Applications for LAMP Fellowship 2025-26 are now open. Apply here. The last date for submitting applications is December 21, 2024
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. 
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 
The 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.
This blog has been updated on Jan 19, 2021 to also cover the Madhya Pradesh Ordinance which was promulgated earlier in the month. The comparison table has also been revised accordingly.
On November 27, 2020, the Uttar Pradesh (UP) Prohibition of Unlawful Conversion of Religion Ordinance, 2020 was promulgated by the state government. This was followed by the Madhya Pradesh (MP) government promulgating the Madhya Pradesh Freedom of Religion Ordinance, 2020, in January 2021. These Ordinances seek to regulate religious conversions and prohibit certain types of religious conversions (including through marriages). The MP Ordinance replaces the MP Dharma Swatantra Adhiniyam, 1968, which previously regulated religious conversions in the state. Few other states, including Haryana and Karnataka, are also planning to introduce a similar law. This blog post looks at existing anti-conversion laws in the country and compares the latest UP and MP Ordinances with these laws.
Anti-conversion laws in India
The Constitution guarantees the freedom to profess, propagate, and practise religion, and allows all religious sections to manage their own affairs in matters of religion; subject to public order, morality, and health. To date, there has been no central legislation restricting or regulating religious conversions. Further, in 2015, the Union Law Ministry stated that Parliament does not have the legislative competence to pass anti-conversion legislation. However, it is to be noted that, since 1954, on multiple occasions, Private Member Bills have been introduced in (but never approved by) the Parliament, to regulate religious conversions.
Over the years, several states have enacted ‘Freedom of Religion’ legislation to restrict religious conversions carried out by force, fraud, or inducements. These are: (i) Odisha (1967), (ii) Madhya Pradesh (1968), (iii) Arunachal Pradesh (1978), (iv) Chhattisgarh (2000 and 2006), (v) Gujarat (2003), (vi) Himachal Pradesh (2006 and 2019), (vii) Jharkhand (2017), and (viii) Uttarakhand (2018). Additionally, the Himachal Pradesh (2019) and Uttarakhand legislations also declare a marriage to be void if it was done for the sole purpose of unlawful conversion, or vice-versa. Further, the states of Tamil Nadu (2002) and Rajasthan (2006 and 2008) had also passed similar legislation. However, the Tamil Nadu legislation was repealed in 2006 (after protests by Christian minorities), while in case of Rajasthan, the bills did not receive the Governor’s and President’s assent respectively. Please see Table 2 for a comparison of anti-conversion laws across the country.
In November 2019, citing rising incidents of forced/fraudulent religious conversions, the Uttar Pradesh Law Commission recommended enacting a new law to regulate religious conversions. This led the state government to promulgate the recent Ordinance in 2020. Following UP, the MP government also decided to promulgate an Ordinance in January 2021 to regulate religious conversions. We discuss key features of these ordinances below.
What do the UP and MP Ordinances do?
The MP and UP Ordinances define conversion as renouncing one’s existing religion and adopting another religion. However, both Ordinances exclude re-conversion to immediate previous religion (in UP), and parental religion (in MP) from this definition. Parental religion is the religion to which the individual’s father belonged to, at the time of the individual’s birth. These Ordinances prescribe the procedure for individuals seeking to undergo conversions (in the states of UP and MP) and declare all other forms of conversion (that violate the prescribed procedures) illegal.
Procedure for conversion: Both the Ordinances require: (i) persons wishing to convert to a different religion, and (ii) persons supervising the conversion (religious convertors in UP, and religious priests or persons organising a conversion in MP) to submit an advance declaration of the proposed religious conversion to the District Magistrate (DM). In both states, the individuals seeking to undergo conversion are required to give advance notice of 60 days to the DM. However, in UP, the religious convertors are required to notify one month in advance, whereas in MP, the priests or organisers are also required to notify 60 days in advance. Upon receiving the declarations, the DMs in UP are further required to conduct a police enquiry into the intention, purpose, and cause of the proposed conversion. No such requirement exists in the MP Ordinance, although it mandates the DM’s sanction as a prerequisite for any court to take cognisance of an offence caused by violation of these procedures.
