Centre considering proposal to merge rail, general budgets: Lavasa

New Delhi, Aug 7  The Union Finance Ministry has said it has started the process of examining the proposal from the Railway Ministry to merge the Rail Budget with the General Budget, 92 years after the separation took place.

"We will look at his (Railway Minister Suresh Prabhu's) proposal and examine it. It will have to be done in consultation with the Railway Ministry. That process has started," Finance Secretary Ashok Lavasa told IANS.

The Rail Budget has had a separate existence from the General budget since 1924 when the British spun it off for a better focus on India's most important infrastructure network. The Railways then accounted for 70 per cent of the total budget.

The Rail Budget now is only 15 per cent, on an average, of the country's budget.

Asked when a decision is likely, Lavasa said, "We can reach a conclusion only after we have considered the pros and cons of his (Railway Minister's) proposal." 

"This (merger) is something that has been suggested even in the past. So, one will have to consider what was the view taken in the past and why that view was taken," he said. 

The Indian Railways suffer from a huge revenue deficit, the burden of which after the merger will be transferred to the Ministry of Finance.

According to Prabhu, who suggested the merger of the two budgets in a recent letter to the Finance Ministry, the already stressed Railways were facing an additional burden this year of Rs 30,000 crore on account of the 7th Pay Commission recommendations.

The letter from Prabhu came after a committee headed by NITI Aayog member Bibek Debroy suggested the merger as part of restructuring of the Railways.

If the merger happens, the Railways will also get rid of the annual dividend it currently has to pay for Gross Budgetary Support (GBS) from the government.

Prabhu in the current Monsoon session of parliament had questioned the paying of the dividend to the Finance Ministry.

"This paying dividend to the Finance Ministry is one area which really needs to be looked into. Why should the Railway pay dividend? This has been a recommendation of the Standing Committee. There have been several unanimous recommendations on this by several Standing Committees that the Railways discharge very useful public functions," Prabhu said in the Lok Sabha.

If the Finance Ministry agrees to the proposal, there could be a unified Union Budget for 2017-18 after 92 years.