Railways on divergent tracks: Gap between forecasts and reality is widening

The gap between forecasts and reality is widening for India's largest public-sector operator

Of the Rs 7.5 trillion the government plans to spend on capital expenditure in the next fiscal, one in every five rupees will go towards the Railways. Although this is lower than one in every four rupees the railways apportioned in 2020-21, it is still a considerable amount, given that the sector figures prominently in other government plans — the National Monetisation Pipe­line and the National Infrastructure Pipeline list the Railways as the second-largest sector after roads.

Budget mathematics tends to indicate a revival as well. Data released by the government shows that receipts are expected to grow 18.8 per cent over last year. In contrast, expenses will rise 16.6 per cent in 2022-23, leaving the Railways with Rs 5,360 crore extra for allocation to its other funds (the depreciation reserve fund is included in these calculations).

The excess only accounts for 2.2 per cent of total receipts; it will be the highest in the last seven years.

The calculations are predicated on the back of a 13.6 per cent rise in goods and a whopping and unprecedented 31.8 per cent rise in passenger earnings. In 2021-22, goods revenues grew 23 per cent as the Railways cornered a significant share of freight traffic (see chart 1).

Though the Railways seems to be pulling through in budget mathematics, a Business Standard analysis shows that the space for India’s largest public-sector operator is shrinking.

Barring last year, when passenger revenues jumped 191 per cent on the back of a low base, passenger revenues have never grown in double digits in the last six years. Growth in goods revenue last hit double digits in 2017-18.

Sundry earnings — money the Railways earns from advertising and leasing — were declining before the pandemic hit the sector. The Railways now expects these earnings to grow 42 per cent to Rs 10,000 crore in 2022-23, a target last breached in 2016-17 (see chart 2).
 

Further analysis shows that the Railways has never met its Budget target for passenger earnings in the last six years and has even fallen short of its sundry earnings target (see chart 3).

The failings are evident on the expenditure side as well. Even though the allocation has been reduced in terms of the depreciation reserve fund, the Railways has not even met those targets.

The finances that the Railways accounts for are coming from gross budgetary support and extra-budgetary resources, not from the transport utility’s revenues.

Appropriation to the development fund, capital fund and Rashtriya Rail Sanraksha (partly borne by the central government) have all declined.

In the last six years, the average appropriation to these funds has been just 30 per cent of the budgeted amount. In many years, the appropriation was less than 20 per cent of the budgeted amount (see chart 4).

Although the Railways was to contribute Rs 5,000 crore each year to the Rashtriya Rail Sanraksha Kosh for track repair works, by the end of this year, its contribution will be just one-fourth of the budgeted estimates (see chart 5).

Instead, the expenditure is increasingly being shifted to extra-budgetary resources. This year’s demand for grants has also made a provision for the Railways to contribute some amount towards debt servicing. The Centre gave the service provider a break on debt servicing given its dwindling finances. How much of that the organisation can achieve will only be apparent in the coming months.