India’s Railway Budget – the Journey so far!


After 92 years, India will not have a separate railway budget from next year. As part of its budgetary reforms process, the government has expectedly decided to merge the Union and railway budget, a move that might make it easier for the government to slash populist subsidies and push through structural reforms in the chronically loss-making national transporter.

Back in 1921, the Acworth committee had suggested that there ought to be a separate budget for the railways to preserve its commercial character. Then, the dividends the railways paid amounted to one-seventh of the government’s revenues. The first railway budget was presented in 1924.

The Debroy report said the original rationale no longer existed as the net dividend payout by the railways to the government had since shrunk to Rs 4,100 crore.

Railway Budget of India also referred as Rail Budget is the Annual Financial Statement of the state-owned Indian Railways, which handles rail transportation in India. Railway Budget is presented every year by the Union Minister of Railways, representing the Ministry of Railways, Government of India, in the Indian parliament. The Railway Budget is presented every year, a few days before the Union budget of India.

Historically, the railway finances of India were separated from the general government finances in 1924 following the recommendation of the 10 member-Acworth Committee in 1920-21, headed by British Railway Economist William Acworth. The “Acworth Report” led to the reorganisation of railways in the then undivided Indian sub-continent, a practise which continued in independent India to date.

Sir William Mitchell Acworth KCSI (22 November 1850 – 2 April 1925) was a British Railway Economist, a renowned barrister and politician. The third son of the Reverend William Acworth of the Hall, South Stoke, near Bath, Somerset, and Margaret née Dundas, he was born at Rothley, Leicestershire, where his father was vicar in 1850. He was educated at Uppingham School and Christ Church, Oxford. He graduated with a master’s degree in modern history in 1875.

For eighteen months after his graduation he worked in Germany as English tutor to Prince Wilhelm and Prince Henry of Prussia, the future Kaiser Wilhelm II and his brother. He subsequently took a post as a master in Dulwich College, where he remained until 1885.

Map of Indian Railways prior to partition of the great Indian sub-continent for carving out Pakistan purely on the religious lines at the behest of an intolerant, fascist and religious maniac Mr.Mohammad Ali Jinnah

Acworth became involved in Conservative and Unionist politics of London, and in 1886 he was elected a member of the Metropolitan Asylums Board. When the first elections to the London County Council was held in January 1889, Acworth was nominated as a candidate of the Conservative-backed Moderate Party. He was elected as one of two councillors representing Dulwich. He served only one term, standing down at the next council elections in 1892. In 1890 he was called to the bar at the Inner Temple.

In 1889 he wrote Railways of England followed in the following year by Railways of Scotland. These two books comprised a series of descriptive articles of the railways, but his later work concentrated on the economics and statistics of the industry. He visited the United States where he studied the statistical methods used on the railroads there, and on his return wrote his third book, Railways and the Traders (1891), which was critical of the accounting practices of the British railway companies. From the mid-1890s he lectured at the newly formed London School of Economics on railways. In 1905 he published his fourth book The Elements of Railway Economics, which was widely used as a textbook. In 1919 he gave evidence to the United States Congress before the Joint Committee on Inter-State and Foreign Commerce. His testimony formed the basis of his fifth and final book, State Railway Ownership, was published in 1920.

He maintained his connections with the Conservative Party, and was adopted as their candidate for the parliamentary constituency of Keighley in the West Riding of Yorkshire. He contested the seat on three occasions in 1906, 1910 and 1911 but failed to be elected.

His expertise led to him to serve on the Royal Commission on Accidents to Railway Servant (1899), the Vice-Regal Commission on Irish Railways (1906), the Royal Commission of Enquiry into Canadian Railways (1916), the Royal Commission on South Rhodesian Railways (1918). He was also appointed a director of theUnderground Electric Railways of London Ltd and of the Midland and South Western Junction Railway.

In 1921 Acworth was knighted and appointed chairman of the Committee on Indian Railways. The report of the committee, known as the “Acworth Report”, led to reorganisation of railways there, and the creation of a separate Railway Budget, an arrangement which continues in independent India today. He was appointed a Knight Commander of the Star of India in 1922. In 1923 he prepared a report on Austrian railways for the League of Nations.

William Acworth was married twice. In 1878 he married Elizabeth Louisa Oswald Brown, who died in 1904. In 1923 he married Elizabeth Learmonth Wotherspoon.

In 1924 he was given the task of reorganising the German railways by the Inter-Allied Reparations Commission. The heavy workload led to a deterioration in his health, and he died suddenly at his London home at The Albany, Piccadilly, aged 74.

First live telecast of railway budget took place on 24 March 1994. Lalu Prasad Yadav, who remained Railways Minister from 2004 to May 2009, presented the railway budget 6 times in a row. In 2009, under his tenure a ₹108 billion (US$1.6 billion) budget was passed.

