Budget 2022 | Indian Railways’ capex spend to be 14% higher

The Indian Railways is set to get a capital expenditure push of Rs 2.45 lakh crore in the financial year 2022-23, 14 percent higher than the budgeted capital expenditure of Rs 2.15 lakh crore for the current financial year.

The funds will be spent on building railway tracks, wagons, trains, electrification, signaling, developing facilities at stations, while focusing on safety.

"Railways will develop new products and efficient logistics services for small farmers and small and medium Enterprises, besides taking the lead in the integration of postal and Railways networks to provide seamless solutions for the movement of parcels," Finance Minister Nirmala Sitharaman said in her Budget speech on February.

She said 2,000 km of the network will be brought under Kavach, the indigenous world-class technology for safety and capacity augmentation in 2022-23.

The annual expenditure will be funded through budgetary support of almost Rs 1.40 lakh crore in the financial year 2022-23, against revised budgetary support of Rs 1.17 lakh crore for the financial year 2021-22.

Speaking to Moneycontrol, a top railway official put the budgetary support at about Rs 1.37 lakh crore.

The railways has budgeted to carry 8,595 million passengers in fiscal 2022-23, almost 2.5 times the number it carried in the previous year.

On the freight side, it has set a target to carry 1,475 million tonnes of cargo in fiscal 2022-23. The India Railways has set a revenue target of Rs 2.39 lakh crore for fiscal 2023, 18 percent higher from 2021-22.

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Vande Bharat trains may need Rs 40,000 crore to 60,000 crore

A plan to roll out 400 Vande Bharat trains over the next three years, solutions to develop new products and efficient logistics services for small farmers and small and medium enterprises (SMEs) are some of the highlights of the Budget.

400 new generation Vande Bharat trains with better efficiency to be brought in during the next 3 years

Moneycontrol reported in January that the Budget may see the expansion of Vande Bharat Express and announcement on new innovative boxes to cater to small-scale businesses as the public transporter tries to improve its share in the domestic cargo movement.

Implementing Kavach, a safety and signalling solution, to cover over 2,000km and developing Gati Shakti goods terminals are some of the focus areas that emerged in the Budget announcements.

Subodh Jain, a former member-Engineering Railway Board, estimated that 400 Vande Bharat would require an investment of about Rs 60,000 crore.

The move will create demand for steel, aluminium, electricals and electronics products among others, Jain added.

Also read: Budget 2022| FM Niramala Sitharaman blends welfare needs with reformist intent

“Vande Bharat vendor base for underframe propulsion systems needs to be expanded. There is only one supplier of the underframe propulsion system within India, and the foreign suppliers do have the capacity to supply immediately,” another rail official said.

Sudhanshu Mani, former GM, ICF, who led the making of Train 18 welcomed the announcement.

Dubbing the target to build hundreds of new Vande Bharat trains difficult and ambitious, Mani estimated that it could cost Rs 30,000 to 40,000 crore as some benefits may accrue due to the high volumes involved.

Also read: Budget 2022 | FM pegs fiscal deficit at 6.4% of GDP for FY23

Setting up Kavach, a safety and signalling solution, will require an investment of Rs 1 crore per kilometre, said Jain, hoping that the railways would focus on its core business on the ground.

After the Budget was announced, railway minister Ashwini Vaishnaw thanked Prime Minister Narendra Modi for a higher outlay for the railways. He tweeted, “Railways will introduce new products and services for small farmers and small enterprises” and added, “integration of posts and railways will bring better logistics solutions for people living in remote areas”.

Also read: Budget 2022 at a glance – your definitive, quick guide to one and a half hours of FM speech

 Cargo out of pandemic shadow, passenger segment struggles

Faced with challenging circumstances due to COVID-19 on the passenger movement front, the railways has focussed on garnering a higher share in the total cargo moved in the country.

In the present fiscal, the Indian Railways has already mopped a revenue of Rs 1.15 lakh crore, which is almost 24 percent higher than the corresponding period last year.

100 Cargo Terminals under PM Gati Shakti will be developed in the next few years.

For the second year in a row, the pandemic has hit passenger segment revenues. In the almost 10 months of the present fiscal, the railways has managed only Rs 28,000 crore in the passenger segment, which is half the budgeted target for the financial year 2021-22.

The railways has historically received a larger chunk of its revenue by moving freight. This trend was further accentuated during COVID-19 for the single largest people mover, when its operations were disrupted.

Operating ratio of railways for 2022-23 at 96.98

The operating ratio for the financial year 2022-23 is proposed at 96.98 against 98.93 at the current year. There was, however, a catch in the figure of operation ratio of the previous years, particularly the financial year 2021-22.

With a dip in revenue at one end, and high staff and pension costs at the other, the railways’ operating ratio—a measure of its profitability—worsened and crossed 100 for two consecutive financial years 2019-20, and 2020-21. This means that to for every Rs 100 earned, the transporter spent more than Rs 100.

But the operating ratios reported upfront in last year’s budget did not reflect this plunge as an amount of Rs 79,398 crore was provided in revised estimates 2020-21 as “special loan for COVID related resource gap” to the railways, the fine print of the budget document of the financial year 2021-22 said.

Another significant point was a drop in budgetary support to about Rs 29,000 crore (which was 36 percent of the budgeted Rs 79,000 crore) to the Indian Railways for the financial year 2021-22.

Expanding cargo, Kisan Rails get a boost too

Financial challenges notwithstanding, despite COVID-19, and aided by emptier rail tracks to some extent, the Indian Railways moved all sorts of cargo that it could—from coal to cement to fly-ash to vehicles to containers and parcel cargo in the last two years.

It also moved agricultural produce, especially perishable items like vegetables and fruits in its Kisan Rail, with the Food Processing Ministry bearing a part of subsidy to make the train journeys cheaper for fresh produce.

The railways also came to the rescue of the country by moving oxygen expresses at a time when several states faced shortage of medical oxygen during the devastating second COVID wave.