Gone are the days when the Railway Budget caused excitement, as since 2017 it is a very small part of the Union Budget. The excitement was not because of the projected/budgeted numbers of revenue/expenditure or even capex in the current and the next fiscal, but because the government used the opportunity to announce new lines, infrastructural projects, trains and populist measures. The numbers are put out in the same manner but the announcements in the speech are limited to some lines.

Merger of the Rail Budget was logical as its size was increasingly getting smaller vis-à-vis the national Budget. While this has led to greater budgetary support to the Railways it has in a way put a smokescreen on its financial performance.

First the numbers. Even before the Budget speech was read, one had a fair idea of the Railways’ financial performance. As expected, more than 20 per cent y-o-y rise in revenue has been projected but a large part of the fiscal 2021-22 was a washout because of Covid.

A comparison of earnings and expenditure on three-year CAGR basis, with 2019-20 (a largely non-Covid year but a bad one from performance standpoint) would show that things are less exuberant as they look; the earnings would show 9-10 per cent increase whereas the rise in working expenditure would be around 6 per cent.

Compare with 2018-19, an even more realistic year, and the CAGR for earnings would be barely over 5 per cent whereas expenditure, close to 5 per cent. In an economy growing at 6-7 per cent, one would expect the Railways’ growth of revenue to be 13-14 per cent. The Railways is nowhere near this yet.

Coal loading

If we discount the unexpected surge in coal loading starting 2021-end, the picture would be gloomier; the rise in coal loading may continue to some extent in the next fiscal too but in the long term it would not, and the Railways’ performance is not likely to be very impressive. Yes, the gap between the earning and expenditure is increasing and that is good but not good enough. The budgeted rise in revenue in 2023-24 is 10 per cent with the expenditure rising by 12 per cent. This shows that the initiatives of Gati Shakti and NLP have yet to show a positive impact.

Meanwhile, the capital expenditure has been mounting in spite of lack of internal resources, and so a manifold increase in General Budgetary Support (GBS) and Extra Budgetary Support (EBR), which are borrowings. Although this Budget provides for a capex of ₹2.4-lakh crore, after it had risen to a record ₹2.45-lakh crore in 2022-23, EBR has reduced to ₹17,000 crore from ₹1.01-lakh crore in FY 22-23 and GBS has increased from ₹1.37-lakh crore to ₹2.40-lakh crore in FY 23-24.

The borrowings have reduced considerably, and that is good as they have cumulatively mounted to above ₹4-lakh crore. But how long can the Railways sustain this without massive GBS? The government seems to believe that as long as the government supports or the Railways borrows only for investment and not for running expenses, it is justifiable for the overall economy of the country as the resultant growth justifies borrowings for investment.

Investment in infrastructure creates four times the demand, compared to one for subsidies, in turn creating private investment in manufacturing and services, eventually raising government revenue. At the same time, at some stage these investments must translate into higher revenue and this should start happening soon.

Now the banner declarations. Last year, it was limited to four: i) logistics for small farmers and small/medium enterprises, including integration of postal and railway networks for seamless movement of parcels; ii) ‘One Station-One Product’; iii) Kavach on 2,000 km and 400 Vande Bharat trains; and iv) PM Gati Shakti Cargo Terminals.

This year it was just one-and-a-half. One about the capital outlay of ₹2.4-lakh crore and another half about one hundred critical transport infrastructure projects, of which, presumably some would involve the Railways.

Having spoken so much about Vande Bharat, station redevelopment, DFCs, HSR, Kavach, Hydrogen trains and so on, and without a significant progress to show for, the government seems to have taken a break from making tall claims on the Railways.

The writer is a retired General Manager, Indian Railways, and an independent consultant

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