Why India has a separate Rail budget?

Indian railway is the world’s fourth largest railway network after United States, Russia and China and the most accessible public mode of transport in India. Every year a Railway Budget, separate from the union budget is presented in the parliament few days before the main budget. We all know what budget is and every year we eagerly wait for it to see the after budget impacts on our pockets.

The Railway Budget is the traditional way to kick off India’s annual Budget carnival. And my question here is that why India need a separate rail budget? Why not include railways in the Union Budget? Why do we have a railways ministry at all? The only other large country with a specific railway ministry is China (Pakistan, like India, has one as a British legacy). Other countries with large rail networks merge the job into a transport or infrastructure portfolio, which is probably a more holistic view of looking at the issue.

Just have a look at the facts below:

Pulled first train to wyche web

The tradition of presenting a separate railway budget started in 1924 during the British era, when the network was the country’s largest industrial asset. Railway was considered a great asset of that time so a separate budget made sense, but as the Indian economy grew exponentially, the railway budget seemed quite smaller than the main budget. But the government has not yet abolished the separate budget for Railway.

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15421As per a consensus of government employees by All India Audit and Accounts Association in 2009, 44 per cent of civilian employees, employed by central government come under Ministry of Railways. With 1.3 million employees, the Indian Railways is among the world’s largest employers. It has added about 260,000 staff in the past five years.


Indian Railways has a network comprising of 115,000 km of tracks and a route of over 65,000 km. It has to maintain 7,172 stations and runs 12,617 passenger trains and 7421 freight trains daily.

Lack of reforms and investment has hurt the growth of facilities and infrastructure of the railway. Indian Railways is completely owned by the central government and private investment is almost negligible. It needs more than $300 billion of investment in the next five years.

tain-indiaPassenger trains carry around 23 million of passengers daily and passenger fares are highly subsidized for the 23 million Indians that travel daily by rail.

Indian railway carries almost one third of the country’s cargo which directly affects the production and development.

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There are 12 production facilities where rolling stocks, engineering components, engines and coaches are produced that directly come under the ministry of railways.

brand CONCORThere are other 14 subsidiary public undertakings under the direct control of Indian Railways, Container Corporation of India Limited (CONCOR) and Indian Railway Catering and Tourism Corporation (IRCTC) are two most known names of those 14 companies.

Indian Railways have a full-fledged R&D department, known as Research Designs and Standards Organisation (RDSO), located at Lucknow for all research, designs and standardization tasks.

The above facts are vital to answer the question in the above argument. The management of such a large organization, infrastructural development, salaries of employees and passenger services definitely require a separate budget. It also aims to take burden off from finance ministry that is already responsible for world’s third largest economy.

Does a separate budget is helping Indian railways?

Critics have long argued that India should abolish a separate budget for railways, given that it now accounts for a small share of the overall budget of Asia’s third-largest economy. Lack of timely reforms and investment have hurt growth. Experts say railways need 20 trillion rupees ($334 billion) of investment by 2020. To date, there has been little private sector participation.

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For the last five years, when there was a $16 billion investment target, public-private partnerships accounted for only 4 percent of the total.

Growth in the route network has been slow. There were 53,996 kilometers (33,540 miles) of routes in 1947 when India became independent, and rail tracks now cover 65,000 km. That’s an addition of around 11,000 km in 67 years, or 164 km annually.

India added 1,750 km in railway tracks between 2006 and 2011, according to report from consulting firm EY. In comparison, China added 14,000 km during the same period, the firm said.

Railways handled most of the country’s cargo in 1950 but now account for only about one-third because of the congested network and slow train speeds.


So if a separate budget and a separate full-fledged working ministry is dedicated to Indian railways then why Indian rail is in such pathetic conditions?

Prime Minister Narendra Modi’s new government in its Rail Budget, promised to seek increased foreign and domestic private investment to fund modernization of the country’s huge but badly stretched rail network. Let’s see if this government can do what the last 67 years of government was unable to do.

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Harsh is a curious writer who loves to explore his surroundings. There are many websites who provide answer to people queries but no single website alone resolves the curiosity of people. Curious Mind Box is an initiative to resolve the curiosities and answer every What, How and Why question that comes into your mind.

2 thoughts on “Why India has a separate Rail budget?

  • June 15, 2015 at 11:15 am

    Hello dear writer,

    Good Post !!!
    Keep it up.



    • June 16, 2015 at 10:09 am

      Thanks Punam.


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