Here’s Why Scrapping the Railway Budget May Not Be a Good Idea

Merging rail budget with general budget will result in lesser transparency and lack of accountability.

A panel headed by Bibek Debroy, a member of Niti Aayog has suggested the practice of a separate railway budget be discarded. This remedy is worse than the disease.

Firstly, it is said to help depoliticise the Railways. Even without it, Suresh Prabhu has strongly resisted attempts to influence Railway decisions for political reasons. He has refused to announce new lines, new trains, etc. He has introduced transparency in tendering.

Secondly, it is also said that this would help the government take commercial decisions. There are two enemies who must be defeated if Railways are to take commercial decisions. A separate budget is not one of them.

Two Enemies of the Railways

• The Railway unions entrenched in a corrupt relationship with bureaucrats, will never allow reducing the staff cost from the current 53 percent of the revenue to at least 40 percent, when 10-20 percent is the norm and commercial viability threshold in other railways.
  
• The bureaucracy which has made Railways their own empire with absolute freedom from accountability will not allow any change in the status quo. (Remember the Rs 10 crore scam of Bansal’s nephew.) They would even expand their empire solely to serve their interests (9 zones increased to 17  but efficiency only decreased:  Debroy report).
  

Merging Rail Budget Is Not a Good Idea

Thirdly, there is nothing to show that customer service  would improve if it became a part of the Government. If the budgets are merged, Railways would move further into the Government instead of moving further away from its control.

Let the zones become corporations. Let manufacturing units compete with the private players in those sectors. Let them follow the standard commercial accounting practices. Let them lure investments. Then Railway budget will become irrelevant and fall like a withered leaf gently. Merging now is putting the cart before the horse.

Fourthly, this merger is said to facilitate account reforms. Several committees, from  Sarin (1985) to Debroy (2015) have recommended accounting reforms to understand easily the true financial state of the organisation. The power of the Railway Bureaucracy can be measured by the fact that till today they have stalled all efforts to reform although there is a Chartered Accountant as a Minister. Prabhu promised  zero based budgeting in this year. Has it happened?

What is needed is separation of Railway employees and its members from the Railway Board, and a complete overhaul of the Board by bringing in experts.

Will Scrapping the Budget Ensure Accountability?

Fifthly, this merger can be done only at the cost of transparency and accountability.   Sadananda Gowda in his Railway Budget speech of 2014 said that out of 676 projects in 30 years, only 327 were completed. After spending the original estimate Rs 1,57,883 crore, now the railway needed Rs 1,82,000 crore to complete the rest.

Only one out of 99 new lines sanctioned in the last ten years has been completed. This kind of shocking revelation will never be made about Railways in the General Budget. Debroy wants only a paragraph for Railways in the General Budget. Even the financial details would be relegated to a corner in small print in the annexure.

Besides, IR carries 822 crore passengers in a year ( 2014-15). Because its decisions affect the people, there are expectations and curiosity  about the budget. It is certainly an engine of economic growth. Railway’s annual revenue is projected to be Rs 1, 84, 820 crore. Only, U.P., A.P. and Maharashtra have higher budgets. IR needs special attention.

Rail Budget is Justified on Principles of Business

Let us see why the Railway Budget was separated from  the General Budget in the first place.The Acworth Committee (1921) wanted Railways to be run as commercial organisation on sound business principle (Indian Railways-M. A. Rao  pg 58-60 ). Then it would meet its needs from its own income, from outside the general revenues of the country. Three more committees endorsed this view. Japan separated its Railway Budget from the Central Budget in 1919.

A Legislative Assembly committee on 20 September 1924 passed a resolution separating Railway budget from the General Budget. The Government accepted this and the Convention of 1924 came into force. It recognised the railways as being free to look after their own affairs and to function on “sound business principle” as a commercial undertaking, besides being a public utility.

This must continue. Merging the budgets and making it a mere department of the Government would take us back by a century to pre-1924 days.

(The writer is Secretary, Consumer Protection Council, Tamil Nadu)

This was a counter view on Niti Aayog’s recent suggestion to scrap the railway budget. You can read the view here.

Also read:

Abolish Railway Budget Speech, Increase Parliamentary Oversight