In the year 2000, Mamata Banerjee, who is the current Chief Minister of West Bengal became the first women Railway Minister of India. In the year 2002 she also became the first female Minister of Railways (India) to present the Railway budget, she is also the only woman who presented the railway budget for two different central governments (NDA and UPA).

In 2014 railway budget, Railway Minister D. V. Sadananda Gowda announced the first bullet train and 9 High-Speed Rail of India.

Railway Budget 2016 was the last Railway Budget of India presented on February 25, 2016 by Suresh Prabhu, Union Minister of Railways.

Railway Budget 2016 was the last Railway Budget of India presented on February 25, 2016 by Suresh Prabhu, Union Minister of Railways
Railway Budget 2016 was the last Railway Budget of India presented on February 25, 2016 by Suresh Prabhu, Union Minister of Railways

After 92 years, India will not have a separate railway budget from next year. As part of its budgetary reforms process, the government has expectedly decided to merge the Union and railway budget, a move that might make it easier for the government to slash populist subsidies and push through structural reforms in the chronically loss-making national transporter.

Experts, however, say it could also be a precursor to railways’ ultimate privatisation. In the same vein, the government has also decided to advance presentation of Union budget by a month and removed the distinction between plan and non-plan expenditure.

As part of its social obligation, railways annually bears a subsidy of Rs 30,000 crore on passenger fares, a part of which it recovers by charging tariff on freights. The government justified the cabinet decision by saying “presentation of a unified budget will bring the affairs of the railways to the center stage and present a holistic picture of the financial position of the government.”

All India Trinamool Congress leader and former railway minister Dinesh Trivedi, however, fears that it is a move towards privatisation of the railways, which is the world’s largest employer. “This is the first step towards railways’ privatisation,” Trivedi told.

He further said the railway is bankrupt and so there was not going to be any railway budget this year, anyway. Cross subsidisation of passenger fares due to populism has eroded the railways’ finances to such a degree that freight tariff has had to be hike over 450 times in recent years leaving it uncompetitive when pitched against road transport.

Now that the need for a separate railway budget has been dispensed with, the railways should be merged with shipping or civil aviation ministry, Trivedi added.

Merger of railway budget would lead to presentation of a single Appropriation Bill, including the estimates of ministry of railways, thereby saving precious time of Parliament by not having to hold separate consideration and passing of two Appropriation Bills.

The government in a statement maintained that the railways would continue to maintain its distinct identity as a departmentally run commercial undertaking as at present. It will also retain its functional autonomy and delegation of financial powers as per the existing guidelines.

It further said the existing financial arrangements would continue wherein the railways will meet all its revenue expenditure, including ordinary working expenses, pay and allowances and pensions from its revenue receipts.

The capital at charge of the railways estimated at Rs 2.27 lakh crore on which annual dividend is paid will be wiped off. This would means that it will not have to pay any dividend to the central government from next year, which would lead to savings of Rs 9,700 crore. The national transporter will continue to get gross budgetary support, the official release added.

Former finance minister Yashwant Sinha said the railways cannot be treated like any other department. “My own feeling is that the finance minister will have to grant a lot of autonomy to the ministry of railways,” Sinha told a news channel.

The presentation of separate railway budget started in 1924 and has continued after Independence as a convention rather than under constitutional provisions.

Following cabinet’s decision to advance presentation of Union budget by nearly a month, the budget session will now be called sometime before January 25. The beginning of budget preparation will be brought forward to early October and GDP estimates made available on January 7 instead of February 7 now.

The government will secure all legislative approvals for the annual spending and tax proposals before the beginning of the new financial year on April 1.

Early presentation of budget would mean that the entire exercise is over by March 31, and expenditure as well as tax proposals come into effect right from the beginning of new fiscal, thereby ensuring better implementation.

The Union budget is presented on the last day of February and approved by Parliament in two phases during March and May. And since the monsoon arrives in June, most of the schemes and spending by states do not take off until October, leaving just half a year for their implementation. Actual date of budget presentation will be decided after taking into account dates of assembly elections, finance minister Arun Jaitley said while briefing media after a cabinet meeting.

The cabinet also ended distinction between plan and non-plan expenditure as the present classification leads to excessive focus on former at the cost of the items such as maintenance, which are classified as non-plan expenditure.

The cabinet felt it is the total expenditure, irrespective of plan or non-plan, which generates value for the public. Plan expenditure was for the first time presented separately in the budget for 1959-60.

The classification of plan and non-plan expenditure has led to a fragmented view of resource allocation to various schemes, making it difficult not only to ascertain cost of delivering a service but also to link outlays to outcomes, according to the government.


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