Acworth Committee on Indian Railways
In 1920, an East Indian Railway Committee was constituted under the chairmanship of Sir William Acworth. This committee consisted of 10 members and among them 3 were Indians viz.
- V S Sriniwas Sastri (Member of Council of States) ,
- Purshottam Das Thakurdas (representing Indian Commercial Interests) and
- Rajendra Nath Mukherjee.
The Acworth Committee recommended the consolidation and nationalization of the Indian Railways. Based upon the recommendations of Acworth Committee, the Finances of Railways were separated in 1924 and thus from 1924 onwards, the Railway Budget is separated from the General Budget.
Key Recommendations
The Acworth Committee recommendations were finally passed on September 20, 1924 as the Separation Convention. Separation of railway finances from general finances was by far the most important reform in financial management. The key recommendations were as follows:
Separation of Railway Finances
Complete separation of the Railway budget from the general budget of the country was done. Its reconstruction was done in a form which frees a great commercial business from the trammels of a system which assumes that the concern goes out of business on every 31st of March and recommences de novo (from the beginning) on the 1st of April. The general revenues were to receive a definite annual contribution from the Railways which would be the first charge on the net receipts of the railways.
Emancipation of Railway Management
The railway management’s emancipation from the control of Finance Department was recommended.
Equalisation of Dividends
The committee recommended that a depreciation fund and Railway reserves be built so that dividends may be equalised. A system of finance was introduced to have unimpaired control of the House while ensuring general revenues a fair return from their Railway property, more suited to the needs of a vast commercial undertaking.
Loan Account Separation
Separation of loan account (known as capital-at-charge) and the Block Account (gross block of assets) followed in the wake of separation of Railway finance. The term capital outlay in statistical reports was changed to capital-at-charge. The contribution shall be based on the capital-at-charge and working results of commercial lines which shall be a sum equal to one per cent on the capital-at-charge.
Borrowings of the Railways
The Railway administration shall be entitled, subject to conditions prescribed by the Government of India, to borrow temporarily from the capital, or from the reserve to cater for the ensuing expenditure if there is lack of funds. Such loans have to be repaid if taken from the revenue budget of the years to come.
A Standing Finance Committee for Railways
The Department of Railways will submit its estimates to a newly constituted State Finance Commission before it is time for the deliberation on Demand for Grants for Railways. It was further recommended that expenditure maybe shown under a new separate depreciation fund.
Budget Presentation
The Railway budget was to be presented to the Legislature prior to the general budget with distinct days for its discussion. The accounts and functions of the Railways would be stated by the Member-in-Charge.
Periodic Revision
These recommendations would be tested for at least three years and then revised from time to time. Hence, the Railway budget was separated from the general budget to mark a new phase in the Indian Financial Administration.
