Budget reform: Cabinet clears merger of rail, general budgets

Ending a nearly century-long practice, the Cabinet today decided to scrap a separate budget for railways and merge it with general budget, presentation of which will be advanced to spur spending and boost economy.
As part of a major overhaul of the budget process, the Cabinet headed by Prime Minister Narendra Modi also decided to do away with classifications of expenditure into Plan and non-Plan, making the exercise simpler.
Briefing reporters, Finance Minister Arun Jaitley said the Cabinet has in-principle decided to end the colonial-era tradition of presenting Budget on last day of February and advance it to help complete the legislative approvals for the annual spending plans and tax proposals before the beginning of the new financial year on April 1.

But the actual date of presentation of the Budget for 2017-18 will be decided later keeping in mind the schedule for assembly elections in crucial states like Uttar Pradesh, he said.
The Finance Ministry had proposed to the Cabinet that the annual Budget presentation be fixed for February 1 and complete the budget exercise by March 24.
Presently, the Budget approval process happens in two parts extending to the second or third week of May, hampering early implementation of schemes and spending programmes.

"While we in-principle are in favour of advancing the budget date and finishing the entire financial business before March 31...The actual dates will be decided after consultations depending on calendar of the state elections," he said.

To facilitate early presentation of the Budget, his ministry had proposed that the Budget Session of Parliament be convened sometime before January 25, a month ahead of the current practice.
Consequently, the preparation for the Budget would start now in early October and GDP estimates made available on January 7 instead of February 7.
The government, he said, is keeping itself in a "state of readiness" to advance the Budget presentation.
A separate Budget for Railways has been presented to Parliament since 1924 even though neither the Constitution nor legal requirements call for a separate Budget.
With the merger of the Railway Budget there would be a single Budget which would holistically depict the financial position of the Government of India.

Rail Minister Suresh Prabhu said the merger of rail and general budgets will not impact the functional autonomy of the railways but help in enhancing capital expenditure.
"One single budget will mean railway and general budget will work in harmony," he said, adding railways will not have to pay dividend to the government.