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Why India must scrap a separate Railway Budget

By BS Bureau
August 01, 2016 14:03 IST
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The Union government is reportedly considering doing away with the practice of presenting a separate Railway Budget.

In response to the recommendation made to this effect by a committee headed by NITI Aayog member Bibek Debroy, the Prime Minister’s Office has sought the comments of the railway ministry on the proposal.

Railway Minister Suresh Prabhu, according to a report in this newspaper, has endorsed the idea, whose implementation would mean the scrapping of a 93-year-old ritual of a railway minister presenting a separate Budget for the country’s largest transportation network.

Mr Prabhu’s endorsement of doing away with a separate Railway Budget should not come as a surprise.

Already, he has taken some initiatives that have set him apart as a railway minister.

Not only did he stop the age-old practice of announcing the launch of new train services in the Railway Budget, he has also moved ahead on committing significant amounts of investment to build railway capacity, modernising railway stations through private sector participation and creating a rail tariff authority that would keep the process of fixing fares and freight rates immune from political influence.

His speed of executing these plans may have suffered from delays, bureaucratic lethargy and resistance in some cases, but Mr Prabhu has left nobody in doubt that he is keen on reforming the railway network to achieve greater operational efficiency and higher customer satisfaction.

His stance on the Railway Budget is in line with the progressive thinking that marked his other initiatives and deserves to be welcomed.

Since 1924, when the practice of presenting a separate Railway Budget began, the place and importance of the Indian Railways in the Indian economy have undergone significant changes.

Its Budget then was as large as almost 85 per cent of the Union government’s full Budget and today it is less than 10 per cent.

Those days the Indian Railways’ share in the country's total freight transportation network used to be over 90 per cent and today it is less than 40 per cent.

Not surprisingly, the Indian Railways today has a share of less than two per cent of the country’s current gross domestic product.

Indeed, more than half a dozen top Indian companies, including a few public sector undertakings, have an annual turnover that is higher than the top line of the Indian Railways.

Given the Indian Railways’ size of operations in relation to other economic entities, there is no reason why the railway minister should continue to present a separate Budget.

As an alternative, the Union Budget could provide for a brief outline of the revenue and expenditure of the railways.

Three caveats, however, need to be made here.

One, the scrapping of the practice of presenting a separate Railway Budget should not mean that the ritual of annual reviews of fares and freight rates is performed instead by the finance minister.

The task of fare and freight changes should be entrusted with the proposed rail tariff authority.

Two, the scrapping of the separate railway Budget practice should also mean a major and much-needed accounting policy change of freeing the Indian Railways of the burden of paying dividends on the budgetary support it gets from the Centre.

And finally, the change should be accompanied with a greater thrust on expediting projects for the dedicated freight corridors, modernisation of railway stations and the locomotive factories, without which reforms of the Indian Railways would remain incomplete.

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BS Bureau
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