Union Cabinet approved Merger of rail budget with general budget

The Union Cabinet has approved the proposal of Ministry of Finance to merge Railway budget with the General budget.

Background:

The presentation of separate Railway budget started in the year 1924, and has continued after independence as a convention rather than under Constitutional provisions.

The arrangements for merger of Railway budget with the General budget have been approved by the Cabinet with the following administrative and financial arrangements:

• The Railways will continue to maintain its distinct entity -as a departmentally run commercial undertaking as at present.
• Railways will retain their functional autonomy and delegation of financial powers etc. as per the existing guidelines.
• The existing financial arrangements will continue wherein Railways will meet all their revenue expenditure, including ordinary working expenses, pay and allowances and pensions etc. from their revenue receipts.

The Capital at charge of the Railways estimated at Rs.2.27 lakh crore on which annual dividend is paid by the Railways will be wiped off. Consequently, there will be no dividend liability for Railways from 2017-18 and Ministry of Railways will get Gross Budgetary support.

In 2016-17, the Railways were budgeted to pay Rs. 9,731 crore as dividend, whereas the subsidy claimed by the Railways towards loss-making routes was estimated at Rs. 4,301 crore. The net dividend payment to the Finance Ministry was estimated at Rs. 5,430 crore.

The merger would help in the following ways:

• The presentation of a unified budget will bring the affairs of the Railways to centre stage and present a holistic picture of the financial position of the Government.
• The merger is also expected to reduce the procedural requirements and instead bring into focus, the aspects of delivery and good governance.
• Consequent to the merger, the appropriations for Railways will form part of the main Appropriation Bill.

Other details:

As the government decides to merge the Railway budget and the General budget, Union Cabinet on Wednesday scrapped the Railway Convention Committee (RCC), which determines the rate of dividend to be paid to the Finance Ministry

Railway Convention Committee (RCC):

The Committee consisted of 18 members — 12 members of the Lok Sabha and six of the Rajya Sabha. Both the Ministers of Railways and Finance were its nominated members.

• It was constituted in 1949 with the primary role of determining the rate of dividend, modalities of its payment and exemptions.
• It took on a wider role of examining various subjects related to the working of the Railways and its finances since 1971.