Rail Budget merged with General Budget; to be presented one month early with no plan, non-plan distinction

In a major overhaul, the Cabinet on Wednesday approved advancing presentation of the annual Budget by a month, scrapped over nine-decade old tradition of having a separate Railway Budget and removed classifications for expenditure to make the exercise simpler.

Ending 92-year-old tradition, the Cabinet on Wednesday decided to merge rail budget with the general budget and agreed in-principle to advance the date of its presentation in Parliament from the usual February end.

The actual date for presentation of the general budget for 2017-18 will be decided by the government after taking into account the ensuing assembly elections, Finance Minister Arun Jaitley said while briefing the media about the Cabinet decisions.

The Cabinet has also decided to do away with the Plan/ Non-Plan expenditure classification in Budget 2017-18 and replace with 'capital and receipt'.

The government, Jaitley said, was in favour of advancing the budgetary exercise to that it could be completed before March 31 and expenditure on public-funded schemes could begin from April 1.

He said: "While we in-principle are in favour of advancing the budget date and finishing the entire financial business before March 31...The actual dates will be decided after consultations depending on calendar of the state elections."

The government, he added, is keeping itself in a "state of readiness" to advance the Budget presentation.

As per tradition, the Budget is presented on the last working day of February. A separate railway budget was started by the British in 1924.

Economic Affairs Secretary Shaktikanta Das said the Central Statistical Organisation (CSO) will provide provisional Advance Estimates of national income or GDP by January 7 so that the data can be incorporated in preparation of Budget.

The provisional advance estimates, he hoped, would be in line with the one normally released by February 7.

Das said the government will issue Budget circular in a day or two.

Rail Minister Suresh Prabhu said the merger of rail and general budgets will not impact the functional autonomy of the railways but help in enhancing capital expenditure.

"One single budget will mean railway and general budget will work in harmony," Prabhu said, adding Railways will not have to pay dividend to the Government.

Jaitley said the report of a committee headed by NITI Aayog member Bibek Debroy had observed that presenting a separate railway budget is only a ritual as its size has become very small compared to the general budget.

It had suggested that rail budget should be a part of government's overall fiscal discipline and the developmental approach of the Budget.

"Cabinet has decided that rail budget and general budget will amalgamate. There will be only one budget which will be the general budget and all proposals with regard to the railways will be part of the general budget. Consequently there will be only one appropriation bill," Jaitley said.

He said the government will continue to maintain the distinct identity of the railways and its functional autonomy.

"The government will also take an initiative to ensure that there is a separate discussion to the railways expenditure each year so that there is a element of detailed Parliamentary scrutiny and accountability," Jaitley said.

Asked who will decide on passenger fare and freight rates, Jaitley said: "These decisions will continue to be taken by the Railways. But the accounts of railways will be presented to Parliament by the Finance Minister. Presentation of statement of accounts will be consolidated so there will be a horizontal merger of the two accounts."

As regards advancing the date for presentation of Budget, Jaitley said the government is in-principle in favour of advancing the budget date so that financial business ends before March 31 and taxation can be levied and expenditures can be incurred from April 1.

"We should move away from the current practise when (certain indirect tax) proposals come into effect from June 1. The government is in-principle in favour of advancing budget date and budget session. However, the specific date for budget will be decided after taking into account the calendar for assembly elections," he said.

He said that during assembly elections, Parliamentarians are busy campaigning and hence the actual dates will be decided after consultations, depending on the calendar of the state assembly elections.