General Budget Current Affairs

Union Cabinet approves merger of Rail budget with General budget

The Union Cabinet has approved the proposals of Ministry of Finance to merge of Railway budget with the General budget.

Merger of Railway Budget with the General Budget will be effective from the Budget 2017-18.  It will end 92-year-old tradition as the presentation of separate Railway budget started in year 1924. Since then it has continued after independence as a convention rather than under Constitutional provisions.

The merger has been approved with the following administrative and financial arrangements of Railways

  • It will continue as a departmentally run commercial undertaking to maintain its distinct entity as at present.
  • It will retain its functional autonomy and delegation of financial powers etc. as per the existing guidelines.
  • Its existing financial arrangements will continue wherein it will meet the revenue expenditure from revenue receipts.
  • The Capital at charge estimated at 2.27 lakh crore rupees on which Railways pays annual dividend will be wiped off.
  • Consequently, Railways will not have dividend liability from 2017-18 and the Union Ministry of Railways will get Gross Budgetary support.
  • It will save Railways from the liability of payment of approximately 9,700 crore rupees as an annual dividend to the Central Government.

Benefits of merger

  • The unified budget presentation will bring the affairs of the Railways to centre stage and present a holistic picture of the financial position of the Government.
  • It is expected to reduce the procedural requirements and instead bring into focus on the aspects of delivery and good governance.
  • The appropriations for Railways will form part of the main Appropriation Bill due to the merger.

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Union Cabinet approves advancement of the Budget presentation

The Union Cabinet has given in principle approval for advancement of the date of Budget presentation from the last day of February to a suitable date.

Besides in another reform relating to budgetary process, Union Cabinet has approved merger of Plan and Non Plan classification in Budget and Accounts.

Advancement of the date of Budget presentation

Benefits

  • Pave way for early completion of Budget cycle and enable Central Ministries and Departments to ensure better planning and execution of schemes from beginning of financial year.
  • It will also enable Central Ministries and Departments to ensure better utilize the full working seasons including the first quarter of the year.
  • It will preclude the need of appropriation through ‘Vote on Account’. It will enable implementation of legislative changes in tax and laws for new taxation measures from the beginning of financial year.

Merger of Plan and Non Plan classification in Budget and Accounts

The Union Cabinet also approved proposal of Union Finance Ministry to do away with the Plan and Non-Plan expenditure classification from 2017-18and replace with ‘capital and receipt’.

The relevance of plan and non-plan expenditure was lost after the abolition of the Planning Commission.

However Budget will continue earmarking funds for Scheduled Castes Sub-Plan/Tribal Sub-Plan and similarly, the allocations for North Eastern States.

Plan/Non-Plan will help in resolving the following issues

  • This distinction of expenditure had led to a fragmented view of resource allocation to various schemes.
  • It had made it difficult to ascertain cost of delivering a service and also to link outlays to outcomes.
  • It had led to bias in favour of Plan expenditure by Centre as well as the State Governments and had neglected essential expenditures on maintenance of assets and other establishment related expenditures to provide essential social services.
  • The merger is expected to provide appropriate budgetary framework that will have focus on the capital and revenue expenditure.

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