Railways Continue To Be Lavished With Budget Support For Capex, But Where’s The Payback?

The Indian Railways have a preference for capital investment in the interim budget in keeping with the central government’s focus on improving logistics and reducing transportation costs, but they continue to lag in both physical and financial performance.

The central government will invest 23% of its total capital expenditure, or Rs 2,52,000 crore, in the railways. Another Rs 13,000 crore will come from internal and extra-budgetary resources. Over the past five years, the capital expenditure of the railways has grown by 76% and the central government’s budget support has increased 3.5 times.

Such a massive investment should have increased carrying capacity. There should have been a jump in traffic revenues as well. But the performance is satisfactory, not spectacular.

This year, 1,580 million metric tonnes of cargo will be carried, about 30% more than in 19–20. The net tonne kilometre, or total cargo, hauled distance has increased by the same proportion from 707 billion km to 922 billion km.

The gross traffic receipts from both passengers and goods have risen by about 50%. But operating expenses consume three-fourths of it. After appropriations for passenger amenities, track renewals and safety measures, a little surplus is left. The share of expenses (including appropriations) in receipts has been above 96% over the past five years. This year, it is nearly 99%. In fact, it is quite possible that certain items of expenditure have been deferred to show a small surplus. It is very likely that the railways have suffered an actual loss this year, as in many previous years.

The railways’ grouse is that they cannot earn a profit because of their social obligations. Those obligations are inevitable, as the railways are a public monopoly and don’t allow competition. This year, 391 million people travelled long distances by sleeper class. On social media, one can see pictures of them travelling in hideous conditions, particularly during festivals. Perhaps the railways are not interested in investing in this class of travel because they earn just 57 paise per passenger per km.

On the other hand, AC three-tier fetches Rs 1.39 per passenger km. The railways seem to have invested in this class of travel and demand seems to have kept pace with increased supply. This class of passengers travelled a total of 155 billion km last year, a jump from about 96 billion km just before the pandemic. This year, they are expected to travel 187 billion kilometres.

Two-tier AC passengers are also returning. Last year, they travelled 31 billion km, 9 billion km more than before the pandemic. This year, they are expected to do 5 billion km more.

On the cargo front, while total tonnage has increased by 30%, the average distance travelled has remained flat at about 585 km between 2019–20 and now.

According to the budget documents, the railways have met all the physical targets set for new lines, gauge conversion, electrification, track renewals and line doubling. The rolling stock target has also been met, except for a small shortfall in the purchase of wagons.

In December, the Railway Minister told the Parliament that the eastern dedicated freight corridor from Ludhiana in Punjab to Sonnagar in West Bengal has been completed and 78% of the western corridor from Dadri in Uttar Pradesh to Jawaharlal Nehru Port has been done. When these corridors become operational, the railways should be able to improve their freight and revenue performance.

In the interim budget, the Finance Minister said that special tracks for the movement of coal and minerals, port connectivity and easing of congestion in dense traffic corridors will be taken up. These are statements of intention and have been made in the past. One will have to wait for the regular budget to see allocations for them.