Union Budget 2025: Indian Railways gets ₹2.52 Lakh Crore Capex for FY2025-26

New Delhi, India (Metro Rail Today): In the Union Budget for the financial year 2025-26, Finance Minister Nirmala Sitharaman has allocated ₹2.52 lakh crore for capital expenditure (Capex) to the Indian Railways, marking the second consecutive year of this funding level. This allocation reflects a steadfast commitment to modernizing the railway infrastructure, with an emphasis on safety measures, electrification, and the expansion of services.

Presenting the first full Budget of the third term of the Modi government, Finance Minister Sitharaman outlined a series of priorities for the Indian Railways, aiming to accelerate infrastructure development while addressing key challenges within the sector. The budgetary support remains unchanged from FY2024-25, signifying a stable trajectory for capital investment in the sector, despite expectations of more aggressive reforms.

Focus on Safety, Electrification, and Infrastructure Upgrades

The ₹2.52 lakh crore budgetary allocation for the Indian Railways will be utilized across a variety of critical initiatives, including laying new tracks, converting gauges, enhancing electrification, and upgrading rolling stock. In particular, the focus on safety, which has been a key priority in recent years, is expected to continue, with significant investments planned for advanced signaling systems and the development of new technologies to prevent accidents.

One such technology making waves is India’s Kavach (Automatic Train Protection System), a safety measure introduced in 2020 that automatically applies brakes if a train driver fails to take corrective action. The system has already been deployed on 1,465 route kilometers and integrated into 144 locomotives. As of July 2024, over ₹2,300 crore has been allocated for Kavach’s rollout, with additional funds earmarked for further expansion. The system's latest version, Kavach 4.0, was approved by the Research Designs and Standards Organisation (RDSO) in July 2024, underscoring the government’s commitment to enhancing rail safety through innovation.

Railways’ Record Freight Performance

While the capital allocation remains unchanged, Indian Railways continues to deliver impressive results. In FY2023-24, the Railways achieved a record-high freight loading of 1,588 million tonnes (MT), an increase from 1,095 MT in FY2014-15. The freight sector’s stellar performance is indicative of the ongoing improvements in rail infrastructure and logistics, which have positioned Indian Railways as a critical player in the nation’s economic growth.

The Railways also reported an all-time high in total receipts for FY2023-24, with earnings touching ₹2,56,093 crore, and a net revenue of ₹3,260 crore. This demonstrates the efficiency improvements and higher revenues generated through enhanced freight and passenger operations.

Budgeting for Long-Term Growth: Extra-Budgetary Resources

Beyond the budgetary support, Indian Railways has also raised funds through internal and extra-budgetary resources (IEBR). The IEBR for FY2025-26 has remained constant at Rs 13,000 crore, similar to FY2024-25 levels. These funds are typically raised through various financing avenues, including the Indian Railway Finance Corporation (IRFC), which provides capital for the Railways' long-term projects.

Over the past decade, the Indian Railways has significantly ramped up its infrastructure development. Notably, the Railways has commissioned 31,180 kilometers of new track since 2014, bringing the pace of track-laying from 4 kilometers per day in FY2014-15 to an impressive 14.54 kilometers per day by FY2023-24. Additionally, the electrification of 41,655 route kilometers between 2014 and 2024 has nearly doubled the electrified network, reinforcing the Railways' commitment to reducing dependence on fossil fuels and increasing operational efficiency.

Market Response: Stock Market Reactions

While the Indian Railways’ budget allocation remains stable, the stock market response was less favorable. Stocks of key railway-linked companies like IRCON, IRCTC, and IRFC saw a decline of over six percent after the budget announcement, with analysts expressing disappointment at the lack of major structural reforms or ambitious proposals. Analysts had anticipated more transformative measures for the sector, but the budget presented a more conservative approach, focusing on consolidating existing plans rather than introducing groundbreaking changes.

The Path Forward: A Modernized, Sustainable Railway Network

Despite the absence of major reforms, the government’s unwavering focus on electrification, safety, and infrastructure modernization presents a clear long-term vision for Indian Railways. With plans to further electrify the railway network and upgrade essential safety systems, the country’s railway infrastructure is poised for steady growth in the years to come.

The ₹2.52 lakh crore Capex allocation for FY2025-26 will continue to fuel Indian Railways' ambition to transform itself into a safer, more efficient, and environmentally friendly transportation network. With strategic investments in technology, infrastructure, and electrification, Indian Railways is paving the way for a more sustainable and connected future for millions of passengers and freight operators across the nation.