India to merge rail, union budgets

Dhaka,  Monday,   2016-09-21
Published : 21 Sep 2016, 17:35:20

India to merge rail, union budgets

India will merge its railway budget with the annual union budget from the next fiscal year, ending a nearly century-long practice and easing the way for the government to cut populist subsidies and push through structural reforms.

The world's fourth-largest rail network employs about 1.3 million people and pays the government a net dividend of about 40 billion rupees ($596.81 million) annually.

The practice of a separate railway budget dates back to the days before India's independence from Britain in 1947, when the network was a major industrial asset and revenue earner.

Since then the need for a separate budget has waned, but the exercise has also turned into an opportunity for political parties to press the government to hand out expensive subsidies on passenger fares, and curry favour with voters.

"It should give flexibility to the railways ministry to make its own pricing policy without waiting for parliament approval," said N.R. Bhanumurthy, an economist at a Delhi-based think tank, the National Institute of Public Finance and Policy, which is partly funded by the government.

After the merger, the railways will not have to pay the government a dividend, Finance Minister Arun Jaitley told reporters following the cabinet decision on Wednesday.

India inherited a railway network from the British that was more than twice as long as China's, and has since grown it by a fifth, to 65,000 km (40,390 miles). In contrast, China's rail network is close to double the size.

Subsidies on passenger fares cost more than $4 billion a year, analysts estimate.

Railway-related stocks jumped after the news.

Texmaco Rail & Engineering Ltd was up 5.9 per cent in midday trade, Titagarh Wagons rose 3.6 per cent and Kalindee Rail Nirman Engineers stood up 2.6 per cent.

- TS
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