Explained: Why Was Railway Budget Merged With Union Budget

The government, in 2016, decided to merge the Railway Budget with the Union Budget. The late Arun Jaitley, the then Finance Minister, presented the first combined Budget for the financial year 2017-18.
Every year, the allocations towards Indian Railways are keenly watched during the Union Budget presentation as a major part of government spending goes to the sector. Prior to 2017, the Railway Budget used to be presented separately a few days ahead of the Union Budget. This 92-year-long practice came to an end when Finance Minister Jaitley delivered the Union Budget for FY 2017-18. Since then, this practice has been followed by the subsequent governments.

Ahead of the Interim Budget 2024 on February 1, let's understand the interesting history of the Railway Budget in India.

First Railway Budget

In 1924, the Railway Budget was separated from the General Budget, as per the recommendations of the Acworth Committee (1920-21).  The maiden Railway Budget of India after Independence was presented by the country's first Railway Minister John Mathai in 1947. Mathai also presented two Budgets as India's Finance Minister.

Why was the Railway Budget merged with the Union Budget?

In November 2016, the Ministry of Railways said that the central government had decided to merge the Railway Budget with the Union Budget. The merger was based on the recommendations of a committee headed by Bibek Debroy, a member of NITI Aayog, and a separate paper on ‘Dispensing with the Railway Budget' by Debroy and Kishore Desai.
It was decided that the Ministry of Railways will continue to function as a departmentally run commercial undertaking, while the Union Budget will have a separate statement of estimates and Demand For Grants for Indian Railways.

Here are some of the salient features of Railway and Union Budget's merger:

1. The Ministry of Finance will prepare and present a single Appropriation Bill, including the estimates for railways, to Parliament. All legislative work connected in addition to that will be handled by the Finance Ministry.
2. The Indian Railways will be granted exemption from payment of dividend to the government, while its capital-at-charge would stand wiped off.
3. The Ministry of Railways will be provided gross budgetary support by the Finance Ministry towards meeting part of its capital expenditure.
4. To finance its capital expenditure, the Indian Railways will continue to raise resources from the market through extra-budgetary resources.
5. A unified budget will help present a holistic picture of the financial position of the central government.
6. The merger was aimed at facilitating multimodal transport planning between highways, railways and inland waterways.
7. The merging of the two Budgets will offer more elbow room to the Finance Ministry for better allocation of resources at the time of mid-year review.