RAILWAY BUDGET

Introduction and definition: -

  • Budget is a statement of the estimated annual receipts and expenditure both on capital as well as revenue transactions of an organization. It is a process of planning and reviewing the activities of an organization. Railways being a Govt. of India department, receipts and payments of the system were use to be merged in the General Budget of the Govt. of India. As a result of the recommendations of the “ACWORTH COMMITTEE” during 1920-21, it was decided to separate the finances of Railways from General Finances with the objects of securing stability for General revenues and to strengthen the Railways finances. This is generally known as “Separation Convention of 1924”. Since then the Railway Budget is submitted in advance of the General budget.
  • In terms of article 112 of the Constitution of India, the budget is presented to both the Houses of parliament viz. Lok sabha and Rajya sabha.
  • The expenditure on Railways may be either voted or charged. The expenditure covered under the former category requires the approval of parliament. But in respect of charged expenditure the sanction of the President of India is conveyed without being submitted for the vote of Parliament. The items of expenditures that are covered under this category are as under: -
  1. iInterest, sinking fund charges and redemption charges on loan and debts.
  2. iiSalary, allowances and pension payable to or in respect of Comptroller and Auditor General Of India.
  3. iiiAny sum required satisfying any judgment, decree or award of any court or arbitration tribunal.
  4. ivAny other expenditure declared by the constitution of India or by Parliament by law to be so charged.

THE SOURCE OF FUNDS FOR THE RAILWAY ORGANIZATION: -

CONSOLIDATED FUND OF INDIA.

  • In terms of article 266(I) of the Constitution of India, a fund is created which will act as a reservoir in which all the earnings flow (credited) and from which the expenditures of Government as authorized by the Parliament will be made. Central Government is having Consolidated Fund of India.
  • Any expenditure to be made from this fund needs Parliament's sanction/votes. For this purpose, a bill known as “Appropriation bill” is required to be introduced by Railway minister in Parliament.
  • The bill is discussed and when passed by the Parliament is send to the President of India for his assent. When the assent is given by the President, the bill gets converted into the “Appropriation Act” and this act enables to withdraw the money from the Consolidated Fund of India.

CONTINGENCY FUND OF INDIA.

  • Normally all expenses incurred by the Government should be met out of consolidated fund of India with the vote of the parliament or Appropriations sanctioned by the President. However, to meet unforeseen contingencies when the expenditures cannot be met out of available grants and the vote of the parliament cannot be obtained due to the same not being in session or dissolved the expenditure is met out of fund created for the purpose under article 267(II) which is known as “Contingency Fund of India”. The fund is under the control of President of India. As far as Railways are concerned, Financial Commissioner (Railways) controls the fund.
  • This fund is used as and when the contingency arises. Money can be withdrawn from this fund on an application addressed to the President and is given as an advance which needs recoupment. The amount from this fund can be withdrawn when the parliament is not in session and to meet the unforeseen expenditure, which cannot be met from out of the amount of grant available.
  • As soon as parliament comes to session an “Accommodation bill” is passed and amount is recouped from Consolidated Fund of India.

DEMANDS FOR GRANTS: -

  • The budget proposals of the expenditures to be met out from the “Consolidated fund of India” should be presented in the form of Demands for Grants.
  • Parliament has got the powers to assent or to refuse to assent or to reduce the amount proposed by the Railway Ministry during the course of discussion on Railway budget.
  • Such powers are exercised to cut motion.
  • The voted part of expenditures together with the charged appropriation are presented to the parliament in the form of Demands for Grants.
  • At present there are sixteen demands for Grants which are grouped under seven categories viz.

PREPARATION OF ANNUAL BUDGET: -

Preparation of annual budget is done by the Railway Administration and other production units. The revised estimates for the current financial year and the budget estimate for the ensuing financial year are prepared and submitted to Railway board in the month of November every year.

The estimation is done on the basis of –

  1. 1Actual expenditure for the previous year under each demand.
  2. 2Actual expenditure for the first seven months of the previous financial year under each demand.
  3. 3Actual expenditures for the first six months of the current financial year and the approximate expenditures for the seventh month.

The revised requirement of the remaining five months of the year are thus worked out which are known as revised estimates for the current year. The same become budget estimates for the ensuing financial year after taking into account special features and known factors for the next financial year.

The budget is presented to the parliament duly compiled by the Railway board in the month of February each year on the dates fixed for the purpose.

PRESENTATION TO THE PARLIAMENT: -

The consolidated budget proposals are presented before the parliament by Honorable Railway Minister in the following form –

  1. 1The speech of Railway Minister (Yellow Book)
  2. 2The book of Demands for Grants(Blue Book)
  3. 3The explanatory memorandum (White Book)
  4. 4Works, Machinery and Rolling Stock Programme (Pink Book)
  5. 5Budgetary Notes(Green Book)

APPROPRIATION BILL: -

In terms of article 114(I) of the Constitution of India, after the budget is voted by the Parliament and Appropriations sanctioned by the President, an Appropriation bill is introduced in the Parliament, on passing of the same, it becomes Appropriation Act. This act authorizes Government to withdraw money from consolidated fund of India to the extent sanction for incurrence of expenditure.

RULES OF RE-APPROPRIATION: -

The following are the rules of Re-appropriation: -

  1. 1Re-appropriation is not permitted from one demand to another demand.
  2. 2Re-appropriation is not permitted from capital to revenue demands and vice versa.
  3. 3Re-appropriation is not permitted from voted expenditure to charged expenditure and vice versa.
  4. 4Any surplus amount that remains unutilized by the end of the financial year lapses with that year and is not available for spending during the next financial year.
  5. 5Railway Board is empowered to make re-appropriations within the same demand.
  6. 6GM is empowered to make re-appropriations from one subhead of demand to another subhead of demand but within the same demand.

