Earlier today, the Union Cabinet announced the merger of the Railways Budget with the Union Budget.  All proposals under the Railways Budget will now be a part of the Union Budget.  However, to ensure detailed scrutiny, the Ministry’s expenditure will be discussed in Parliament.  Further, Railways will continue to maintain its autonomy and financial decision making powers.  In light of this, this post discusses some of the ways in which Railways is financed, and issues it faces with regard to financing. Separation of Railways Budget and its financial implications The Railways Budget was separated from the Union Budget in 1924.  While the Union Budget looks at the overall revenue and expenditure of the central government, the Railways Budget looks at the revenue and expenditure of the Ministry of Railways.  At that time, the proportion of Railways Budget was much higher as compared to the Union Budget.  The separation of the Budgets was done to ensure that the central government receives an assured contribution from the Railways revenues.  However, in the last few years, Railways’ finances have deteriorated and it has been struggling to generate enough surplus to invest in improving its infrastructure. Indian Railways is primarily financed through budgetary support from the central government, its own internal resources (freight and passenger revenue, leasing of railway land, etc.), and external resources (market borrowings, public private partnerships, joint ventures, or market financing). Every year, all ministries, except Railways, get support from the central government based on their estimated revenue and expenditure for the year.  The Railways Ministry is provided with a gross budgetary support from the central government in order to expand its network.  However, unlike other Ministries, Railways pays a return on this investment every year, known as dividend.  The rate of this dividend is currently at around 5%, and also includes the interest on government budgetary support received in the previous years. Various Committees have observed that the system of receiving support from the government and then paying back dividend is counter-productive.  It was recommended that the practice of paying dividend can be avoided until the financial health of Railways improves.  In the announcement made today, the requirement to pay dividend to the central government has been removed.  This would save the Ministry from the liability of paying around Rs 9,700 crore as dividend to the central government every year.  However, Railways will continue to get gross budgetary support from the central government. Declining internal revenue In addition to its core business of providing transportation, Railways also has several social obligations such as: (i) providing certain passenger and coaching services at below cost fares, (ii) running uneconomic branch lines (connectivity to remote areas), and (iii) granting concessions to various categories of people (like senior citizens, children, etc.).  All these add up to about Rs 30,000 crore.  Other inelastic expenses of Railways include pension charges, fuel expenses, lease payments, etc.  Such expenses do not leave any financial room for the Railways to make any infrastructure investments. Railways1 In the last few years, Railways has been struggling due to a decline in its revenue from passenger and freight traffic.  In addition, the support from the central government has broadly remained constant. In 2015-16, the gross budgetary support and internal revenue saw a decline, while there was some increase in the extra budgetary resources (shown in Figure 1).   Railways’ internal revenue primarily comes from freight traffic (about 65%), followed by passenger traffic (about 25%).  About one-third of the passenger revenue comes from first class passenger traffic and the remaining two-third comes from second class passenger traffic.  In 2015-16, Railways passenger traffic decreased by 4% and total passenger revenue decreased by 10% from the budget estimates.  While revenue from second class saw a decrease of 13%, revenue from first class traffic decreased by 3%.  In the last few years, Railways’ internal sources have been declining, primarily due to a decline in both passenger as well as freight traffic. Freight traffic Railways2The share of Railways in total freight traffic has declined from 89% to 30% over the last 60 years, with most of the share moving towards roads (see Figure 2).  With regard to freight traffic, Railways generates most of its revenue from the transportation of coal (about 44%), followed by cement (8%), iron ore (7%), and food-grains (7%).  In 2015-16, freight traffic decreased by 10%, and freight earnings reduced by 5% from the budget estimates. The Railways Budget for 2016-17 estimates an increase of 12% in passenger revenue and a 0.26% increase in passenger traffic.  Achieving a 12% increase in revenue without a corresponding increase in traffic will require an increase in fares. Flexi fares and passenger traffic A few days ago, the Ministry of Railways introduced a flexi-fare system for certain categories of trains.  Under this system, the base fare for Rajdhani, Duronto and Shatabdi trains will increase by 10% with every 10% of berths sold, subject to a ceiling of up to 1.5 times the base fare.  While this could also be a way for Railways to improve its revenue, it has raised concerns about train fares becoming more expensive.  Note that the flexi-fare system will apply only to first class passenger traffic, which contributes to about 8% of the total Railways revenue.  It remains to be seen if the new system increases Railways revenue, or further decreases passenger traffic (people choosing other modes of travel, such as airways, if fares increase significantly). While the Railways is trying to improve revenue by raising fares, this may increase the financial burden on passengers.  In the past, various Parliamentary Committees have observed that the investment planning in Railways from the government’s side is politically driven rather than need driven.  This has resulted in the extension of uneconomic, un-remunerative, yet socially desirable projects in every budget.  It has been recommended that projects based on social and commercial considerations must be categorised separately in the Railways accounts, and funding for the former must come from the central or state governments.  It has also been recommended that Railways should bring in more accuracy in determining its public service obligations. The decision to merge the Railways Budget with the Union Budget seems to be on the lines of several of these recommendations.  However, it remains to be seen whether merging the Railway Budget with the Union Budget will  improve the transporter’s finances or if it would require bringing in more reforms.



