UPSC Prelims Practice Questions — Income from Indian state railway

Q1. With reference to the Operating Ratio of Indian Railways, consider the following statements. Which of the above is/are correctly identified?

1. It is the ratio of working expenses to gross traffic receipts, expressed as the amount spent to earn ₹100.
2. A lower Operating Ratio indicates better profitability and more resources for capital spending.
3. Indian Railways' Operating Ratio has remained above 96% since 2016-17.
4. In 2021-22, Indian Railways spent only ₹95 to earn ₹100 of traffic revenue.

• A. 1, 2 and 3
• B. 1 and 2 only
• C. 2, 3 and 4
• D. 1, 2, 3 and 4

Q2. Among the following financial years, in which one did Indian Railways record its worst Operating Ratio, spending about ₹107 to earn ₹100 of traffic revenue?

• A. 2018-19
• B. 2019-20
• C. 2020-21
• D. 2021-22

Q3. With reference to the separation and subsequent merger of the Railway Budget, consider the following statements. Which of the statements given above is/are correct?

1. The Railway Budget was first presented separately from the Union Budget in 1924.
2. The separate presentation of the Railway Budget was mandated by a specific constitutional provision.
3. The Railway Budget was merged back with the Union Budget from 2017-18.

• A. 1 and 2 only
• B. 1 and 3 only
• C. 2 and 3 only
• D. 1, 2 and 3

Q4. The 2017 merger of the Railway Budget with the Union Budget was based on the recommendations of a committee headed by which one of the following?

• A. Bibek Debroy
• B. William Acworth
• C. John Matthai
• D. Arun Jaitley

Q5. With reference to colonial railway finances in India, consider the following statements. Which of the above is/are correctly identified?

1. Under the Guarantee System, private railway companies were guaranteed a 5% return by the Crown.
2. The net profit of Indian State Railways in 1925-26 was about £6.5 million.
3. Of the 1925-26 profit, about £4 million was contributed to the British Indian general revenue.
4. The Guarantee System extended its guaranteed return only to Indian-owned private railway companies.

• A. 1, 2 and 3
• B. 1 and 4 only
• C. 2, 3 and 4
• D. 1, 2, 3 and 4

Q6. In the context of colonial Indian railways, which one of the following best describes the 'Guarantee System'?

• A. A system under which the Crown guaranteed private railway companies a fixed return of about 5% on their invested capital
• B. A system guaranteeing fixed freight rates to Indian merchants using the railways
• C. A system under which the colonial state guaranteed employment to Indians on railway construction
• D. A system guaranteeing the British Treasury a fixed dividend on the Consolidated Fund of India

Q7. Which one of the following commodities is the single largest contributor to Indian Railways' freight earnings in 2026-27?

• A. Coal
• B. Cement
• C. Iron ore
• D. Foodgrains

Q8. With reference to the composition of Indian Railways' traffic revenue, consider the following statements. Which of the statements given above is/are correct?

1. In 2026-27, freight contributes a larger share of traffic revenue than passenger services.
2. Passenger services cross-subsidise freight services on Indian Railways.
3. Coal's share of freight revenue has risen from about 44% in 2017-18 to about 48% in 2026-27.

• A. 1 and 2 only
• B. 1 and 3 only
• C. 2 and 3 only
• D. 1, 2 and 3

Q9. With reference to the dividend and budgetary support arrangements of Indian Railways after the 2017 merger, consider the following statements. Which of the above is/are correctly identified?

1. Railways' capital-at-charge was wiped off and it no longer pays an annual dividend to the general revenues.
2. The removal of the dividend liability saves Railways about ₹10,000 crore annually.
3. Railways continues to receive Gross Budgetary Support for its capital expenditure.
4. Post-2017, Railways pays its dividend to the Reserve Bank of India instead of the Consolidated Fund of India.

• A. 1, 2 and 3
• B. 2 and 4 only
• C. 1, 3 and 4
• D. 1, 2, 3 and 4

Q10. With reference to the Union Budget 2026-27 provisions for Indian Railways, consider the following statements. Which of the above is/are correctly identified?

1. Railways' internal revenue is estimated at ₹3.02 lakh crore in 2026-27.
2. This internal revenue estimate is about 8.4% higher than the 2025-26 revised estimate.
3. Capital expenditure for 2026-27 is estimated at about ₹2.93 lakh crore.
4. Gross budgetary support finances about 50% of the 2026-27 capital expenditure.

• A. 1, 2 and 3
• B. 1 and 4 only
• C. 2, 3 and 4
• D. 1, 2, 3 and 4

Q11. With reference to milestones in the development of Indian railways, consider the following statements. Which of the statements given above is/are correct?

1. India's first passenger train ran in 1853 between Bombay (Boribunder) and Thane.
2. The first passenger train was operated by the East Indian Railway.
3. On Independence in 1947, 42 separate railway systems were integrated, with full nationalisation under a unified administration following in 1951.

• A. 1 and 2 only
• B. 1 and 3 only
• C. 2 and 3 only
• D. 1, 2 and 3

Q12. The Acworth Committee (1920-21) is best known in Indian railway finance for recommending which one of the following?

• A. Separation of railway finances from the general finances of the government
• B. Full nationalisation of all private railway companies in 1951
• C. Merger of the Railway Budget with the Union Budget
• D. Introduction of the 5% Guarantee System for private railway companies