Indian Railways is at an inflexion point. It would need to overhaul its operations to meet the logistics needs of a manufacturing sector that is trying to scale up to world standards. As an energy-efficient mode of transport, it has a crucial role to play — as much as EVs — in reducing dependence on fuel. To encourage rail passenger travel over road for short and medium distances, it needs to be comfortable, fast and reliable. A shift towards making rail the prime mover of goods and people, akin to what China has achieved over time, would require a prudent investment in rolling stock, infrastructure and safety. This investment requirement, identified by the National Infrastructure Pipeline at ₹13.7 lakh crore between 2022-25, will have to be funded beyond 50 per cent by the Centre and States (the rest through market borrowings), as the Railways sadly uses up all its revenues towards meeting operational expenses. The 26 per cent rise in the outlay in last year’s budget (2021-22) over 2019-20 for the Railways, at ₹1.07-lakh crore (which accounts for half of the Railways’ capex budget for this fiscal), suggests that the Centre realises the role of the Railways in the coming years. This trend should be sustained, with a close eye on how the Railways spends these funds. Capex should be done intelligently, and not on vanity projects. In recent years, the behemoth has not seen much parliamentary scrutiny.

The Railways’ operating ratio (expenditure as a proportion of revenues) — which is estimated at 96.2 for this fiscal, a figure that is often downplayed — needs to be brought down to sub-90s. Internally generated capex funds are the way to go when the global rate cycle is turning. The expenditure side of OR is dominated by salaries and pensions (70 per cent), for which quick solutions are not easy to find. Hence, OR needs a revenue-led approach; losses from passenger operations amounting to over ₹40,000 crore (PRS Research) are met through freight earnings. The rates for freight can be further rationalised and lower-end passenger ticket fares raised. This will reduce passenger losses and lift freight volumes and earnings. The objective should be to raise the share of rail in freight movement to 45 per cent in another eight years, as spelt out in the National Rail Plan, 2030. At present it is 27 per cent, while road transport accounts for 45 per cent. Freight policy needs to be attuned to a reality where coal, which accounts for nearly half the Railways’ freight earnings, will lose out to renewables as a source of power.

The Railways’ plan to allow private operators on certain routes can fetch it revenues (by providing rights to operate) in sections where the traffic is heavy and unmanageable. However, an independent regulator that looks into the maintenance, service obligation and safety aspects is crucial. Railways’ plan to modernise trains, including the launch of Train 18 in new avatars, is welcome, but its technical staff deserve a free hand. . In sum, the Budget should promote discipline, innovation and pragmatism. 

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