Rail budget and finances in Indian Railways

The Railway Budget deals with the induction and improvement of existing trains and routes, the modernisation and most importantly the tariff for freight and passenger travel. The Parliament discusses the policies and allocations proposed in the budget. The budget needs to be passed by a simple majority in the Lok Sabha (India's Lower House). The comments of the Rajya Sabha (Upper House) are non binding. Indian Railways are subject to the same audit control as other government revenue and expenditures. Based on the anticipated traffic and the projected tariff, the level of resources required for railway's capital and revenue expenditure is worked out. While the revenue expenditure is met entirely by railways itself, the shortfall in the capital (plan) expenditure is met partly from borrowings (raised by Indian Railway Finance Corporation) and the rest from Budgetory support from the Central Government. Indian Railways pays dividend to the Central Government for the capital invested by the Central Government.

As per the Separation Convention (on the recommendations of the Acworth Committee), 1924, the Railway Budget is presented to the Parliament by the Union Railway Minister, two days prior to the General Budget, usually around 26 February. Though the Railway Budget is separately presented to the Parliament, the figures relating to the receipt and expenditure of the Railways are also shown in the General Budget, since they are a part and parcel of the total receipts and expenditure of the Government of India. This document serves as a balance sheet of operations of the Railways during the previous year and lists out plans for expansion for the current year.

The formation of policy and overall control of the railways is vested in Railway Board comprising the Chairman, Financial Commissioner and other functional Members for Traffic, Engineering, Mechanical, Electrical and Staff matters. As per the 2006 budget, Indian Railways earned Rs. 54,600 crores (Rs. 546,000 million or US$12,300 million). Freight earnings increased by 10% from Rs. 30,450 cr (US$7,000 million) in the previous year. Passenger earnings, other coaching earnings and sundry other earnings increased by 7%, 19% and 56% respectively over previous year. Its year end fund balance is expected to stand at Rs. 11,280 cr (2.54 billion US$).

Around 20% of the passenger revenue is earned from the upper class segments of the passenger segment (the air-conditioned classes). The overall passenger traffic grew 7.5% in the previous year. In the first two months of India's fiscal year 2005-06 (April and May), the Railways registered a 10% growth in passenger traffic, and a 12% in passenger earnings.

A new concern faced by Indian Railways is competition from low cost airlines that has recently made its début in India. In a cost cutting move, the Railways plans to minimise unwanted cessations, and scrap unpopular routes.

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Latest information about Railway Budget 2009-10
written by Poker Singh, July 25, 2009

Latest information and News stories about Indian Railways' Railway Budget is Available Here: Railway Budget 2009-10

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