Railway Board forms panel to examine budgetary allocation, merger of funds

Focus towards minimising overlaps in fund purpose

The Railway Board has formed a committee to take a relook at the budgetary fund allocation in an attempt to minimise overlaps of fund purpose. In an order issued earlier this month, the Railway Board decided to constitute a committee to ‘examine feasibility of merging funds operated by Railways, including few connected issues/aspects.’

In addition to other responsibilities, this committee has been tasked with examining the feasibility of merging existing Railway Funds, keeping in view the relevance and need. It is also expected to suggest rules of allocation for merged fund(s).

"In the Indian Railways, money is traditionally allocated to certain heads for specific purposes. This makes the policymakers handicapped sometimes as that money cannot be used for any other purposes and transferring is a complicated process. The role of the current committee is to simplify the existing system so that fund allocation to development projects is smooth," Vijay Dutt, former additional member of the Railways, told Business Standard.

The Railways earmarks its budgetary allocation under specific heads that have been set up with identified purposes. In line with this objective, appropriation to the Depreciation Reserve Fund (DRF) is for covering the cost of track replacements and renewals.

The appropriation to Pension Fund (PF) is being made while giving due consideration to factors such as higher withdrawals from the Fund due to increase in number of pensioners, sanction of higher dearness relief, liberalisation of Pension benefits, among others. The Rashtriya Rail Sanraksha Kosh (RRSK) has been created for critical safety related works.

According to Alok Kumar, former Executive Director (Civil Engineering-General), of the Railway Board, a relook at the funds under various heads of the railway budget is a step in the right direction. “It will ensure that the utilization of funds is in line with more up-to-date requirements of the railways," Kumar said.

Another term of reference for the committee is to examine the need for maintaining two separate sources of borrowings under Extra Budgetary Resources (EBR).

“Having a relook at two separate sources under EBR --- EBR-IF and EBR-IRFC -- is a logical one,“ said R Sivadasan, former financial commissioner.

This committee will also examine the need for continuance of Railway funds in their present form, including the need for separate ring-fenced special purpose funds, like DRF, Development Fund (DF), PF, and Railway Safety Fund (RSF).

“Railways is spending around Rs 34,000 crore on an annual basis -- for repairs only. Whether it is part of any fund, the aim should be on getting the final work done," Sivadasan added.

The role of internal controls for ensuring judicious use of funds in case of merged funds is under the purview of this committee. It will also relook at the principles governing the application of the test of 'remunerativeness', in terms of Rate of Return (ROR) among others, in case of remunerative projects.