Indian Railways expected to boost capital expenditure by around 25% from the 2023-24 budget estimate.
The allocation for Indian Railways in the budget is projected to reach record highs in the fiscal year 2024-25 as the government prepares to back a substantial overhaul for the national transportation system, encompassing the introduction of more advanced and faster trains as well as enhanced safety features.
According to informed sources, the capital expenditure (capex) for the railways is set to increase by approximately 25% from the 2023-24 budget estimate, potentially surpassing ₹3 trillion in the upcoming fiscal year. The railway ministry has reportedly requested a boost in planned capex to support long-term infrastructure projects concerning freight corridors, rapid trains, and the modernization of the rail fleet with state-of-the-art trains, wagons, and locomotives.
The augmented capex is expected to contribute towards the introduction of 300-400 Vande Bharat trains in various configurations, including one featuring sleeper coaches, along with the upgrading of the signaling systems. Moreover, the safety budget for the railways is anticipated to nearly double to expedite the achievement of its Mission Zero Accidents.
It has been noted that the safety budget has remained stagnant at around ₹11,000 crore for the past two years. Queries directed to the finance and railway ministries remained unanswered at the time of reporting.
Expressing the necessity for a higher plan capex allocation for Indian Railways, former Railway Board member Subodh Jain emphasized the critical stage the national transporter is at in terms of implementing key infrastructure projects. Highlighting the substantial increase in gross budgetary support in the previous fiscal year, Jain underscored the expectation of even greater absolute support in the upcoming fiscal period, despite a potentially slower growth rate compared to the previous year.
In conclusion, the forthcoming substantial increase in budgetary allocation for the Indian Railways signifies the government’s commitment to providing crucial financial support for the modernization and enhancement of the country’s railway infrastructure, bolstering the prospects for a more efficient and advanced railway network.
Keywords: Indian Railways, budget allocation, fiscal year 2024-25, capex, Vande Bharat trains, safety budget, infrastructure projects, Railway Board member Subodh Jain, modernization, financial support, railway network.
In the 2022-23 budget, Indian Railways had a total capital allocation of around ₹2.45 trillion, with the Centre’s gross budgetary support at approximately ₹1.6 trillion.
By 2023-24, gross budgetary support had risen to ₹2.4 trillion, coinciding with the railways’ total capital allocation of ₹2.6 trillion. It is anticipated that over 90% of the 2024-25 capital allocation will once again originate from the government’s gross budgetary support.
Gross budgetary support represents the tangible amount that a government entity receives from the general budget.
Sufficient funding is crucial for Indian Railways to develop new infrastructure. Given the government’s favorable borrowing conditions from the market, it is expected that capital spending for critical infrastructure sectors, including railways and roads, will be facilitated by the government’s gross budgetary support.
The support for Indian Railways has shown a consistent increase, climbing to ₹1.17 trillion in 2021-22 from ₹70,250 crore in 2020-21, ₹69,967 crore in 2019-20, and ₹55,088 crore in 2018-19.
Following years of predominantly supporting revenue expenditure, gross budgetary support has refocused in recent years to bolster the railways’ capital expenditure (capex).
According to sources familiar with the government’s strategy, a substantial portion of the heightened gross budgetary support allocated to Indian Railways in the budget may be designated for the Ahmedabad-Mumbai bullet train project. Progress on this project is advancing rapidly for both the Gujarat and Maharashtra tracks.
The government’s focus on the railways is set to encompass several key initiatives in the upcoming Budget 2024. For instance, plans are underway for the initiation of the Delhi-Varanasi high-speed train. Additionally, the augmentation of track renewal and expansion of new tracks to facilitate faster trains is on the agenda. Last year, Indian Railways demonstrated significant progress by constructing over 5,000 kilometers of new lines, and the aim is to sustain this momentum over the next decade with the addition of 50,000 kilometers of new lines, entailing an expenditure exceeding ₹7.5 trillion.
Moreover, a proposal has been put forward for a revamp of the signaling system, transitioning from the electronic interlocking system to a solid-state network. This overhaul is intended to mitigate the potential for human interference to lead to accidents, similar to the incident in Balasore, Odisha, last year. In parallel, there are plans to expedite the implementation of the Kavach rail anti-collision system, aiming to integrate 7,000-8,000 kilometers of railway network under this system annually. Notably, a tender for commissioning 6,000 kilometers of railway network as part of this system is currently in progress.
The significance of prioritizing capital expenditure (capex) within the railway sector is underscored by the need to maximize the allocation of funds for this purpose. According to industry experts, a robust focus on capex is crucial for driving overall economic development. At present, a substantial portion of the Railway’s expenditure is allocated to wages, leading to an operating ratio that surpasses 98%. This emphasizes the imperative to optimize capex composition to positively influence the railways’ efficiency and economic development.
Furthermore, as the Railways leverages its own funds for capex, efforts are underway to prevent higher revenue expenditure from encumbering its capacity to invest in infrastructure and modernization. With the aim of advancing the railway infrastructure and fostering economic growth, an emphasis on prudent financial allocation and expansion strategies is imperative.
