Indian Railways: A Government Ministry or a Public Sector Undertaking?

Often, the question arises whether Indian Railways is a public sector undertaking (PSU) or a ministry of the Government of India. This article aims to clarify the status of Indian Railways, distinguishing it from other entities and explaining why it should be classified as a ministry.

Understanding the Status of Indian Railways

Indian Railways is not classified as a PSU, but rather as a ministry under the Government of India. This distinction is crucial to understanding its role and management. PSUs are companies where the government holds a significant majority of shares, exercising substantial control over their operations. However, Indian Railways is not a company; it is a ministry similar to other ministries such as the Ministry of Defence, Ministry of Finance, and others.

Legislative and Ownership Structure

Ownership and control of Indian Railways are clearly outlined in the Indian Constitution. The Central Government owns almost the entire railway system, which implies direct superintendence and management of the railways by the Central Government rather than through a regulatory mechanism as was the case with company-owned railways in the early years.

According to Article 246 of the Indian Constitution, the legislative power with respect to Railways vests exclusively in Parliament. Entries 22, 30, and 89 of List I of the Seventh Schedule also reinforce this exclusivity of legislative power with respect to Railways. The executive power corresponding to this legislative power also vests exclusively in the Government of India.

Accounting and Management Structure

For accounting purposes, Indian Railways is considered a departmental enterprise. This categorization implies that its accounts are maintained to suit both government accounting principles and commercial accounting standards. However, it's important to note that most government accounts in India are maintained on a cash basis.

A significant step towards bringing Indian Railways in line with international accounting standards has been taken. The Central Government established a committee to explore the transition of government accounts from the cash basis to the accrual basis. Indian Railways is well-prepared to adopt accrual accounting in its government accounts when the policy is fully implemented.

Deploying International Standards and Best Practices

The move towards accrual accounting aligns Indian Railways more closely with international standards and practices. This transition will provide a more accurate reflection of the railway's financial health, aiding better management and decision-making.

Comparison with Other Countries

The treatment of trains as public or private places varies across different countries. In the UK, for example, trains may be treated as both public and private depending on the context. Trains are public places under laws such as gambling and indecency laws, where actions on a train can be treated similarly to actions in public spaces. However, the owner of the railway can also exert control over who is allowed on the trains, similar to private property.

Conclusion

Indian Railways is not a PSU, but a ministry of the Government of India, fully owned and managed by the Central Government. Its unique status and management structure distinguishes it from other government enterprises. The difference in classification and management approach is crucial for understanding its role and operations within the government structure. As Indian Railways transitions to accrual accounting, it moves closer to aligning with international best practices.