The Central government has embarked on a major fiscal reform. The Cabinet will soon take up the proposal to merge the Railway Budget with the General Budget, blurring the difference between plan and non-plan expenditure, and instead switch to the classification of revenue and capital expenditure, advancing the Budget presentation date by almost a month, to the end of January or the first week of February.

Speaking to BTVi , former Finance Minister and senior BJP leader Yashwant Sinha says the Budget needs a complete revamp. It need not be a “secret” document any more, and the Finance Minister should present his budgetary proposals to Parliament as plans and not as a final Budget.

With the GST coming up and with a stability in indirect taxes, Part B of the Budget is not as important as it used to be, he added. Excerpts:

How significant is the need to modernise the Budget-drafting and the Central Government’s accounting processes?

The Budget needs a complete revamp. Now we are planning to make major changes. The Budget need not be a secret document any more.

The Finance Minister should present his budgetary proposals to Parliament as plans and not as the final Budget. And let there be discussions in Parliament, let there be discussions outside Parliament, let him receive suggestions on the Budget, then incorporate as many as he thinks fit and then present the final Budget to Parliament for approval sometime after the recess or after Parliament session is over in April or May. This is my first suggestion.

With the GST coming up and with a stability in indirect taxes and customs duties, Part B of the Budget exercise is not as important as it used to be. So there is absolutely no difficulty in making the Budget an open document.

What do you think of the move to merge the Railway Budget with the General Budget?

It is a good move but it will raise some problems. The Railways, because of its separate Budget, have always enjoyed an amount of autonomy compared with other departments and ministries of the government. So this discussion is perhaps taking place in government now regarding the level of autonomy that will be permitted to the Railways in terms of the traditions they have enjoyed. And the Railway Board has always been more or less independent of the Finance Ministry.

So when you dovetail the Budget, what control is the Finance Ministry going to exercise? What autonomy will the Railways continue to enjoy?

These issues have to be settled before the accounts of the Railways are fully merged with the general accounts.

There is an attempt underway to advance the Budget’s presentation. And the issue, therefore, is not just of resetting Parliament session, but also closing the government account faster and perhaps moving more towards the calendar year.

Is that going to deliver any significant improvement in the manner in which expenditure is carried out because it seems to be the key intention behind such an attempt? Is the intention to advance the Budget date to ensure spending happens at the right time and does not get bunched up and delayed?

The reason for bunching up expenditure is not really the late passage of the Budget because the Budget is passed by the middle of May, if not a little earlier.

But there is always a Vote-on-Account, which permits expenditure for the first 2-3 months of the financial year. And therefore the expenditure never actually comes to a stop, including capital expenditure that could be incurred in April, May and June. And the reason why the Budget is prepared and presented by the end of February is that you are able to anticipate closer to the the next financial year on what are going to be the economic issues and take decisions accordingly.

And when you are nearer to March 31 when the fiscal ends, you are in a better position to anticipate both the expenditure as well as the economic issues. If you are preparing the Budget and presenting it in the first week of February, to that extent you are likely to be handicapped.

The advantage — the whole Budget will be passed before March 31 and the expenditure will be from the regular Budget and not from the Vote-on-Account Budget. But that to my mind will make only a little difference.

It does not really militate against the government departments incurring expenditures. And the reason for bunching is more administrative. The Ministries delay, the Ministries do not get utilisation certificate from the States and these become a problem for release of funds. So these are more to do with expenditure reforms, which have to be made. Merely changing the date of the presentation of the Budget is not going to achieve the end result.

Will there be any concerns about the final reporting of the most watched numbers, which are the fiscal deficit data and some other related data items, that could arise out of a presentation of Budget in the first week of February?

It will, because you have a whole quarter which is in an area of darkness. You would not know what the expenditure has been in January, February and what it is likely to be in March.

And therefore the fiscal deficit estimate both for the current year as well as for the next year will be, to that extent, more of a guess work than is the case at present.

The Committee that is supposed to give a formal report and advice on charting out the changes for the Budget has not yet submitted its report. The time frame given to the Committee is till the end of December this year. But the Cabinet is likely to take up the proposal of the merger of Railways and the General Budgets.

You yourself, during your Finance Ministry days, must have felt some amount of frustration at the manner in which massive projects of Railways were getting delayed, not just from an allocation point of view but also from an execution point of view.

Will the this merger have any positive impact on project execution in Railways?

Execution of projects is bad in every ministry of the Centre. I don’t know what the current figures are.

But at one time, when I was in Lok Sabha, we had reviewed the pending projects of the Central Government at over ₹10 crore and we found that a huge number of them were pending across all ministries and it was a humongous figure in terms of cost override as a result of time override.

It is not merely the problem of the Railways. It is a problem of all major spending ministries of the Centre. If the Railway Budget becomes a part of the General Budget, the Finance Ministry will have to start worrying about the pending projects in the Railways much more than they do now; just as they have to worry about the pending projects in other ministries.

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