'Merging Railway and Union Budget won’t alter fiscal deficit'

Published - July 30, 2016 10:39 pm IST

NEW DELHI, 28/07/201: Finance Secretary Ashok Lavasa during an interview to The Hindu, in New Delhi on Thursday.  
Photo: V. Sudershan

NEW DELHI, 28/07/201: Finance Secretary Ashok Lavasa during an interview to The Hindu, in New Delhi on Thursday. Photo: V. Sudershan

Ashok Lavasa, Finance Secretary, spoke to us about the proposed reforms of the budgeting process that the Centre is working on.

Edited excerpts:

Railways Minister Mr. Suresh Prabhu has sought a merger of the Railway Budget with the Union Budget. If accepted, will the move widen fiscal deficit?

We are looking at the proposal. In the past too some committees have made the recommendation. The thought has been with us for some time. My own sense, without having gone deep into the matter, is that it will not make too much of a difference to the general budget. It only means that the Railway Budget will not be presented separately. It will alter the numbers [the expenditure and revenue projections etc] but I don’t think it will alter the fiscal deficit. The Railway Budget is taking care of its own requirements. The Railways don’t have an operating loss. Their operating ratio varies but is always around 90 per cent. It has never been over the top.

The next Budget could see several institutional changes—new fiscal year and no plan-non-plan distinction. How different will the Budget process be?

For eliminating the distinction between plan and non-plan and replacing it with revenue and capital expenditures, a decision is already in place. A very elaborate exercise is going on for both the procedural as well as the formatting aspects. Soon we should be in a position to lay down the new structure of the budget.

The necessity of planning has been underscored. For every scheme being implemented, a new scheme conceived or a new project to be made, the first decision is that the scheme should have a sunset clause. This entails two things: you are able to predict the kind of resources which will be required in a given length of time and the corollary to that is that you have given yourself and the system a certain timeframe within which the desired outcome and the output should be achieved.

There could always be cases where even after achieving the output for the outcome you might have to wait. This is the thinking behind the new design. We are also expecting all the ministries to undertake an evaluation of the current schemes as you happen to be in the terminal year of the 12th plan. Should they decide for good reasons after their evaluation that the schemes need to continue then they will have to make a case for that.

A similar exercise was undertaken by a committee of state chief ministers that gave its report to the NITI Aayog on centrally-sponsored schemes.

This is the time to take stock, review, evaluate and come to a well-reasoned conclusion on whether they want to end a scheme or revamp it, such as the central sector schemes in the department of human resource development or social welfare or the environment.

The 7th Pay Commission recommended that no more pay commissions should be appointed and a system of pay revisions linked to performance should be introduced. Did the Centre miss an opportunity to improve governance and introduce efficiency by not accepting it?

The government has accepted recommendations pertaining to pay and pension.

All the rest, it left to be decided subsequently. Issues which are administrative in nature, those have been left to respective departments to examine.

So is there a deadline?

The government has not said it has not accepted or rejected the other recommendations. Commissions have made observations, advice that can not be strictly categorised as recommendations. But all the same, since experts go into issues of governance, the government does consider their observations. There is no deadline, but obviously, at some point, the ministries will be asked to tell us their view on those recommendations.

The government is bottom-heavy with perhaps too few bureaucrats. Do you expect any decision to rationalise it?

There is an ongoing process in which cadre strengths are reviewed. All organised services are supposed to carry out cadre restructuring exercises every five years. It is at that point in time you take a view whether you want to increase or decrease the posts, or change the strengths at the different levels. There are authorities within the government empowered to create posts when situations demand it. Equally, there are rules that say if a post is sanctioned but not utilised for a certain length of time then it lapses.

On the other hand, there could be an argument that government should downsize or right-size. There could be a case to re-engineer the work of the government by which the burden of various departments is divested. Take the case of passport services or Registrar of Companies.

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