Bringing on track

Railways must address structural inefficiencies

It has been exactly a hundred years since the first Railways Budget was presented in 1924 — an era when the size of the Railways Budget exceeded the size of the general Budget. Much has changed since then and India no longer has a separate Railways Budget. In this year’s Budget, unsurprisingly, the Railways found very little space. Mere absence in the Budget speech, however, should not be seen as neglect. On the contrary, for 2024-25, the capital expenditure of the Railways has been pegged at Rs 2.62 trillion, of which gross budgetary support stands at Rs 2.52 trillion while Rs 10,000 crore will be met from extra-budgetary resources. Although budgetary capex outlay this year represents a mere 5 per cent increase over that of the previous year, it must be seen with 2023-24, when the capital outlay was significantly higher than in the previous year, representing an increase of almost 51 per cent.

This year’s Budget envisages integrating railway connectivity with industrial development. For this, an announcement was made regarding enhancing connectivity across major industrial corridors such as the Visakhapatnam-Chennai Industrial Corridor, Hyderabad-Bengaluru Industrial Corridor, and Amritsar-Kolkata Industrial Corridor. However, the result of increased capex remains mixed. Revised Estimates for 2023-24 show that cumulative expenditure on laying new lines, gauge conversion, doubling, and track renewal stood at Rs 90,560.57 crore. The outlay for these four dimensions decreased to Rs 86,286.42 crore this financial year. The outlay for rolling stock and electrification projects has also registered a marginal decrease. However, despite increasing capex, efficiency is not improving. For instance, in 2019-20, the operating ratio was at 95 per cent, indicating that the Railways spent Rs 95 for every Rs 100 it earned. It worsened to 98.65 per cent in 2023-24.
 

Over the past 10 years, the Railways commissioned 31,180 kilometres (km) of tracks. During the same period, the pace of track laying also increased more than three times. Electrification is also complete in around 95 per cent of the broad gauge network. In 2023-24 alone, the Indian Railways electrified 7,188 km. Yet, the data released by the Ministry of Railways suggests that the average speed of freight trains was 23.6 km/hour (kmph) in 2023-24. Speed restrictions have also reduced the average speed of semi-high-speed Vande Bharat trains from 84.48 kmph in 2020-21 to 76.25 kmph in 2023-24. It is not clear at what point increased capex will start showing results in terms of improved efficiency. Low speeds and high logistics costs mean the Railways is losing its freight share to other competitive modes of transport like roadways.
 

Further, despite the recent spate of railway accidents — though the frequency has come down over time — it is surprising that the allocation to the Rashtriya Rail Sanraksha Kosh remains stagnant at Rs 10,000 crore. The Kavach Automatic Train Protection System is operational on only 1,500 km of railway tracks, which accounts for only 2.14 per cent of the railway network. The Railways also needs to address overcrowding, particularly in non-air-conditioned coaches on busy routes. The way forward could be fare rationalisation and capacity addition. Clearly, the Railways needs significant adjustment to be able to cater for the needs of a rapidly growing economy.