No mention of ‘railway’ in the budget speech came as a surprise. From a full fledged rail budget to complete silence, the Indian Railways have come a long way.
Going by the interim budget, the capital outlay of Rs2.65 lakh crore is far below expectation, particularly in view of utilisation of Rs2.62 lakh crore in 2023-24. The policy initiative of strengthening mineral and cement corridors, port connectivity and dedicated freight corridors alongside the high-density corridors has helped railways in achieving consistently robust growth in freight traffic and passenger traffic in the past year. Budget proposal is to further continue with this strategy.
In fact, recent policy initiatives with regard to development of logistic parks and railway terminals on the demand of industry under Gati Shakti policy has got a very good response from the industry and will result in substantial reduction in the logistics cost. Total capital expenditure of about Rs10 lakh crore during the last five years has substantially addressed the capacity issues. However, the fault lines are visible now.
The internal generation and extra budgetary resources are on the decline, indicating that everything is not right. Despite an increase in traffic, profitability is going down. Operating ratio, the indicator of profitability, is hovering around hundred, even though funds allocated for maintenance are stagnant. In fact, on account of increase in infrastructure and rolling stock there should have been an increase in maintenance expenditure. Neglecting maintenance can prove to be disastrous in the long run.
Another problem is that the commitments made in the previous budgets are not being followed up. There is no clarity on consolidation and the merger of railway PSUs, private operation of passenger trains or monetisation of DFCC. The railways has announced several policy and reform initiatives, the most successful being the elimination of at-grade crossings and complete electrification. The elimination of level crossings has saved huge manpower and resulted in improved operational efficiency. Similarly, complete switchover to electric traction has made operation efficient, economical and environment friendly. Unfortunately, the station redevelopment performance has been lacklustre. After several rounds of policy flip-flops, quite a few contracts have been awarded and it is now expected that the programme will be on track. This perhaps is the reason that funds allotted under the head “passenger amenity” remain under-utilised.
Vande Bharat is a ‘Made in India’ product, which is world class and has generated a lot of expectations. However, the upgrade of infrastructure to utilise the speed potential of Vande Bharat has been missing in the Budget. Project delivery system in the railways is far from satisfactory. Often the railway projects are allotted to the railway PSUs, which results in multi-layered subcontracting and consequent risks of failures.
For a sustainable growth, an appropriate framework will have to be worked out where specialised knowledge and experience, peculiar to railways, is made accessible to the private sector to bring in efficiency and build up capacities. The sector is capital-intensive and substantial investment has been done in the past nine years in all segments i.e. new lines, doubling, electrification, rolling stock, last mile connectivity and signalling. There are issues with organisational structure, which may need to be addressed through radical reforms. The time is opportune to have an independent rail regulator.
