<b>Bibek Debroy:</b> A 1924 legacy

The moment the Railway Budget, as a separate budget distinct from the Union Budget, is mentioned, everyone thinks of the Acworth Committee. That doesn't necessarily mean people have read the Acworth Committee's Report or are familiar with the background. To give it the proper name, it was a committee appointed by the secretary of state "to enquire into the administration and working of Indian Railways". This was constituted in 1920 and had a broad mandate. However, the trigger is important too. "The appointment of this committee was the outcome of discussions originating in the question of the action to be taken in connection with the East Indian Railway, a state-owned railway managed by the East Indian Railway Company (EIRC) under a working contract, terminable in December 1919, with the secretary of state. In the course of these discussions a good deal of attention was devoted to the respective merits and defects of various possible systems of management. As a temporary measure, the EIRC's contract was extended to the end of 1924, and it was decided that the general questions arising out of the discussion of that case should be referred to a representative committee for consideration." This is a quote from the committee's Report. Hence, it isn't surprising that the committee was also known as the East India (Railway Committee). In a perverse way, policy for the Indian Railways (IR) in 2016 is being determined by the fortunes of the EIRC in 1919. In passing, the committee sat for 50 days and examined 142 witnesses.

There is an impression that private companies built railways under a guarantee system and this later changed to government ownership and operation of railways. The truth is messier. Towards the close of the 19th century, there were 10 different systems in simultaneous existence: (1) Lines constructed, owned and operated by private companies under old contracts and guarantees; (2) Lines constructed, owned and operated by private companies under new contracts and guarantees; (3) Lines constructed, owned and operated by the government of India; (4) Lines owned by the government of India, but constructed and operated by private companies; (5) Lines constructed and operated by private companies, without a guarantee, but with some kind of government assistance; (6) Lines owned and operated by princely states; (7) Lines owned by princely states, but operated by the government; (8) Lines owned by princely states, but operated by private companies; (9) District Board lines, short local lines within a district, financed through a local cess; and (10) Lines in foreign (French or Portuguese territory). The Acworth Committee listed five systems, since several were clubbed together as miscellaneous.

Though the EIRC was formed in 1845, it signed a contract with the East India Company in 1849, amended again in 1854. This contract was under the old guarantee system, before it was tweaked through the new guarantee system. Leases were for 99 years, but after 25 years the government (East India Company and later government of India) had the option of purchasing everything (including rolling stock, plant and machinery) back. This is what the 1854 contract provided for, though not the 1849 one. Counting from 1854, this led to the East India Railway Company Purchase Act of 1879, a statute for nationalisation. However, though ownership changed, the EIRC was allowed the franchise to operate the railway for 50 years. The EIRC's status changed from (1) to (4) and this was to be reviewed in 1919. (It was 1919, because the franchise agreement was in 1869.)

Most people who work for the IR will quote you the following from the Acworth Committee Report. The Nehru Memorial Museum and Library is probably one of the rare places where all volumes of the Acworth Committee Report are available. In this set, a specific section has been marked out in pencil. Subconsciously, everyone probably feels the urge to quote this. "We do not think that the Indian railways can be modernised, improved and enlarged, so us to give to India the service of which it is in crying need at the moment, nor that the railways can yield to the Indian public the financial return which they are entitled to expect from so valuable a property, until the whole financial methods are radically reformed. And the essence of this reform is contained in two things: (1) the complete separation of the Railway Budget from the general Budget of the country, and its reconstruction in a form that frees a great commercial business from the trammels of a system, which assumes that the concern goes out of business on March 1 every year and recommences de novo on April 1; and (2) the emancipation of the railway management from the control of the Finance Department." While that's fine, the Acworth Committee itself said it had 24 unanimous recommendations and another 26 divergent/supplementary recommendations. For example, "we suggest that there should be a less rigid regard than hitherto to the claims of seniority". Or, adherence to commercial accounting principles. Out of the recommendations that still remain relevant, only one was really implemented, the idea of a separate Railway Budget. And that's the one we continue to persist with.

The writer is a member of the National Institution for Transforming India Aayog. The views are personal