in the existing practice. The merger of Rail and General Budgets does not impact the functional autonomy of the railways but help in enhancing capital expenditure. The decision to merge the Railway Budget with the General Budget has also been seen as a significant one, as in recent years political heavyweights, particularly regional satraps, have used this occasion to nurture their constituencies in a big way.

Follow full coverage of Union Budget here. Firstpost Conversations 9 Months S. Home Business News Union Budget Railway Budget ceased to be a separate event in , ending year-old history. In fact the Rs 1. Railway Minister Suresh Prabhu is justified in saying that this is the biggest reforms done till date in the sector. The financial autonomy will remain with the railways. The existing financial arrangements will continue and all revenue expenditure, working expenses, pay and allowance and pension will continue to be met by revenue receipts of the railways.

The immediate benefit is that Railways will no longer have to pay dividends hereafter. The railways pay nearly Rs 10, crore as dividend annually and this amount can now be put to use for capital expenditure of railways. It will also certainly reduce paperwork and do away with separate passage of appropriation bill for railways. Railways can now adopt rational approach to unviable projects. Along with this merger, the cabinet decided to remove the distinction between Plan and non-Plan expenditure, a commendable initiative to simplify and streamline decision-making within the government.

Year after year, nearly 20 to 30 per cent of plan expenditure remain unutilized due to various reasons including some political making a mockery of this distinction. The idea of merging these two heads of expenditure in the government was first mooted by Prime Minister Economic Advisory Council Chairman C Rangarajan some years back.

It is a positive development as it would help spending money in a more useful and integrated manner. What is the point in continuing with the farce of making huge allocation for plan expenditure when they are not actually spent. Instead the money could be put to better use by spending in areas in which it ought to be. Another important change brought about is in-principle clearance to advance the presentation of the Union budget to early part of February, perhaps first of the month instead of last day of the month.

This is a significant development as this would help in ensuring that the entire budget exercise, which is a three stage passage in parliament, is completed before the end of the financial year.

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