Chanakya IAS Academy Blog


A unified Railway Budget?

Recently, demands have been raised for the separation of the railway budget from the main budget. Prior to 1920, there was a single budget for both railways and general. But in 1920, a 10 members committee was set up, called the Acworth Committee for reforms in the Railway sector. The committee decided to separate the railway budget from the main budget in order to bring some radical reforms in the railway sector. It is because financial autonomy could help in development.

After 92years, the question still remains that, has the railways in India really developed?

Some statistics:

  • In 1950, the railway lines in India were around 54,600km and after so many years, only 11,000km has been added. Compared to which, China has built greater than one lakh km rail lines by now.
  • As for speed, Indian superfast trains have speeds of 130km per hour to 160km per hour at the max. Whereas in other countries, the premium trains move as fast as 300km per hour.

So, is it only the monitory issue due to which development is lacking? Well, finance is not an issue if it is utilized properly. India has a lot of innovation and research minds. But the scope for research and development in the railway sector is lacking. The reason is not lack of finance but lack of prioritizing the research and development sector. Finances should be directed more towards development rather than subsidies and benefits to the passengers.

Some of the common problems with the railways:

  • Most of the funds are directed towards subsidization of fares
  • There is a populism approach in order to gain votes
  • Due to which, the goods or freight have to subsidize the passenger fares. As a result of which, the dependence upon road transport increases manifold.
  • The budget allocated for railways cannot therefore meet the railway sector demands and it has to seek budgetary support from general exchequer.
  • Therefore the railways lack innovation, research and development, infrastructure even after getting the financial autonomy.

A merger of the railway budget and the general budget:

The Bibek Debroy committee has suggested a merger of the railway budget and the main budget with the hope that the problems faced by the railway sector can be solved. But there are both pros and cons of the merger.


  • The long pending projects in the railways can be addressed once it becomes a part of the general budget
  • The populism approach can be minimized since the railways will no longer be a ‘separate sector’ gaining too much attention
  • Fare hikes, etc will become the Finance Minister’s decision and will be done impartially and as a routine task
  • Transparency will be increased since there will be an Indian Railway reports in the economic survey giving details of the sector
  • Investment in the track renewal, maintenance, development will be increased rather than focusing only on subsidies
  • Earning and spending will no longer remain the sole decision of railways
  • There is a demand for a separate price regulatory body for deciding upon the prices or fares
  • The savings of the sector will also increase since no dividends need to be paid to the government


  • Since the priority of the sector is reduced, it can also have an adverse impact
  • The passenger fares might rise arbitrarily which might become a burden on the passengers
  • The merger is only for the finance portion, and rest all will remain the same which means development, etc. will still remain the primary task of the railway sector only
  • Railways have a lot of staff whose increased salaries, after the 7th pay commission, are also to be met. Which means that, there might still be a shortfall of the allocations which eventually will be met by cutting down maintenance costs
  • Privatization and commercialization can be done better once there is financial autonomy.

So, instead of making separation of budgets the main agenda, the focus should be more on directing the budget allocated for steps like:

  • Better administration
  • Development of pending projects
  • Modernization, technological innovation
  • Promotion of research and development
  • Increasing the railway links
  • Fast delivery mechanism
  • Better infrastructure
  • Checking the overcrowding of trains and making tickets available for passengers by using innovative and new ideas on booking tickets
  • Integration of non functional departments with functional ones in order to cut costs of maintaining them unnecessarily
  • Checking and monitoring the role of railway staffs so that they perform efficiently
  • Regulation of fares by drawing a balance between the passenger fares and freight charges.

Therefore, it is not about separating or merging budgets. It is more about better performance and development in the railway sector by introducing innovation and technology in it to make Indian railways a world class infrastructure.

Read 1575 times Last modified on Wednesday, 26 October 2016 11:59

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