Budget 2017 – 18 may introduce several reforms including the merger of general budget and railway budget. Explain the rationality
Proposed Reforms in the 2017-18 budget –
1. Ending the difference between the plan and non plan expenditure
2. Advancing the date of presentation of the budget
3. merging the Railway budget with general budget.
The East India Railway Committee, chaired by Sir William Acworth, pointed out the need for unified management of the entire railway system. On the recommendations of this committee and ratification of the resolution for separation in 1924, the government took over the actual management of all the railways, and also separated the railway finances from the general governmental finances, leading to the practice of presenting the Railway Budget separately from the general budget of India every year.
In 1924, the railway budget formed about 70% of the country's budget. So separating it out allowed better focus on each budget's priorities. It helps to run the railways on commercial lines.
However, it was proposed that from 2017-18 financial year, the railway budget will be merged with general budget again. The following factors are attributed to this –
1. Railways has to bear an additional burden of about Rs. 40,000 crore on account of implementation of the 7th Pay Commission awards
2. To bear annual subsidies of Rs. 32,000 crore
3. To reduce the delay in completion of projects that resulted in cost overrun of Rs. 1.07 lakh crore and huge throw-forward of Rs. 1.86 lakh crore in respect of 442 ongoing rail projects.
4. to get rid of the annual dividend it has to pay for gross budgetary support from the government every year.
5. The merger will shift the issue of raising passenger fares, an unpopular decision, to the Finance Ministry
7. In the long-term interest of national transporter as well as the country’s economy.
8. The political implication is - Railway ministers will not favor the constituencies that they are representing by way of new trains and projects
9. During the British rule the Railway budget occupied 70% of the GDP. But now it covers less than 15% of India's national budget. This drastic reduction do not require managing a separate budget.