Railway Budget Merged with General Budget

Railway Budget Merged with General Budget

This is a guest blog by Brajesh. During the British rule railways took up to 85 percent of the annual budget. It has come down to about 15 percent now. Today roads carry almost 86 percent of the India’s passengers and more than 60 percent of freight. Considering the diminished significance of railways it was high time that the railway budget was merged with the general budget. Thus this decision should be welcomed. In this blog we shall analyze the implications of this exercise.

State of Railways

  • Indian railway is one of the world’s largest railway networks comprising 115,000 km of track over a route of 67,312 km and 7,112 stations.
  • Railway is the second largest employer in India with 1.376 million employees after defence.
  • In 1950 railway carried over 74% of passenger traffic which has come down to below 13% now. In 1950 it carried over 86% of freight which has now come down to below 38%. Cost of transportation by rail is lower than road and also less polluting. Thus poor growth of railway has increased logistics cost, pollution and lowered competitiveness of Indian industry. Thus cumulatively causing losses of lakhs of crores of Rupees over the years.
  • Expansion in railway has been only 11,000 km since 1950. In the same period China added 80,000 km to its railway.
  • Railway is beset with several major problems. The major problems are:
    • Inadequate expansion.
    • Poor safety.
    • Slow movement, thus keeping the per year carriage of freight and passengers much below international standards.
    • Mired in the socialist mindset fares have not been raised in keeping with the costs.
    • Employee productivity has been ever decreasing. Currently it has around 30% surplus workforce and with the implementation of 7th pay commission and the burden of pensions of its employees, the situation will further worsen.
    • Railway ministers have traditionally misused their power to benefit their vote banks and take populist measures resulting in massive losses to railway.

Benefits of Merging Railway Budget

The Finance ministry accepted the recommendations of the Bibek Debroy Committee to merge Railway Budget with the general budget. Some expected benefits are as follows:

  • Reduction in populist measures and improved management.
  • Faster rate of expansion.
  • Improved safety measures and thus reduction in loss of lives through accidents.
  • Presumably the government will devise a holistic transportation plan to include road, air, waterway and railway to enhance transportation efficiency, unlike the past.
  • Railways will no longer have to pay the annual dividend of around Rs. 10,000 crore, which it had to pay for budgetary support from the government.
  • The merger will enable the government to present a single appropriation bill including the estimates of railway in the parliament, thereby shortening the process.

Perceived Losses

There are no serious perceived losses except issues like:

  • Passenger fares will go up because of lack of media scrutiny.
  • Future Railway Ministers may not be able to pamper their constituencies unfairly.

Is Merger of Railway Budget a Revolutionary Change?

The merger is a good step as has been analyzed above. It, however, is hardly a revolutionary change but an overdue action. The needed steps are:

  • Rapid expansion with greater induction of funds.
  • Globally competitive speed of transportation and logistics costs.
  • Internationally acceptable safety standards.
  • Efficient management to include termination of aspects like colonial mindset misuse of manpower and selling off of the idle land.
  • Railway should focus on core task and not schools, hospitals, police, production and maintenance units as well.
  • Increased role of the private sector.
  • Improved transparency and accounting to increase investor confidence.

Hopefully this step, in the right direction, will pave the way for future improvement which is vital to lower logistics costs in India and help Indian industry become globally competitive and India’s population get world standard travel and safety.

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