The Economic Survey 2021-22 devotes considerable space to highlight the emphasis laid by the Union Government on improvement of the Railways in the past few years. While capital expenditure allocation quintupled since 2014, the National Railway Plan (NRP) was formulated in tBudget o2021-22, which aims at the creation of a future ready railway system that is able to meet passenger demand as well as increase the modal share of the Railways in freight to 40-45 per cent.

Budget 2022-23 does not deviate from the above theme, with the Railways again figuring centrally in the Finance Minister’s Budget speech. While the announcements to introduce 400 new Vande Bharat trains, roll out the indigenous train collision avoidance system (KAVACH) on 2,000 km track length and create 100 Gati Shakti cargo terminals were aimed at capacity creation and augmentation within the Railways, those pertaining to creation of ‘one station-one product’ to help local businesses and creation of products and services for farmers and MSMEs highlight the role of Railways as an economic multiplier.

The priority given to multimodal connectivity between mass urban transport and railway stations along with integration of postal and railway services would also act as catalysts in boosting rail transport.

These plans for the Railways are highly ambitious and require the budgetary outlay o match The UBudget 2does not disappoint on this front, allocating ₹1,40,367 crore as gross budgetary support (GBS) to the Railways; the highest ever allocation till date. The major chunk of the GBS (₹1,37,100 crore) his towards capital expenditure, a near 28 per cent increase from the previous year. This will greatly aid in the early completion of railway projects essential for immediate capacity enhancement of the rail network.

Capacity generation

A closer examination of the distribution of capex grant reveals a marked emphasis on capacity generation and expansion of the rail network. Allocation for the creation of new lines has increased by nearly 55 per cent and for doubling of existing lines, a whopping 303 per cent over the previous year’s Budget Estimates.

These numbers are indicative of the importance of the Railways in the government’s capex strategy to boost the growth of the economy. The gross budget outlay for the National High Speed Rail Corporation, at ₹24,102 crore, is a 72 per cent jump ifrom that in FY 2021-22. This will give a fillip to the ongoing Ahmadabad-Mumbai bullet train project.

On the performance side as well, the Budget figures indicate a steady improvement in the Revenue Estimates of the Railways. While passenger earnings targets set in Budget Estimates 2021-22 were always going to be difficult to achieve given Covid related constraints, the Railways has performed remarkably well in achieving its freight earning targets.

As on January 20, 2022, the Railways had achieved freight earnings of ₹1,13,054 crore making the 2021-22 Budget target of ₹1,28,849 crore well within reach. The estimated freight revenue for 2022-23 is an impressive ₹1,65,000 crore. The booming freight business also augurs well for the achievement of the goal of garnering 40-45 per cent modal freight share envisaged in the NRP.

The move to make the Railways develop new products and efficient logistics services for small farmers and small and medium enterprises is a logical step after the success of Kisan Rail, which saw the Railways transport approximately six lakh tonnes of perishables including fruits and vegetables in the last year-and-a-half. The Survey also expects the Railways to play a major role in India’s push to meet its commitments made at COP26, Glasgow, through the Railways’ ‘Net Zero Carbon Emission’ target that it aims to achieve by 2030.

Areas needing attention

Moving forward, there are some areas which would require attention to ensure there are tangible ‘outcomes’ for this fiscal backing given to the Railways. Extra Budgetary Resources (EBR) of financing have been pegged at ₹1,08,500 crore in 2022-23 against ₹97,700 crore in the RE figures of 2021-22. Since EBR carry an interest burden, it is essential that projects chosen to utilise such funds are remunerative, with fixed completion timelines to alleviate the interest burden of the Railways.

A major decision in this regard is the categorisation of projects into “critical” and “super critical” and prioritisation accorded to completion of sanctioned projects as per the NRP. This will help set completion targets and prevent accumulation of interest liability due to time overruns.

While all EBR funded projects are monitored by a committee of the Railway Board and MoUs detailing specific targets to be achieved are signed with the Zonal Railway undertaking such work, additional measures such as formation of coordination committees with State governments to expedite forest clearances and land acquisition can be considered.

Further, to maximise return on investment through EBR, the planned introduction of private operators on select routes and private party led tourism-based schemes such as Bharat Gaurav can help in generation of revenue which can offset the cost of borrowing for infrastructure investment.

In addition, the original tenure of the Rashtriya Rail Sanraksha Kosh (RRSK), a special safety fund with a corpus of ₹1 lakh crore, ended in FY 2021-22. The budgetary allocation towards RRSK has hence come down to ₹12,000 crore in 2022-23 from ₹25,000 crore in 2021-22.

This resource gap would need to be bridged through alternative sources. Further, the planned execution of new Dedicated Freight Corridors and High Speed Passenger Corridors in the second half of the decade would require sustained financing.

The vision of a safe, efficient, competitive and world class railway system seems to be taking shape and if provided with necessary support, it will ensure that the Railways truly emerges as the engine of national growth in the ‘Amrit Kaal’.

Sharma, Indian Railway Accounts Service, is Divisional Finance Manager, Bengaluru Division, South Western Railways, and Suman, Indian Revenue Service, is Deputy Commissioner of Income Tax, Karnataka Goa. Views are personal

Published on February 10, 2022