In the last few years, several states have enacted laws to curb cheating in examinations, especially those for recruitment in public service commissions.   According to news reports, incidents of cheating and paper leaks have occurred on several occasions in Uttarakhand, including during the panchayat development officer exams in 2016, and the Uttarakhand Subordinate Services Selection Commission exams in 2021.  The Uttarakhand Public Service Commission papers were also leaked in January 2023.  The most recent cheating incidents led to protests and unrest in Uttarakhand.   Following this, on February 11, 2023, the state promulgated an Ordinance to bar and penalise the use of unfair means in public examinations.  The Uttarakhand Assembly passed the Bill replacing the Ordinance in March 2023.  There have been multiple reports of candidates being arrested and debarred for cheating in public examinations for posts such as forest guard and secretariat guard after the ordinance’s introduction.  Similar instances of cheating have also been noted in other states.   As per news reports, since 2015, Gujarat has not been able to hold a single recruitment exam without reported paper leaks.  In February 2023, the Gujarat Assembly also passed a law to penalise cheating in public examinations.  Other states such as Rajasthan (Act passed in 2022), Uttar Pradesh (Act passed in 1998) and Andhra Pradesh (Act passed in 1997) also have similar laws.  In this blog, we compare anti-cheating laws across some states (see Table 1), and discuss some issues to consider.

Typical provisions of anti-cheating laws

Anti-cheating laws across states generally contain provisions that penalise the use of unfair means by examinees and other groups in public examinations such as those conducted by state public sector commission examinations and higher secondary education boards.  Broadly, unfair means is defined to include the use of unauthorised help and the unauthorised use of written material by candidates.  These laws also prohibit individuals responsible for conducting examinations from disclosing any information they acquire in this role.  The more recent laws, such as the Gujarat, Uttarakhand, and Rajasthan ones, also include the impersonation of candidates and the leaking of exam papers within the definition of unfair means.  Uttarakhand, Gujarat, Rajasthan, Uttar Pradesh, Chhattisgarh, and Andhra Pradesh prohibit the use of electronic aids.  Maximum prison sentences for using such unfair means range from three months in Uttar Pradesh, to seven years in Andhra Pradesh. 

Issues to consider

The Gujarat and Uttarakhand anti-cheating Acts have relatively stringent provisions for cheating.  The Uttarakhand Act has a fixed 3-year prison sentence for examinees caught cheating or using unfair means (for the first offence).  Since the Act does not distinguish between the different types of unfair means used, an examinee could serve a sentence disproportionate to the offence committed.  In most other states, the maximum imprisonment term for such offences is three years.   Andhra Pradesh has a minimum imprisonment term of three years.  However, all these states allow for a range with respect to the penalty, that is, the judge can decide on the imprisonment term (within the specified limits) depending on the manner of cheating and the implications of such cheating.  Table 1 below compares the penalties for certain offences across eight states.

The Uttarakhand Act has a provision that debars the examinee from state competitive examinations for two to five years upon the filing of the chargesheet, rather than upon conviction.  Thus, an examinee could be deprived of giving the examination even if they were innocent but being prosecuted under the law.  This could compromise the presumption of innocence for accused candidates.  The Gujarat and Rajasthan laws also debar candidates from sitting in specified examinations for two years, but only upon conviction. 

These laws also vary in scope across states.  In Uttarakhand and Rajasthan, the laws only apply to competitive examinations for recruitment in a state department (such as a Public Commission).   In the other six states examined, these laws also apply to examinations held by educational institutions for granting educational qualifications such as diplomas and degrees.  For example, in Gujarat, exams conducted by the Gujarat Secondary and Higher Secondary Education Board are also covered under the Gujarat Public Examination (Prevention of Unfair Means) Act, 2023.   The question is whether it is appropriate to have similar punishments for exams in educational institutions and exams for recruitment in government jobs, given the difference in stakes between them.

Sources: The Rajasthan Public Examination (Measures for Prevention of Unfair Means in Recruitment) Act, 2022; the Uttar Pradesh Public Examinations (Prevention of Unfair Means) Act, 1998; the Chhattisgarh Public Examinations (Prevention of Unfair Means) Act, 2008; the Orissa Conduct of Examinations Act, 1988; the Andhra Pradesh Public Examinations (Prevention of Malpractices and Unfair means) Act, 1997; the Jharkhand Conduct of Examinations Act, 2001, the Uttarakhand Competitive Examination (Measures for Prevention and Prevention of Unfair Means in Recruitment) Act, 2023, the Gujarat Public Examination (Prevention of Unfair Methods) Act, 2023; PRS.