Context
The Railways themselves have been withdrawing from their core areas of operations and concentrating on peripheral items
Separation of railway budget: Pre independence
A separate rail budget has its genesis in the recommendations of the Acworth Committee of 1920 when its chairman, Sir William Acworth, recommended that “the Finance department should cease to control the internal finances of the railway, that the railway should have a separate budget of its own…
Rationale behind separation
This was considered necessary because the Railways’ revenues far outstripped the general revenue and had the potential of masking small yet important aberrations in the general budget of the Government of India, if presented together
Separation of rail budget: Post independence
- More rail revenue than general revenue, separation to continue: In 1947, when Independence was achieved, railway revenues were still 6% more than the general revenue (see table)
- Separation to continue: The Railway Convention Committee headed by Sir GopalaswamyAyyangar recommended, “separation of Railway finances from General finance should continue”
- Resolution passed: A resolution to this effect was approved by the Constituent Assembly on December 21, 1949. The revised convention was to be effective for a period of five years starting 1950-51, but continued for 66 years
Factors that proved suicidal for railways
Author states that two factors proved suicidal for railways,
- Subsidizing passenger fares by raising freight rates while the non-AC fares have remained static for the past 12 years. Freight rates are so high that road hauliers are competing with railways. Moreover, rail share in the overall freight sector is down from 89% in 1950-51 to less than 30% in 2014-15
- Withdrawal from core areas: Railways themselves have been withdrawing from their core areas of operations and concentrating on peripheral items
- They have withdrawn themselves from all urban transport activities. In the 1990s, if the IR had devised innovative solutions like forming Special Purpose Vehicles (SPVs) to catalyze construction of metro lines, both the people of India and the Railways would have benefited from it. Movement of petroleum products was the most profitable business for the Railways and it had a lion’s share of 75% in this sector. It is now down to 10%
Retrieval of financial health
Author states that a retrieval of the Railways’ financial health is quite within reach, if due focus is laid on the core sectors of freight operation and enhanced productivity of assets
In the ensuing paragraph, author compares the present condition of the railways on the either side of the border with Indian Railways to justify the separation of rail budget over so many years.
