Cabinet approves Union Budgets and Railway Budgets approval

The government of India broke the 92 years old rule in a sweeping reform by announcing the merger of the Union Budget and the Railway Budget and advances the date by a month. This move will allow the various departments of the government to kick start from the very first day of the financial year. Currently the budget takes place on the last working day of the February and gets passed in the budget session of the parliament. However, the government departments get fund approval only in the first week of May. This is about to changed under the new practice.

In the present scenario, the railway budget happens separately and has its own income and expenditure. It is presented separately in the parliament. The government has various departments and the outlay of the defence and infra is much bigger than the railway outlay. Therefore the government felt that there is no need for a separate railway budget as defence and infra is a part of the Union budget itself.

Over time, many committees have recommended putting away the rail budget, reasoning it did not serve any purpose while politicizing the process, making fares almost impossible to raise as well as using the railways as a vehicle to dispense patronage.

While commenting on this new development railway minister Suresh Prabhu said in an interview that this is one of the biggest reforms in the history of Indian railway sector. It will continue to maintain its autonomy and has proposed to set up independent regulator which will be another part of the reform. All these changes are expected to go well for the Indian railway. The railway minister also highlighted that the railways will save Rs 9700 crore as it does not as it does not have to pay dividend to the Central government.

The government has not decided on the roughly Rs 30,000 crore social burden of the railways that stems from providing cheap fares accompanied with the subsidized freight. The government does not see any impact on the general budget and the fiscal deficit as expenses of railway will continue to be met by revenue. The railways expect Rs 40,000 crore hit on account of Seventh Central Pay Commission award.

However, this is a good move and the government led by the Prime Minister Narendra Modi and Finance Minister Arun Jaitley is taking practical approach to bring about much needed reforms in the railway sector.

This move will not impact the railway manufacturers like Titagarh Wagons (Titagarh Wagons share price trading at Rs 121.40 apiece on NSE), Kalindee Rail (Kalindee Rail share price trading at Rs 116.85 apiece on NSE), Texmaco Rail (Texmaco Rail share price trading at Rs 113.00 apiece on NSE) etc since it is just a policy move.

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