Budget in consonance with govt’s broader reform blueprint: Bibek Debroy6 min read . Updated: 06 Feb 2017, 09:54 AM IST
Bibek Debroy, member, NITI Aayog, explains how fiscal consolidation is an integral part of the NDA government's reform template
New Delhi: As part of the radical rethinking on improving India’s transportation architecture, for the first time in 93 years, a combined budget was presented on 1 February after the merger of the railway budget with the Union budget. A committee led by Bibek Debroy, member, NITI Aayog, had recommended phasing out the colonial legacy of having a separate railway budget as recommended by British politician William Ackworth in 1924.
In an interview with Mint, Debroy spoke about having suggested integration of central public sector enterprises (CPSEs) on similar lines as an integrated public sector “oil major" announced in the budget, the need for removing silos within the railways, and fiscal consolidation being an integral part of the National Democratic Alliance (NDA) government’s reform template. Edited excepts:
How do you rate the railway part of the budget presented on Wednesday?
The railways finances today are not in a very good shape. But then they are in this bad shape because of a legacy that goes back several decades. You cannot expect that legacy to be changed overnight. You can’t expect those numbers to improve overnight and, therefore, there are structural reforms which are required. I would say that the structural reforms belong to five different kinds of strands.
First, you must have a change in the accounting systems, which is much beyond accrual, cash, much beyond that. A complete change. Because, today it is not just a question of attracting private investments. Today, I don’t even know what a typical investment project in the railways gives what kind of returns? In the course of the budget, the social cost was mentioned but I don’t even know what is the true social cost?
Second is an independent regulator, which of course the railways are now calling a development authority. The third one is greater private entry. About greater private entry, people are often very simplistic. They tend to think that the private sector will run trains from Delhi to Howrah. But it’s not that. That’s not possible today. Nor does it mean that DLW (Diesel Locomotive Works) will be privatised. But private entry in a whole variety of areas.
The fourth one would be decentralisation. Because over a period of time, the railways has become excessively centralised with a lot of decisions taken in the Rail Bhawan. Even in the ’50s, it was much less centralised.
The fifth is the breaking down of the silos because today as you no doubt know entry into the railways, I am talking about officers, is through seven different streams. Eight, if I include medical, and those silos continue with vertical mobility. Those silos must be broken down, at least with prospective effect for new entrants. Retrospectively, it is much more difficult. You need to factor in seniority.
Out of these five, on four there has been movement, including on the decentralisation. Initially, what the railway minister did is that he decentralised it to the level of GMs (general managers). Later, he decentralised it to the level of station superintendents, train superintendents... Now, don’t get me wrong, I am not saying everything has happened. I am just saying some movement on each of these (has happened). The only one where nothing much has happened today is on the silos. There has been some change in the railway board but that’s more nomenclature because until you break down the silo at the entry level, you don’t solve it.
So, the end of the railway budget as we have known it, is not a miracle. It is not a magic wand that solves everything. It’s just a trigger for those five strands of structural reforms to be undertaken. It’s also a fact that much of what was anticipated when the separate railway budget was started materialised. And Mint readers will not want to get into this trivia... So this Ackworth committee which led to this, some people may not know that the trigger for the Ackworth Committee was that the East India Railway Company’s lease was coming to an end. That is how the Ackworth Committee started.... For God’s sake, in 2017, we are still burdened with the legacy of the East India Railway Company of 1919.
If I look at the figures, because of the historical baggage, there was a GBS (gross budgetary support) and there was a dividend. So with the left hand, I gave a GBS and with the right hand, I took it away. Now, it’s clean. And you are getting a GBS of Rs55,000 crore. You are not getting Rs1,31,000 crore from the general budget. The rest of the money has to be found by the railways through various sources, including something that they have not tapped much in the past, which is the non fare revenue.
Railways found the announcement regarding the listing of their subsidiaries such as Indian Railways Catering and Tourism Corp., Ircon International Ltd and Indian Railways Finance Corp. as a bolt from the blue. Your views.
I won’t comment on what they have said but look there is a certain template of reforms that this government has been doing for “disinvestment". And NITI in a sense has got that mandate of at least recommending what should be done for disinvestments of central PSEs (public sector enterprises). After that, of course it is up to the line department to see it through. Central PSEs are of different types... But one principle that NITI has followed for all Central PSEs is: I don’t know what is the values of the PSE? So one of the first things we should do is to list the unlisted ones. This is a template that is known to everyone. So I don’t really see why people should have been saying this is a “bolt from the blue". This was the template in any case. So why should the railways be any different?
The finance minister announced the creation of an integrated public sector “oil major" as part of the PSE reforms. Is this the precursor of things to come, with energy sector being the starting block?
There will be others but this doesn’t mean that you do it overnight. It’s not binary. So yes I think it will happen.
Have you recommended anything on that front?
PSEs differ. So for different baskets we have suggested different things for different PSEs. Because they don’t have the same template. In some cases there are revival plans, in some cases there is land which belongs to the state or is on lease from the state government and has to go back to the state government. Some we have already talked about listing, unlisting. Sometimes, there are judicial cases, so you have to handle those differently. So, yes as part of that in some cases we have suggested similar things.
Could you share those cases?
That I can’t.
How do you rate the overall budget?
The budget needs to be considered against the context of a broader reform blueprint that the government has got. So it is completely in consonance with what the government is doing elsewhere. It’s not that the budget happens on a single day and other 364 days, the government ceases to function. Therefore, I think, people, who were talking about big bang and expecting this, that and the other, have been completely unrealistic. Because it is part of that continuity. And essentially fiscal consolidation is there, you were trying to get public investments in certain areas. You are not frittering away resources in short-term schemes and you are trying to improve efficiency. This is essentially the template.