Poor railway performance may mar merged Budget

Railways may have to seek government loan to meet revenue shortfall

The government’s decision to merge the Railway Budget with the General Budget may turn out to be an addition of two paragraphs from the former into the latter.

The debut Budget, to be read by the minister of finance, might not be noteworthy, as there is a likelihood of the national transporter seeking government loan to get over its revenue shortfall for this year.
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“Revenue has not picked up despite rationalisation of freight rates and introduction of premium pricing. It could be that the revenue falls short of expenditure and we will have to borrow from the ministry of finance. If this happens, it will be disastrous,” said a senior railway official.

The railways has never borrowed to meet its operational expenses. In the current year, the national carrier had to bear an additional burden of about Rs 40,000 crore on account of implementation of the Seventh Pay Commission, besides an annual outgo of Rs 33,000 crore on subsidies for passenger service.

Barring the Budget speech, all the documents presented with the Railway Budget, including the Explanatory Memorandum and the Pink Book of railway projects, will be tabled in Parliament. These are not likely to be part of any annexes. The appropriation account, however, might be merged.

“The various funds of the railway ministry, like the Pension Fund, Depreciation Reserve Fund, would continue to be part of the documents,” said the official.

The change in who delivers the speech would, however, effectively put the onus of railways’ performance and every related decision on the minister of finance, he said. The railways’ autonomy on operational matters would continue.

It is yet to be decided which ministry would take a call on changes in freight rates and passenger fare. There is a proposal to set up a Railway Development Authority to recommend the changes. But whether it would be the ministry of finance or of railways which would take a decision was not yet clear, said the official.

The finance minister might choose to announce the authority’s powers in the Budget itself.

Tricky issues of who bears the social service obligation of the railways, operational expenditure on un-economic branch lines and so on are still be decided. Officials in the ministries of railway and finance are currently working on the nitty-gritties, as the Cabinet decision to merge the Budgets had left certain issues unclear.

Officials in the ministry of railways said political interference might not completely evaporate, though the decision would be taken by the minister of finance.

The government had, on September 21, announced that the 92-year-old practice of presenting the Railway Budget would be put to end by merging it with the General Budget. Finance Minister Arun Jaitley had said the functional autonomy of the railways would be maintained.

Following the merger, the railways would not have to pay dividend to the central government though it would still get gross budgetary support from the exchequer. The salary and pension bills of railway employees would remain the responsibility of the railways.

OFF THE TRACK

• In the current year, the national carrier had to bear an additional burden of about Rs 40,000 crore on account of implementation of the Seventh Pay Commission
   
• It is yet to be decided which ministry would take a call on changes in freight rates and passenger fares
   
• Tricky issues of who bears the social service obligation of the railways, operational expenditure on un-economic branch lines and so on are still to be decided