Rail Budget 2024: A Different Approach to Rail Investment in India

Sudhanshu Mani Posted on: 2024-02-05 17:30:00 Viewer: 573 Comments: 0 Country: India City: New Delhi

Rail Budget 2024: A Different Approach to Rail Investment in India

Sustained fiscal deficit with heavy investment in infrastructure has been the hallmark of this government. This can boost a slowing economy like ours after the impact of Covid, provided the spend is on creating productive assets which in turn help improve investments, purchasing power and job opportunities.

Let us look at the rail component of the Budget and the investments which have gone up multiple times over the levels in FY14, and peaking to ₹2.62-lakh crore in the last Budget. Contrary to the expectation of another 10-15 per cent increase, which saw railway stocks rising considerably in recent days, there was no major change in allocation. The General Budgetary support is up by ₹12,000 crore but borrowings are down by ₹7,000 crore. 

While a reduction in borrowings has become inevitable due to mounting interest burden affecting the operating ratio, a break from the enhancement of investments in Indian Railways (IR) is also called for. These sustained investments have not yet yielded any major difference in IR’s revenue performance. 

Freight loading and revenue, the bread earner for IR, is estimated to increase only at around 4 per cent in FY24 and is budgeted in FY25 at almost the same level as was budgeted in FY24. The saving grace is the increase in passenger receipts, which is estimated to grow at around 15 per cent in FY24 partly due to restoration of all passenger services post-Covid; this segment in any case is not an earner for the Railways and the Budget of FY25 provides for a growth of around 9 per cent.

A word about the only two banner declarations: (i) implementation of three major railway economic corridors, one for energy, cement and minerals, second for ports and third for high-density traffic sectors under PM Gati Shakti, enabling multi-modal connectivity to improve logistics efficiency and reduce costs and to improve speed and safety of passenger trains due the resultant decongestion; and (ii) 40,000 normal passenger coaches to be upgraded to Vande Bharat standards to improve safety and comfort. 

The first one appears to be a last-minute thought to present something new out of nowhere by exploiting the mantra of PM Gati Shakti once again. Similar announcements in previous Budgets were: (a) 100 PM Gati Shakti terminals for multimodal logistics facilities to be developed in three years (FY22); and (b) 100 critical transport infrastructure projects, for last/first mile connectivity for railways and ports for coal, steel, fertilizer and foodgrains sectors to be implemented on priority (FY23). A review of actual progress shows that many sanctioned and ongoing schemes have been simply renamed and brought under the gamut of Gati Shakti. 

Has the government given up on the proposed new DFCs (dedicated freight corridors)? Instead of announcing new DFCs, the first two of which sought to address the need of line capacity problem in early 2000s, the stress seems to have shifted to upgrading the existing high density golden quadrilateral, mineral, cement and energy routes and lines connecting ports with 40,000 km of additional tracks, bypasses and multi-modal facilities. While this reflects a change in strategy perhaps because of IR’s poor record in implementing big ticket projects like DFCs in a timely manner, smaller decentralised handling of this project pegged at ₹12-lakh crore over a decade or more does seem like a good way forward to generate more freight and passenger transport capacities. 

An underlying realisation must be that upgraded facilities with improvements in rolling stock varieties, customer-friendly policies and focus on new commodities are likely to yield better dividends than large-scale spend on expensive fixed assets with the inherent delays in their completion. 

The other announcement is rather cryptic. Conversion of 40,000 coaches obviously refers to ICF-design coaches which number around 35,000 today, manufacture of which was stopped in 2017. It is already planned that these coaches, which have the drawback of capsizing or climbing one another in case of an accident, would be gradually replaced by safer LHB (Linke Hofmann Busch) coaches or Vande Bharat-type trains. This would take years if not decades, but conversion? What is meant by Vande Bharat standards itself is unclear as the latter are self-propelled coaches; conversion of standalone ICF coaches to such coaches is technically untenable. If it’s about adopting some features, like fire alarm, etc., in ICF coaches, work on that is already on whereas the main safety features of Vande Bharat trains like a modern brake system, automatic doors, talk-back facility, semi-permanent couplers, improved crash structure, etc., cannot be retrofitted in old standalone coaches. It is possible that the intention is to upgrade these coaches to Amrit Bharat LHB coach amenities but that would hardly be Vande Bharat standard. 

It is difficult to be upbeat about the upgrade of old coaches to Amrit Bharat type interiors and change of safer coupler, as a similar exercise of changing the couplers in ICF coaches proved to be a failure and was abandoned in 2017; it is certainly more meaningful to retire these coaches in a time-bound programme and replace them by new LHB coaches and, more effectively, by new Vande Bharat train sets. 

The only takeaway from the Budget is that there is a need to pause and review the investment profile critically to fund predominantly those projects which would help IR generate a surplus. One can hope that this would be done by the new government.


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