Budget 2023: Large outlays for Indian Railways, but not enough

The total budgeted capital expenditure of Indian Railways for FY24 on the acquisition of assets, construction and replacement, etc., stands at a record Rs 2.6 lakh crore. (File image: Reuters)

Ever since the Railway Budget got merged with the country’s General Budget in 2017, Indian Railways have been relegated to the margins of the Finance Minister’s annual Budget speech. This year is no exception ― all that the Indian Railways got in the speech was a one-line mention, a capital outlay of Rs 2.40 lakh crore provided to Indian Railways, the highest-ever, at about nine times the FY2014 figure.

When it comes to Railways, the Budget speech conceals all and reveals nothing. One has to read between the lines of other Budget documents, including Key Features of Budget, Budget at a Glance, and Detailed Demands for Grant. After the manthan of the documents, this is what I decipher.

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One, total receipts of Indian Railways, comprising revenues from passengers, goods, other coaching, sundry other heads, etc., for the year FY2023-24 is budgeted at Rs 2.65 lakh crore, against the revised estimate of Rs 2.43 lakh crore for FY 2022-23.

It is the freight revenue from goods transport, the mainstay of Indian Railways’ revenues, that keeps it chugging along as a going concern. This is pegged at Rs 1.75 lakh crore. Passenger revenue and other coaching revenue that consumes most of the time of railway men and disproportionately high resources is perennially loss-making and is budgeted to be Rs 77,000 crore in FY24. And Indian Railways faces an existential dilemma here ― with it losing passengers at both, the high-end (to air) and low-end (to AC buses), it is not even in a position to increase passenger fares.

Two, despite the creative accounting resorted to by Indian Railways, its working expenses (working expenses + other ordinary working expenses) in FY24 is budgeted at Rs 2.60 lakh crore, which is approximately equal to the total budgeted receipts from all sources.

Precarious Condition

This puts the Indian Railways’ finances in an extremely precarious condition, in fact, in the intensive care unit (ICU). Just the top five inflexible and fast-growing expenses are proving to be the giant killers. These are staff expenses at Rs 1.05 lakh crore, pension outgo at Rs 62,000 crore, lease charges for rolling stock taken from IRFC on lease at Rs 23,782 crore, traction energy at Rs 20.5 lakh crore, and diesel charges at Rs 14,358 crore.

These take the operating ratio of Indian Railways to hover precariously at around 100. To earn one rupee, Indian Railways spends close to one rupee. The real truth is expected to be much harsher. But it is what it is.

Four, the total budgeted capital expenditure of Indian Railways for FY24 on the acquisition of assets, construction and replacement, etc., stands at a record Rs 2.6 lakh crore, out of which Rs 2.4 lakh crore is expected to accrue as the Gross Budgetary Support (GBS), a paltry Rs 3,000 crore from internal resources of the Indian Railways, Rs 200 crore from Nirbhaya Fund and Rs 17,000 crore from Internal and External Budgetary Resources (IEBR). On face value, it is the biggest ever annual capex Budget for the Indian Railways, and as such, it needs a deep dive.

Five, a deep dive into the allocated annual capex for FY24 does not present as rosy a picture as the absolute number suggests. The combined expenditure on traffic facilities and customer amenities is less than Rs 16,000 crore ― 6.5 percent of Rs 2.6 lakh crore of the projected capex. Similarly, as regards infrastructure augmentation, new lines get Rs 31,200 crore, doubling of tracks Rs 31,000 crore, gauge conversion Rs 4,600 crore, and critically-needed track renewal, an abysmal Rs 17,000 crore. Where does the balance amount go to?

Six, the devil lies in the detail. The highest amount of Rs 56,000 crore goes to manufacturing suspense, with another Rs 30,000 crore as stores suspense. As an ex-railway finance officer, I find it difficult to decode this capex. Rolling stock rightly takes a share of Rs 38,000 crore (actual need is much higher if the Vande Bharat trains have to be rolled out as planned), there is the inescapable lease charges for assets largely to IRFC, there is the second-highest Rs 45,000 crore transfer to Rashtriya Rail Suraksha Kosh, and Rs 12,480 crore to Sovereign Green Fund.

And what does the Budget earmark for research? A paltry Rs 61 crore for a railway network that’s teetering on the brink, but wants to fly in the sky with new-generation Vande Bharat and hydrogen-powered trains, world-class stations, and high-capacity engines. There is nothing, literally nothing, on how to enhance the speed limit of Indian Railways’ tracks to 160 kmph.  One even forgets the much-needed proliferation of high-speed passenger trains and dedicated freight corridors at 100 kmph dotting the skyline.

The capital outlay of Rs 2.4 lakh crore is welcome. But for me, for Indian Railways, Dilli Door Hain. It has to be able to execute well, be on time, and stay within the cost limits. And then it has to start the tortuous journey to reclaim its position as the lifeline of the nation.

Akhileshwar Sahay is President (Advisory Services), BARSYL. Views are personal, and do not represent the stand of this publication.