Parliamentary Control over Railway Finance

The Parliamentary Control Over Railway Budget is exercised by the following committees either before the submission of demands to parliament for voting or after the expenditure is incurred and annual accounts are closed-

  1. 1Railway Convention Committee
  2. 2Estimate Committee
  3. 3Discussion of Railway Budget
  4. 4National Railway Users Consultative Council
  5. 5Committee on Subordinate Legislation
  6. 6Committee on Government Assurance
  7. 7Public Accounts Committee
  8. 8References from Member of Parliament

1 Railway Convention Committee---

This is an adhoc committee of parliament consisting of 18 members (12 LS and 6 RS). It was constituted for reviewing the financial arrangements between Railway Revenues and General Revenues. This is the only committee of parliament to include two union minister-MR and FM.

  • ➤It examines periodically the Railway Finance and Working.
  • ➤It reviews the rate of dividend payable by the railway to General Revenue.
  • ➤This Committee normally meets after every 5 years.
  • ➤It recommends the changes to be made in Railway Finance.

2 Estimate Committee --

This is a Parliamentary Committee to examine such of the estimates as it may deem fit or specially reffered to it by Parliament or Speaker.

  • ➤There are 30 members elected by Lok Sabha every year.
  • ➤No minister is elected.

3 Discussion of Railway Budget –

The Railway budget is discussed and debated in parliament by members of both houses. They raise starred question, unstarred questions and short notice questions, the Railway minister replies. Thus parliament exercises control over Railway finance and budget. Starred: Questions for oral answers. Unstarred: Replies to which are laid on the table of the house. Short notice: A minimum notice of 10 days is required.

4 NRUCC --

To secure better representation of railway users and afford more frequent opportunities for consultation between Railway & Railway Users on matters related to services rendered by railway NRUCC was formed in 1953.

  • ➤Members hold office not more than 2 years.
  • ➤The council consists of 7 persons.
  • ➤They are appointed by MR from various ministries, Rly. Committees, organization and eminent persons who take interest in Rly. Problems.
  • ➤The council meet at least once a year. MR will preside the meeting of council

5 Committee on subordinate legislation ---

It scrutinizes and reports to Parliament that the power to make regulation, rules, subrules, bylaws etc. conferred by constitution or delegated by Parliament are being properly exercised.

6 Committee on Government Assurances –

It scrutinizes whether Assurances, promises, undertaking given by the Minister from time to time, on the floor of the Lok Sabha and Rajya Sabha have been implemented within the minimum time.

7 Public Accounts Committee

  • ➤It examine the accounts of sum granted by the parliament for expenditure to satisfy: -
  • ➤that the money sanctioned have been utilized legally for the services and purposes to which they have been charged.
  • ➤The expenditure confirms to the authority which governs it.
  • ➤That every Re-appropriation has been made in accordance with the provisions made under rules.
  • ➤PAC consists of 22 members from the both houses of parliament every year
  • ➤A minister is not elected. If a member is appointed as minister, he will be ceased to be a member of PAC.
  • ➤Term of office of member of committee shall not exceed one year.
  • ➤Chairman of PAC is appointed by the Speaker.
  • ➤If Dy. Speaker is a member of PAC, he will be appointed as Chairman.
  • ➤Committee has its own programme and procedures.

8 Reference from Member of Parliament –

Any MP may address the Ministery of Railway, or a Railway Administration on any matter concerning railway working. Member may also ask questions in both the houses of Parliament on issue connected with railway working.

Public Expenditure Accountability of the Indian Railways

The Indian Railways (IR) is one of the chief logistics agents of the Government of India (GOI).

  • Considering the significant GOI funding into IR, public expenditure accountability (PEA) becomes an issue of importance.
  • This paper looks into different aspects of the expenditure and financial management of IR.
  • The paper is divided into three portions.
  • The first portion looks at the railway-government interface. The main areas of focus here include a brief examination of The Indian Railways Act, the financial interface between the GOI and IR (consisting of budgetary support, market sourced financing and dividend payments), evaluating the need for a separate railway budget, political interference in the activities of IR and the interaction of IR with state governments.
  • The second portion of the paper deals with the internal financial management of IR. In this section, there is an effort to evaluate the revenue generation by IR along with suggestions for enhancing its potential. This is followed by a look at the issue of subsidies to IR. Investment decisions of IR and the Special Railway Safety Fund (SRSF) along with the issue of excess manpower and cost reduction are other topics included in this section.
  • The paper ends with a roadmap to corporatisation as a possible solution to the problems IR is faced with. The main areas dealt with are financial issues, pensions, the need for customer focus, the importance of focus on core competencies and a need to revamp IRs administrative structure and attitude.

Cannons/Standards of Financial Propriety –

In exercise of their financial powers, the sanctioning authority must pay due attention to the following principles –

  • iThe expenditure should not prima facie be more than the occasion demands and that every Government should exercise the same vigilance in respect of expenditures incurred from public money as a person of ordinary prudence, would exercise in respect of expenditure of his own money.
  • iiNo authority should exercise its powers of sanctioning expenditure to pass an order, which will be directly or indirectly to its own advantage.
  • iiiPublic money should not be utilized for the benefit of a particular person or section of a community unless –
  • aThe amount of expenditure involved is insignificant.
  • bA claim for the amount could be enforced in a court of law.
  • cThe expenditure is in pursuance of recognized policy or custom.
  • ivThe amount of allowances such as travelling allowance granted to meet expenditure of a particular type should be so regulated that the allowance are not on a whole a source of profit to the recipient.

Note: All proposals involving financial implications except those which have been specifically exempted for this purpose should be referred to finance branch for advice before these are sanctioned.

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