Cabinet to consider Budget presentation on Feb 1; approval for merger of Rail budget with Union budget likely today

The proposal for advancing of the budget and the merger of the railway budget with it will be considered on Wednesday at a meeting of the union Cabinet to be chaired by Prime Minister Narendra Modi, who has been pushing for it.

PTI| Last Updated: Sep 21, 2016, 09:17 AM IST
Cabinet to consider Budget presentation on Feb 1; approval for merger of Rail budget with Union budget likely today

New Delhi: Breaking from tradition, the general budget of the union government is likely to be presented on February 1 instead of the last day of the month, as part of an overhaul that would also scrap the practice of a separate railway budget.

The proposal for advancing of the budget and the merger of the railway budget with it will be considered on Wednesday at a meeting of the union Cabinet to be chaired by Prime Minister Narendra Modi, who has been pushing for it.

The cabinet will also consider the proposal for doing away with the distinction between Plan and non-Plan expenditure.

According to the proposal, the entire Budget-making exercise will be advanced by 3-4 weeks so as to complete the legislative part of financial business before April 1, the start of a financial year.

Sources said the government plans to convene the Budget Session of Parliament before January 25, 2017, present the pre-Budget Economic Survey a day or two before the finance minister reads out the Budget on February 1.

Towards that end, the advance estimates for GDP will now be made on January 7 instead of February 7 and mid-year review of expenditure by various ministries is proposed to be completed by November 15.

The idea, sources said, is to get the Budget passed by Parliament along with Appropriation Bill and the Finance Bill before March 24 as this would ensure implementation of the Budget proposals from April 1.

According to the proposal moved by the ministry of finance, Parliament would take a three-week break -- from February 10/15 to March 10/15 to complete ministerial or departmental scrutiny by various parliamentary committees.

Once the rail and general Budgets are merged and the date of presentation is advanced, there will be no requirement of separate Appropriation Bills as well as Vote on Account, as is the current practice.

Even after the separate railway budget is scrapped and its proposals clubbed in the general Budget, the Railways would continue to maintain its distinct entity status as a departmentally-run commercial undertaking as at present.

Also, the Railways would be allowed to retain its functional autonomy with delegation of financial power rules to continue as is the case now, sources said.

After the merger, the Railways would not have to pay dividend to the central government and its capital at charge would stand to be wiped off.

Like for other departments, the ministry of finance will provide gross budgetary support to the Railways for incurring its capital expenditure.

As regards removing the Plan and non-Plan classification of accounts, it has already been announced by Finance Minister Arun Jaitley in his Budget for 2016-17.

According to the proposal, to ensure better targeting of benefits, all concessional railway passes provided to various categories of concessionaires will be linked to Aadhar number.

Also, the Railway Convention Committee, which reviews the rate of dividend payable by the railways to the government, will be disbanded. Currently, the panel also suggests the level of appropriation to various funds of the railways such as depreciation reserve funds, development fund and pension fund.

Sources said advancement of presentation of the budget by a month and completion of budget related legislative business before March 31 would pave the way for early completion of budget cycle and enable ministries and departments to ensure better planning and execution of schemes from the beginning of the financial year.

Accordingly, the budget calendar would be advanced by about 3 weeks from the current schedule of it starting from the last week of October.

Pre-budget consultations with various stakeholders are proposed to be completed by December 25. Ministries and departments would be asked to present their detailed Demand for Grants to Parliament by February 7, 2017.

After the merger of railway budget with the general budget, one single Appropriation Bill will be presented to Parliament for consideration and voting on or before March 24, 2017.

With the rollout of the goods and services tax (GST), the changes in excise and service tax, which are normally proposed in the general budget, would shift to the GST Council and hence, there would be less onerous Finance Bill for Parliament to debate, sources said.

The decision for the merger of Railway Budget with the General Budget is likely to get the official seal at the Union Cabinet meeting which is slated for tomorrow.

Railway Minister Suresh Prabhu, who has already given his consent on the budget merger proposal, will attend the cabinet meeting along with Chairman Railway Board AK Mital to be part of the historic decision that will end the 92-year old practice of presenting the separate Railway Budget.

Cabinet is likely to take up the budget merger issue tomorrow, sources in railways said.

A joint committee set up to finalise the modalities for the merger of Rail Budget with the General Budget had submitted its report in the first week of this month to the Finance Ministry recommending various changes including waiving off of payment of dividend by railways though the practice of getting gross budgetary support (GBS) from the exchequer will continue.

However, the Cabinet will take a call on whether to continue with providing about Rs 5000 crore as subsidy to railways for construction of strategic railway line.

In the 2016-17 fiscal, railways dividend was Rs 9731 crore and subsidy was Rs 4301 crore as a result the national transporter had to pay Rs 5430 crore to the exchequer.

The General Budget to be presented by the Finance Minister will also have a separate annexure with details of railways' expenditure, according to the recommendations of the joint committee comprising senior officials from Railways and Finance Ministry.

For example, the purchase of 300 aluminium coaches from the market will reflect on the expenditure on account of acquiring new rolling stock for the next fiscal.

The report is believed to have suggested ways for dealing with the railways' huge financial burden, once the Railway Budget is merged with Union Budget.

At present, the railways has to bear an additional burden of about Rs 40,000 crore on account of implementation of the 7th Pay Commission awards, besides an annual outgo of Rs 33,000 crore on subsidies for passenger service.

The delay in completion of projects resulted in cost overruns of Rs 1.07 lakh crore and huge throw-forward of Rs 1.86 lakh crore in respect of 442 ongoing rail projects.

The recommendations will be placed before the Cabinet which has to decide on the subject.

Last month, Railway Minister Suresh Prabhu had said, "I have written to Finance Minister Arun Jaitley for merger of the Railway Budget with the General Budget. This will be in the railways' interest and also in the nation's interest. We are working out the modalities."