Infra push: Railways to spend Rs 1 trn on developing and procuring assets

As part of the government’s infrastructure push, the Indian Railways is planning to spend more than Rs 1 trillion on developing and procuring assets. The national transporter intends to procure 90,000 wagons over the next three fiscal years, for which the process of floating tenders will begin on March 16. The estimated cost of this is around Rs 31,000 crore.

“Our procurement for each year will be slightly more or fewer than 30,000 wagons, but the number would be around 90,000 for the three years,” a senior railways official said.

Of the 90,000, 32,300 are open wagons, 39,000 used to transport cement, 7,500 are primarily for rail and steel pipes, 3,000 for coal, and 8,000 for transporting iron ore. The railways procured more than 7,000 wagons till January this fiscal year. The official said the higher procurement was on account of a rise in demand the national transporter anticipated.

Under the National Rail Plan 2030, the Railways plans to increase its freight volumes in the coming years. The ministry estimates show that the enhanced loading capacity could help the national transporter make an additional Rs 79,000 crore in freight revenue over the next three financial years.

The Ministry of Railways has been allotted Rs 1.40 trillion in the Union Budget 2022-23. This is 27.5 per cent higher than the Budget estimates for this fiscal year, and 16.5 per cent higher than the revised estimates.

The railways’ estimated capital expenditure for the upcoming fiscal year is Rs 2.46 trillion. The push is one of the key pivots of the government’s plans to boost economic growth in 2022-23.

“We are also spending Rs 25,000 crore to procure 200 Vande Bharat trains,” another railways official said. So far, the railways has granted contracts for 44 Vande Bharat trains and the bidding process for 58 is underway.

Union Finance Minister Nirmala Sitharaman in her Budget speech had said the government intended to roll out 400 new-age, cost-effective trains next fiscal year. The railways will also spend approximately Rs 30,000 crore on developing 75 railway stations in the country.

Moreover, the ministry estimates an expenditure of Rs 1,000 crore on installing the indigenous Kavach security system. Railways Minister Ashwini Vaishnaw recently conducted a demonstration of the system, which uses radio frequency identification device (RFID) trackers in locomotives, signalling systems, and rail tracks.

The ministry had set a target of covering 2,000 kilometres with the anti-collision system.

The government plans to float the tenders for all these projects this financial year itself, while the procurement will happen during 2022-24. Senior officials said the ministry planned to begin capital expenditure in April itself. 

“Earlier we began identifying avenues to spend in April, and research and development followed. We have told officials to have the pre-disbursement exercise completed or in progress before the fiscal year starts, so that we can begin releasing money in April itself,” a third official said.

The ministry is expecting a rise in freight demand this fiscal year. Apart from stepping up its wagon manufacturing, the ministry held a meeting with private wagon manufacturers on February 15 and told them to increase capacity utilisation, because the railways would be procuring a higher number of wagons.

The railways recorded the highest ever annual freight loading increase in 2021-22, clocking 1,278.8 million tonnes till February. That is 176.2 million tonnes more than in the same period in 2020-21.

Analysts believe that the infrastructure push is in sync with the government’s plans for economic growth, while also giving a boost to multi-modal freight.

“The National Rail Plan envisages an increase in the railways' share in the country’s total freight to 35 per cent. Since freight capacity needs to be increased to achieve that, the government's push to expand railway infrastructure is a step in the right direction,” said Jagannaryan Padmanabhan, a sector expert at CRISIL.

However, experts also flagged concerns with the ambitious plans.

“The infrastructure push by the Indian Railways, while appreciable, requires sustained economic growth of the country. Economic activity also needs to grow by similar levels as the freight targets,” a Mumbai-based sector expert said.