Some sense at last
After seeking to inject some discipline in the fincing of states, the Central government is now moving fast to make its budgeting exercise more sensible. Setting its fil seal on this initiative, the Union Cabinet recently decided to bring forward the budget session by a month to sometime around January 25 from next year onwards. This means that it wants the Fince Bill and Appropriation Bill to be passed before March 24, so that budget proposals get implemented straightaway from April 1, the beginning of the fincial year. So far, the practice has been for the Fince minister to present the budget on the last day of February, after which Parliament would go into recess and pass the Fince Bill only in the second half of the budget session. By that time, it would be mid-May. By June, the monsoons arrive. It is only around October that expenditures begin and the government schemes get going, so half the fincial year is already lost. It is indeed a wonder why the country put up with such waste decade after decade. Now that the powers-be at the top have filly taken a cold-eyed, hard look at this entire sorry process, there is hope that things will improve if ministries and departments get cracking in the first April-to-June quarter itself. Accordingly, budget making preparations will start from October while GDP estimates will be made available on the first week of January. Another important reform the rendra Modi government has undertaken is to remove for once and all the distinction between plan and non-plan expenditure. This is but a tural corollary of the Prime Minister’s move to scrap the Planning Commission while accepting the tax devolution award of the Fince Commission. For far too long, plan and non-plan expenditures helped confuse the entire picture. Governments spent far more under non-plan heads consisting primarily of salaries, subsidies, loans and interest, which economists basically consider to be non-productive areas. It was the smaller plan expenditure which showed the money set aside for productive purposes like capital building and welfare schemes. So, classifying expenditure under revenue and capital heads in future is expected to give a better picture of how public funds are going towards productive ends.
However, it is the Union cabinet’s decision to merge the general and railway budgets from next year that has grabbed the headlines. That this country persisted so long with a British raj practice since 1924 is another example of how unthinkingly convention-bound our post-Independence rulers have been. Granted there was a time when laying down the railways took up as much as 70 percent of the revenue during colonial times, so its finces had to be separated from general finces during colonial rule. But in the last three decades particularly, the rail budget had become completely skewed. Regiol leaders laid claim on it as some sort of separate fiefdom, announced rail projects, trains and goodies with eyes firmly fixed on their domestic political constituencies, while the economics went for a six. The vast railway bureaucracy too followed its successive ministers’ cue to become a law unto itself. The upshot of all this chromic populism is that Indian Railways is now saddled with concessions and subsidies galore. On a single train journey to its passengers, the Railways offers as much as 43 percent subsidy. In the last fincial year, it reportedly spent Rs 34,000 crore towards ‘social service’ obligations, including cross-subsidies involving fares and freight and over 50 concessions. Salary and pension bill along with fuel expenses now account for nearly 75 percent of Railway expenses. Thankfully, the present Railway minister Suresh Prabhu took stock of the larger picture and decided to forego this crumbling empire, and he was seconded by the NITI Aayog. Union Fince Minister Arun Jaitley has promised that the Railway’s functiol autonomy will be maintained, which essentially means it will continue to be free to raise resources through extra-budgetary means. But for Prabhu, he will at last be free of the burden of annual dividend Raiways has to pay for gross budgetary support from the government every year, to the tune of about Rs 10,000 crore annually. He can also negotiate for better budgetary support and focus on capital expenditure to improve rail services. All in all, future rail ministers will sleep lighter thanks to this belated reform measure.