Rationale for introducing separate budgets in 1921

The separation was introduced in 1921 based on the recommendation of Acworth Committee report. The reason was that a larger part of the country’s GDP depended on railway revenue, therefore, railway demanded separate budgetary focus. Independent India also continued this practice and over the period of time it became accepted practice with following advantages:

1. Accountability: Separate budget used to give sufficient media attention to the budgetary proposals, thereby enforcing accountability of the government.

2. Public transport: Railways has been the public transportation system, therefore it was desirable that railways should be given special attention by separate budget.

3. Autonomy: It was expected that separate budgetary process would ensure requisite autonomy to the railways to function as independent commercial entity.

However, over a period of time, the railway budget became a tool for populism and led to populist waste and inefficiency. Hence, there was a strong demand for corporatization of the Railways. Not having a separate budget for it prepares the ground for such a change.