Vande Bharat to bullet train, Railways to ride a ₹3 tn budget

The capital expenditure (capex) for the railways is likely to be increased by about 25% from the 2023-24 budget estimate, two people aware of the development said. That would take the budgetary allocation to more than ₹3 trillion in 2024-25.

The railway ministry had sought an increase in its planned capex for long-term infrastructure projects of freight corridors and speedier trains, as well as modernizing the fleet with new-age trains, wagons and locos, one of them said.

The increased capex would also go towards rolling out 300-400 Vande Bharat trains in different formats, including one with sleeper coaches, as well as overhauling the signalling systems.

The safety budget of the railways is expected to be almost doubled to help it accomplish its Mission Zero Accidents sooner, this person said. The safety budget has remained stagnant for the past two years at around ₹11,000 crore.

The finance and railway ministries did not reply to queries until press time.

“Higher plan capex allocation for [Indian] Railways is the need of the hour as the national transporter reaches a critical stage of implementing key infrastructure projects," said Subodh Jain, a former member of the Railway Board.

“The government supported (the railways) with an over 50% increase in gross budgetary support in 2023-24, and the expectation is that absolute support would touch new levels next year, even though the growth may be half of last year’s numbers," he said.

Of the total capital allocation of around ₹2.45 trillion for Indian Railways in the 2022-23 budget, the Centre’s gross budgetary support stood at around ₹1.6 trillion.

Gross budgetary support swelled to ₹2.4 trillion in 2023-24, when total capital allocation for the railways stood at ₹2.6 trillion. The expectation is that over 90% of the capital allocation would flow through the government’s gross budgetary support in 2024-25 as well.

Gross budgetary support is the actual amount that a government body receives from the general budget.

Indian Railways needs to be adequately funded so it can build new infrastructure. With the Centre finding it easier to borrow at attractive rates from the market, it is expected that capital spending of key infrastructure sectors, including railways and roads and highways, would come from the government’s gross budgetary support.

This support for the railways has been steadily increasing—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.

After decades of supporting revenue expenditure, gross budgetary support over the last few years has focused on supporting the railways’ capex.

The people privy to the government’s thinking said that of the higher gross budgetary support extended to Indian Railways in the budget, a good portion may be kept for the Ahmedabad-Mumbai bullet train project, work on which is going on at full pace for both Gujarat and Maharashtra tracks.

The government also is looking to start work on the Delhi-Varanasi high-speed train, apart from boosting the pace of track renewal and adding new tracks to run faster trains, they said.

Last year, Indian Railways built more than 5,000 kilometres of new lines. It plans to maintain the momentum for the next decade, adding 50,000 km of new lines on its network spending over ₹7.5 trillion.

Also, a signalling recast has been proposed to switch the electronic interlocking system for railway tracks to a solid-state system network to prevent human interference from resulting in accidents such as the one at Balasore in Odisha last year.

Safety additions would also increase the pace of introducing the Kavach rail anti-collision system. The plan is to add 7,000-8,000 km of railway network under the Kavach system every year. A tender for commissioning 6,000 km of railway network as part of this system is under process.

“For railways, or any infrastructure sector, most funds should go towards capex. That has been a challenge for the Railways through the years," Jain said. “A significant amount of money always goes towards maintenance and other routine expenditure. If the capex composition increases, it will also have a positive impact on the overall development of the economy."

More than 75% of the Railways’ expenditure goes into paying wages. This is the reason the operating ratio—a measure of efficiency—is at more than 98% at the railways. This means Indian Railways spends more than ₹98 for every ₹100 it earns.

The Railways also funds part of its capex through its own funds, and the effort now is to prevent higher revenue expenditure from crimping its ability to pay for infrastructure and modernization.