The History Of Railway Budget And Why It Was Demerged From Union Budget

Finance Minister Nirmala Sitharaman will present the Union Budget 2024 on July 23. As the country waits to see what the Budget has in store, let's recall the history of the Railway Budget, which was once a separate entity, but is now merged with the Union Budget.

History of Railway Budget

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 Arun Jaitley delivered the Union Budget for the financial year 2017-18.

The Railway Budget was first separated from the General Budget in 1924, following the recommendations of the Acworth Committee. After India gained independence, the first Railway Budget was presented by John Mathai, the country's first Railway Minister, in 1947. Mathai also went on to present two Budgets as India's Finance Minister.

Decision To Merge Budgets

In November 2016, the Ministry of Railways announced that the central government would merge the Railway Budget with the Union Budget. This decision 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 Mr Debroy and Kishore Desai.

How The Merger Worked

The Ministry of Finance would prepare and present a single Appropriation Bill, including the estimates for railways, to the Parliament. The Finance Ministry would also handle all legislative work connected to this.

Indian Railways would be exempt from paying dividends to the government, and its capital-at-charge would be wiped off. The Ministry of Railways would receive gross budgetary support from the Finance Ministry to cover part of its capital expenditure.

Additionally, Indian Railways would continue to raise resources from the market through extra-budgetary resources to finance its capital expenditure.

The merger aimed to give a complete view of the central government's finances and improve transport planning between highways, railways and waterways. It also allowed the Finance Ministry more flexibility in allocating resources during the mid-year review.