A significant feature of the Budget for FY2023-24 presented last week is its support to the Railways, for which it has set aside nearly a quarter of its total capex outlay (excluding grants for capital expenditure to States) of ₹10 lakh crore. The Budgetary support amounts to ₹2.4 lakh crore, with the rest of the Railways’ capex thrust largely met by borrowings (just ₹17,000 crore, against ₹81,700 crore in FY23, a marked structural shift in the Railways’ finances) and internal resources (₹3,000 crore). This allocation is meant to increase the modal share of the Railways in goods and passenger traffic on grounds of energy efficiency. The Ministry of Railways has pointed out that railways are six times more energy efficient compared to road.

The goal is to raise the share of rail freight traffic from the current level of 27 per cent (road transport is at 64 per cent) to 45 per cent by 2030. The capex will be used to beef up rolling stock in particular, for which the outlay has more than doubled from ₹15,157 crore in FY23 (revised estimates) to ₹37,581 crore in FY24. A substantial part of this outlay is expected to go towards making 400 Vande Bharat trains over two or three years, each train being developed at a cost of over ₹100 crore. The other major outlays are towards track doubling (₹30,749 crore, up 27.6 per cent over RE of FY23), leased assets (₹22,229 crore in FY24, up 17.6 per cent over RE of FY23) and track renewal (₹17,297 crore, up 12.4 per cent over RE of last year). However, relative to rolling stock expansion, outlays for track renewal have not been substantially raised, whereas the new high speed trains require a large investment towards this end.

Freight earnings (₹1.65 lakh crore in RE FY23) are expected to rise by just under 10 per cent in FY24. Freight earnings are 2.5 times the passenger earnings; it is possible to improve on both counts. Besides, it is crucial to raise the share of containerised freight earnings from 7 per cent of the total freight earnings (the latter being ₹1.8 lakh crore) to make multi-modal freight movement a reality. The share of coal in freight earnings, at about 50 per cent in FY23 as in earlier years, remains a concern. It has shored up rail earnings owing to higher volumes. High-value, high rated commodities such as steel, POL and cement should account for more in volume terms. The Railways must adapt to become a transporter of FMCG, automobiles and other high value products, for which last-mile connect is important. On the passenger side, upper class travel should remain competitive vis-a-vis air and road travel.

Overall, the operating ratio (operating revenues to expenses) of 98.45 per cent (both at above ₹2.6 lakh) does not look flattering, but there is scope to raise both traffic and freight revenues, despite pensions at over 25 per cent of the total operating expenses.