Tracking the Railway Budget

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: Coming Saturday, Union minister Lalu Prasad will be presenting his second Rail Budget. Among the foremost tasks for the minister will be to improve the health of the railways, within the framework of populism so characteristic of the Bihar strongman. The public does not want any hike in passenger fares, while industry opposes any hike in freight charges. At the same time, Indian Railways, which has already completed a 150-year long journey, needs to remain on track to be able to signal India’s entry into the league of developed nations. FE takes a closer look at the Rail Budget—the virtual engine of Indian Railways:
Is it necessary to have a separate budget for the railways ?
Indian Railways is an arm of the government. It is like any other department engaged in commercial activity (like telecommunications, posts and telegraph). Like other departments, it is subjected to all benefits and encumbrances. There is a ministry of railways, headed by a minister answerable to Parliament.

The fund requirements of Indian Railways are mentioned in the annual financial statement tabled in Parliament in pursuance of Article 112.

Also, Article 114 dealing with the Appropriations Bill applies to Indian Railways. Strictly speaking, there is no Constitutional requirement for a separate Rail Budget. All the mandatory things which the Rail Budget seeks to do can be done by the General Budget.

Why then a separate Rail Budget?
First, owing to tradition. Railway finances were separated from general finances in the government budget of 1924. The Railway Board was expanded to have a financial commissioner in pursuance of a resolution, popularly known as ‘Separation Convention’, adopted by the then Central Legislative Assembly. The first Railway Budget was presented in 1925.

The second reason for a separate Rail Budget is the scale of operation and quantum of funds involved. The network of Indian Railways covers 63,000 km of rail route. It runs around 15,000 trains everyday and is of great strategic importance for the nation.

What does the Rail Budget seek to do?
Like any other budget, it too seeks to align receipts and expenditure and also find resources for modernisation of the organisation, keeping in view future requirements. In addition to meeting the operating expenses, the coming Rail Budget will be required to find resources for the Integrated Railway Modernisation Plan (2005-2010), estimated to cost Rs 24,000 crore spread over five years.