Cabinet to take up early Budget presentation, merger today

The Union Cabinet, headed by Prime Minister Narendra Modi, might take up the matter of advancing the date of Budget presentation and merging the rail and Union Budgets. Once approved, it will set in motion the process of the biggest overhaul in the budgeting process in 15 years.

A Cabinet note details the above proposals as well as elimination of Plan and non-Plan classifications of expenditure and shifting to outcome-based budgeting from input-based budgeting. It is likely to be placed for the Cabinet’s approval on Wednesday.
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WINDS OF CHANGE

• The Modi govt is likely to present the Union Budget in the last week of January or the first week of February
• Once approved, it will set in motion the process of the biggest overhaul in the budgeting process in 15 years
• The last time such a major change occurred in the Budget was when  finance minister Yashwant Sinha presented the 1999-2000 Budget at 11:00 am instead of 5:00 pm

The Modi government is likely to present the Union Budget in the last week of January or the first week of February. This will ensure the Finance Bill is passed before the start of the financial year, on April 1, so that all central government departments get their full allocations to work with right from the first day.

In the existing system, the Lok Sabha passes a vote-on-account for the April-June quarter, under which departments are provided a sixth of their total allocation for the year. This is done by March. The Finance Bill is not passed before May. Advancing the dates would enable the government to do away with the vote-on-account.

Rail minister Suresh Prabhu was the one who initiated the process of scrapping the railways Budget. “Except India, no other country in the world has a railways Budget. We want to do away with this colonial tradition,” Prabhu had told Business Standard in August.

Certain key issues such as pension liabilities, dividend, gross budgetary support and other sticking points between the finance and rail ministries are yet to be decided. A call on these points will be taken closer to the Budget. The rail ministry is expected to continue to have full financial autonomy on matters such as fare, tariff revisions and market borrowings.

Also, with the end of Plan and non-Plan classifications of spending from 2017-18 onwards, the government will shift to revenue spending and capital spending classifications. Additionally, centrally sponsored schemes, which are monitored on three parameters currently – input, activity and output – will be monitored on outcome and impact as well.

Once passed, the finance ministries and various government departments will actually get down to the modalities of the changes being planned. Advancing the Budget also means that the Budget session of Parliament will have to be held earlier than usual.

The last time such a major change occurred in the Budget was when Atal Bihari Vajpayee’s finance minister Yashwant Sinha presented the 1999-2000 Budget at 11:00 am instead of 5:00 pm, which had been the practice till then.