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Railway Budget, a vanishing trick

WHISTLE AND LIGHT: “The government should table an annual ‘Indian Railways Report’ in Parliament on the lines of the Reserve Bank of India’s Economic Survey. That will signal reforms with transparency.” Picture shows a heritage train in Kolkata. — FILE PHOTO: PARTH SANYAL   | Photo Credit: PARTH SANYAL

So finally, the almost century-old practice of presenting a separate Railway Budget ahead of the General Budget is to be dispensed with from the next financial year (2017-18), and the Railway Budget “merged” with the General Budget. The Union Cabinet has just cleared the proposal.

What are the reported reasons for this merger? According to earlier media reports, a separate Railway Budget is being dispensed with so that the Indian Railways need not pay the annual dividend to the Government of India on the budgetary support given each year, saving the financially stressed Railways about Rs.10,000 crore annually; over the years, the Budget has been misused by politicians as a populist platform to enhance their own image; no other Ministry has a separate budget and the practice exists in no other country today; the Bibek Debroy Committee has recommended discontinuance of a separate Rail Budget and it is part of the Prime Minister’s reform programme. Besides, it is a colonial legacy.

A point particularly stressed by the Finance Minister in the press conference announcing the Cabinet decision was that the Railways’ share in the General Budget has progressively reduced over the years, making a separate budget an anachronism.

Each of these “reasons” does not present the true or complete picture. It is necessary to separate fact from fiction.

It is a review

There have been sporadic calls in the past for doing away with a separate Railway Budget for various reasons, but the matter was never pursued seriously. One of the more publicised reasons is that it will free the Railways of the obligation of paying the annual dividend, as mentioned earlier. This is only partly true. The dividend is paid not only on the budgetary support extended during a year but also on the total “capital at charge” which includes the gross budgetary support (GBS) of previous years. By this merger, a “loan-in-perpetuity” is converted to a grant. Shorn of officialese, it is a loan waiver; and loan waivers are granted to individuals or institutions in extreme financial distress — something not to go to town about.

In popular imagination, the Railway Budget was seen as a grand spectacle, with the Railway Minister using it as a platform for populism and political grandstanding. What is not appreciated is that the Budget is not merely a statement of allotment of funds to various projects and programmes, unlike other ministries, but comprises a fairly detailed performance review, physical and financial, of the previous year and prospects for the current (Budget) year. Perhaps nowhere in the world is a political functionary called upon to present a financial report card of the country’s largest public undertaking in the full glare of publicity. A separate post-Budget discussion in Parliament on the Railways, as indicated by the Finance Minister, is no substitute, as the focus most likely will be on allotments to various projects, not on financial performance.

Talking of populism, the recent announcement by the Finance Minister of the proposal to set up a new Railway zone to placate a State government as part of a “special package” is proof that it is possible to be “populist” outside a separate budget.

Why should there be a separate budget for the Railways? The fact is that the Railways is indeed unlike any other Central ministry in size and scope: It is an operational ministry; it earns as well as spends, unlike other ministries that only spend. Its gross earnings (Rs.1.68 lakh crore in 2015-16) are among the highest for any Indian organisation, public or private; it has a staff strength (13.2 lakh) that exceeds that of the Indian Army; it fully meets the pension liabilities of its retired employees (13.8 lakh) out of its own earnings unlike other ministries; it follows an accounting practice, though not up to the standards of a purely commercial establishment, that has a number of features of a commercially-run organisation. So, if the Railways is to be treated like other ministries, will the government also fund its pension liabilities which are estimated to be about Rs.45,500 crore in 2016-17? That should be some “savings” indeed!

Part of a package

Perhaps the most misquoted reason given for the merger is that the Bibek Debroy Committee has recommended it. That is being economical with the facts. The committee has recommended it not as a stand-alone step, but as part of a slew of measures such as: complete overhaul of the project financing architecture of the Railways involving ruthless weeding out of unviable/long-pending projects; comprehensive accounting reforms; separation of infrastructure and operations; and setting up of a rail regulatory authority. Pending these steps, each of which is a major project in itself (some politically sensitive), the move to give a hasty send-off to the Railway Budget is perplexing.

The Railway Budget is indeed a colonial legacy; but so are English, the Railways, Rashtrapati Bhavan and the sedition law. Enough said. All this is not to say that the Railway Budget is a holy cow that cannot be touched. Far from it. The question is not “why”, but “why such a hurry to bury it”?

The answer, in one word: Obfuscation. By all accounts, the Railways’ financial position is precarious due to the triple whammy of a fall in revenues, a sudden spike in expenditure due to implementation recommendations of the Seventh Pay Commission, and an increasingly unsustainable interest burden on market borrowings. A separate Budget would have meant having to openly declare an operating ratio in excess of 1.0 (in layman’s language, that means one is living beyond one’s means): not a very good advertisement for a system that aspires to have high-speed tilting Talgo trains shortly and Bullet trains in the not-too-distant future. So why not banish and “vanish” the Railway Budget into anonymity as one of the myriad annexures in the General Budget and earn a fat “bonus” of about Rs.10,000 crore in the bargain? A smart move indeed! It seems now the Budget is more valuable dead than alive. However, what should be a matter of serious concern to the aam aadmi is that the Railways’ finances are sought to be shored up, not by improving efficiency, increasing revenues and cutting costs, but through a dexterous bureaucratic sleight of hand, taking cover behind the smokescreen of “reforms”.

Finally, a suggestion to the government: Do not throw the baby out with the bathwater; table an annual “Indian Railways Report” in Parliament on the lines of the Reserve Bank of India’s Economic Survey. That will signal reforms with transparency.

K. Balakesari is former Member Staff, Railway Board.


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Printable version | Oct 16, 2021 3:08:37 PM | https://www.thehindu.com/opinion/op-ed/Railway-Budget-a-vanishing-trick/article14612166.ece

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