Railways' budgetary support may be up 12%

Following the merger of the railway Budget with the general Budget, the central government’s allocation for the railways’ capital investment will exceed the current year's budgetary support amount of Rs 45,000 crore. 

“The Railways is set to place its demand for more capital allotment to the finance ministry within a few days and it is likely to be more than Rs 55,000 crore,” said an official close to the development. 

Sources involved in the budget-making process said the outlay for the railways, including revenue and capital expenditure, was likely to increase.

Officials said with the merger of the two Budgets, the expenditure department of the finance ministry will ensure less wasteful expenditure and greater discipline in terms of allocation and outflow of funds. “More than the increased allocations, what will really be a positive impact this time is that leakages could be plugged and spending will be more efficient,” a government official said. The official said the expenditure department would have a greater say and monitoring capacity in rail projects, but would also ensure the operational independence of railways.

In 2015-16, the budgetary support to the railways increased 16% to Rs 35,007.87 crore, against the Rs 30,121.16 crore in 2014-15. 

“In 2016-17, we got Rs 45,000 crore, including a Rs 10,000-crore road safety fund, though we asked for Rs 55,000 crore. This year, our demand will be much higher,” a railway ministry official said.

From the next financial year, the railways will not have to pay any dividend, which will save the carrier approximately Rs 10,000 crore. After adjusting for the subsidy in paying dividend, the railways will make a net gain of about Rs 5,000 crore. The railways paid a dividend of Rs 8,722.51 crore in 2015-16 and Rs 9,173.55 crore in 2014-15. 

The Railways Convention Committee decides the rate of dividend. In 2015-16, it was about five%, and the Committee had recommended cutting it to four%. For 2016-17, it is likely to increase. The merger of the two Budgets is based on the recommendations of the committee headed by Bibek Debroy, member, NITI Aayog and a paper titled ‘Dispensing with the Railway Budget’ by Debroy and Kishore Desai.