A Budget for extracting outcomes from outlays given to Indian Railways

In the Railways part of today’s Interim Budget for 2024-25 (FY25), I found some subtle hints that could transform into action points in the regular Budget to be presented by the returning government.

The year 2023 was a golden era for Railways' passenger business. Intercity passenger journeys at the end of Q3FY24 touched 2.2 billion, a 16 per cent growth over the previous year.
 

The Railways seem well poised to achieve equally impressive passenger revenues. The Vande Bharat trains, enthusiastically received by passengers, are likely to boost intercity ridership. The intent to expand these services further is a welcome measure. If the Indian Railways (IR) succeeds in urgently upgrading track speeds in existing corridors, Vande Bharat services could leapfrog low-cost air services.
 

Railways' finances, struggling since pre-Covid years, have been expertly managed to ensure adequate provisioning of more than Rs 2.5 trillion for working expenses. This includes expenditure on safety-critical maintenance and operational expenses and full requirement of pension from Railways’ own revenue generation. The operating ratio is likely to be below 99 per cent to deliver a surplus. Conventional accounting theorists may continue to spite Railways for low contribution to the Depreciation Reserve Fund. This ‘big DRF ‘obsession is a legacy from days of private railway companies sponsored by the East India Company, forcing Company accounting standards to nest in government accounts of IR. They forget that more than 30 per cent of Railways' working expenses (excluding pension), i.e. nearly Rs 60,000 crore, is spent on keeping the track and fixed infrastructure, rolling stock, and plant & machinery in absolute running-fit condition on a daily basis.
 

It is interesting to note that IR’s targeted cargo loading of about 1.6 billion tonnes is close to American Railroads' annual loading. However, IR moves huge freight traffic over a ruthfully smaller railtrack network of 105,000 running track kilometers (km), compared to 260,000 total track km of American Railroads.
 

There is a difference. Americans have a separate rail network for their rail passenger services. America’s freight rail systems ordinarily do not allow passenger trains to use freight tracks. I make this comparison to underscore the imperative for investing in third and fourth lines with higher axle loads in freight-heavy routes beyond dedicated freight corridors.
 

The mantra for IR must be to urgently upgrade third and fourth railway lines and existing track network to higher axle loading (tracks with heavier load) and higher speed. That precisely is why the present government, particularly the finance ministry, provided massive budgetary support to Railways consistently over the past few years.
 

The government objectives are stated loud and clear — these funds are to be used primarily for
 

1) increasing axle load to move heavier freight trains

2) substantially boost track speeds to accommodate higher capacity and  faster rolling stock

3) adhering to global standards in safety

The Railways were given a gigantic Rs 2.4 trillion government funding in FY24 and now a record Rs 2.5 trillion in FY25 to fulfill this purpose. Outcome-parameters-oriented project monitoring, jointly by the finance and rail ministries, has paid rich dividends — almost 80 per cent of the capex has been spent in nine months of FY24. An amazing feat by both ministries!
 

The corridor-planning approach, with a focus on meeting demand for coal, iron ore, cement and ports, and adding more lines on the high-traffic-density routes is exactly the need of the hour. The challenge is to ensure timely execution so that these sectors can build their logistics around Railways.
 

While these new projects are being undertaken, IR must be held accountable for strictly matching their exact measurable outcomes about faster speeds and higher axle load with monies spent through capex.
 

Instead of continuing with generic performance measurement indicators like km of new line constructed and existing track km renewed, IR’s directorates must frankly reveal the number of existing track km upgraded and new tracks laid with higher standard for axle load and speed. This alone will deliver the desired government outcome of lowering logistics cost and improving speed and safety of passenger trains.

The writer is former financial commissioner, Railways and ex officio secretary, Government of India