The UP Ordinance also lays down a post-conversion procedure. Post-conversion, within 60 days from the date of conversion, the converted individual is required to submit a declaration (with various personal details) to the DM. The DM will publicly exhibit a copy of the declaration (till the conversion is confirmed) and record any objections to the conversion. The converted individual must then appear before the DM to establish his/her identity, within 21 days of sending the declaration, and confirm the contents of the declaration.
Both the Ordinances also prescribe varying punishments for violation of any procedure prescribed by them, as specified in Table 2.
Prohibition on conversions: Both, the UP and MP Ordinances prohibit conversion of religion through means, such as: (i) force, misrepresentation, undue influence, and allurement, or (ii) fraud, or (iii) marriage. They also prohibit a person from abetting, convincing, and conspiring to such conversions. Further, the Ordinances assign the burden of proof of the lawfulness of religious conversion to: (i) the persons causing or facilitating such conversions, in UP, and (ii) the person accused of causing unlawful conversion, in MP.
Complaints against unlawful conversions: Both Ordinances allow for police complaints, against unlawful religious conversions, to be registered by: (i) the victim of such conversion, (ii) his/her parents or siblings, or (iii) any other person related to them by blood, and marriage or adoption. The MP Ordinance additionally permits persons related by guardianship or custodianship to also register a complaint, provided they take the leave of the court. Further, the MP Ordinance assigns the power to investigate such complaints to police officers of the rank of Sub-Inspector and above.
Marriages involving religious conversion: As per the UP Ordinance, a marriage is liable to be declared null and void, if: (i) it was done for the sole purpose of unlawful conversion, or vice-versa, and (ii) the religious conversion was not done as per the procedure specified in the Ordinance. Similarly, the MP Ordinance declares a marriage null and void, if: (i) it was done with an intent to convert a person, and (ii) the conversion took place through any of the prohibited means specified under the Ordinance. Further, the MP Ordinance explicitly provides for punishment (as specified in Table 2) for the concealment of religion for the purpose of marriage.
Right to inheritance and maintenance: The MP Ordinance additionally provides certain safeguards for women and children. It considers children born out of a marriage involving unlawful religious conversion as legitimate and provides for them to have the right to property of only the father (as per the law governing the inheritance of the father). Further, the Ordinance provides for maintenance to be given to: (i) a woman whose marriage is deemed unlawful under the Ordinance, and (ii) her children born out of such a marriage.
Punishment for unlawful conversions: Both the MP and UP Ordinances provide for punishment for causing or facilitating unlawful religious conversion, as specified in Table 1. Also, all offences under both Ordinances are cognisable and non-bailable.
Additionally, under the UP Ordinance, the accused will be liable to pay compensation of up to five lakh rupees to the victim of conversion and repeat offences will attract double the punishment specified for the respective offence. However, under the MP Ordinance, each repeat offence will attract punishment of a fine, and imprisonment between five and 10 years. Further, it provides for the Session Court to try an accused person, at the same trial, for: (i) an offence under this Ordinance, and (ii) also for other offences he has been charged with, under the Criminal Procedure Code, 1973.
Table 1: Punishments prescribed under the UP and MP Ordinances for offences by individuals for causing/facilitating the conversion
|
Punishment |
Uttar Pradesh |
Madhya Pradesh |
|
Mass conversion (conversion of two or more persons at the same time) |
||
|
Term of imprisonment |
3-10 years |
5-10 years |
|
Fine Amount |
Rs 50,000 or more |
Rs 1,00,000 or more |
|
Conversion of a minor, woman, or person belonging to SC or ST |
||
|
Term of imprisonment |
2-10 years |
2-10 years |
|
Fine Amount |
Rs 25,000 or more |
Rs 50,000 or more |
|
Any other conversion |
||
|
Term of imprisonment |
1-5 years |
1-5 years |
|
Fine Amount |
Rs 15,000 or more |
Rs 25,000 or more |
If any of the above three offences are committed by an organisation, under the UP Ordinance, the registration of the organisation is liable to be cancelled and grants or financial aid from the state government is liable to be discontinued. Under the MP Ordinance, only the registration of such organisations is liable to be cancelled.
* - It is not clear if the Chhattisgarh Law is currently in force or not.
** - Madhya Pradesh originally enacted a law in 1968. And has now replaced it with an Ordinance in 2021.
Note: For Odisha, Jharkhand, and Uttarakhand, some of the penalties have been specified in the Rules published under their respective Acts. For the rest of the states, the penalties have been specified in the respective Acts itself.
