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Differences between Finance Ministry and Rail Ministry on financial autonomy of railways (Relevance for Prelims, GS Mains paper II)

View of Finance Ministry
The Finance Ministry, which has taken charge of presenting the annual accounts for the Indian Railways, has asked the Railways Ministry to hereafter remit the annual dividends it receives from the 14 central public sector units (CPSUs) under its purview.

Rationale by Finance Ministry
The Finance Ministry told the Railways Ministry that since the ‘capital-at-charge’ of the Railways – on which annual dividend was paid by the Railways – would be wiped-off post the Budget merger, the investment made in the Railways-related PSUs would be treated as having come from the Central government’s accounts. ‘Capital-at-charge’ is the Centre’s investment in the Indian Railways — treated as loan in perpetuity.

“In view of this, the Ministry of Railways is requested to remit the dividends received from its CPSUs to General Revenues,” the Finance Ministry said.

View of finance Ministry
The Indian Railways will no longer be required to pay annual dividend of about Rs. 9,000 crore to the Finance Ministry for the capital invested in it following the Budget merger.

Rationale by Railway Ministry
“The government approved merger of Railway Budget with General Budget on the premise that, besides maintaining its distinct entity as a departmental commercial undertaking as at present, Railways would also retain its functional and financial autonomy,” the Railways Ministry said.  “The existing financial arrangements with regard to Railway revenue and expenditure has thus to continue even after merger.”

The Railways Ministry said the dividend received by the Indian Railways from its CPSUs is not part of the ‘capital-at-charge’. It went on to point out that since the dividends from CPSUs is a part of the Railways’ overall traffic earning projections for 2017-18, remitting the dividend to the Finance Ministry “would add to shortfall in the Railway earnings.”

“As Ministry of Finance, in the larger scenario, is responsible for meeting any gap in Railway resources, the present arrangement of retaining the dividend for Railway PSUs in the Railway earnings may continue,” the Railways Ministry said.

Earlier, the Railway Board members were surprised at Finance Minister Arun Jaitley’s Budget announcement listing three Railways PSUs — IRCTC, Indian Railway Finance Corporation and IRCON — on the stock markets.



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