Trace the evolution of railway finance in India from the Acworth Committee to the merger of the Rail Budget in 2017. What were the gains and costs of the merger?

Indian railway finance has moved between two models. Under the first, a separate budget made the railways pay the Treasury. Under the second, a merged budget has the Treasury fund the railways. The 2017 merger made public finances clearer, but it has not cured the railways' weak finances.

Evolution: Acworth Committee to 2017

Acworth Committee (1920-21) → Separation Convention (1924) → Convention continues after 1947 → Cabinet approval (Sept 2016) → Merged Union Budget 2017-18

Fig.: Evolution of railway finance

• Acworth Committee (1920-21): recommended separating railway finance, mainly to give general revenues a steady, assured contribution from the railways [1].
• Separation Convention (20 September 1924): adopted by a House resolution. The Rail Budget was then presented before the General Budget [1].
• After 1947: the separate budget continued by convention, not under any constitutional article [1]. The railways paid an annual dividend to the Centre [3].
• 2016-17: in September 2016 the Cabinet approved the merger, together with advancing the budget date and ending the Plan/Non-Plan split [2]. Union Budget 2017-18 was the first merged budget since 1924 [3].

Gains of the merger

• Dividend ended: the railways no longer pay a dividend. The last one, for 2015-16, was over ₹8,700 crore [3].
• Integrated planning: rail investment now sits inside one Union Budget and is funded through Gross Budgetary Support (GBS) [3].
• Autonomy kept: the railways retain their functional autonomy [2].
• Bigger capital spending: GBS reached about ₹2.52 lakh crore in 2024-25 [7].

Costs of the merger

• Less scrutiny: without a separate debate, the railways' weak finances get less attention. The operating ratio was 98.10% in 2022-23, and 101.33% once CAG counted understated expenditure [6].
• Dependence on GBS: the 1924 logic is reversed, and the railways now depend on the Treasury [1][3]. An operating ratio of 98.22% in 2024-25 leaves very little surplus for investment [7].
• Cross-subsidy continues: in 2019-20, passenger services lost ₹63,364 crore while freight earned ₹28,746 crore [5]. High freight rates push goods traffic onto roads [4].

The 1920s and 2017 reforms both changed how railway money is presented, but neither fixed how it is earned. The merger removed a colonial-era accounting burden, not the underlying deficit. The way forward is rational fares through an effective Rail Development Authority [4], commercial-style accounts as CAG suggests [6], and a larger share of freight traffic. Then the integrated budget can deliver the resilient infrastructure that SDG 9 calls for.