The finances of Indian Railways were separated from the general finances of the country in 1924 by a resolution of the Central Legislature. Under the separation convention, the Railways are required to pay a dividend at a fixed rate on their capital, which has been advanced by the Central Government, subject to the obligation to pay a dividend at the prescribed rates to the General Exchequer and observance of the national economic policies. The railways are free to pursue their own financial policies to their best advantage. The dividend rates as well as other financial arrangements between the Railways and General Finance are determined periodically by the convention committee, which is an Indian Parliament committee. Indian Railways was required to pay a dividend at 4.5 per cent on capital invested up to March 1964, 5.5 per cent for fresh investments up to the years 1980-85, and
6.5 per cent thereafter for the seventh plan period, i.e., for the years 1985-90. Railway finances and policies are controlled by the Parliament through discussions and debates on the annual railway budget, interpellations during the question hour whenever the Parliament is in session, and Parliamentary committees such as the Railway Convention Committee, the Estimates Committee, and the Public Accounts Committee.
The railway administration also gets a feel of public opinion and secures people’s cooperation through Railway Users’ Consultative Committees at various levels and also through advisory committees for specific purposes such as the Passenger Amenities Committee and Time Table Advisory Committee.