Indian Railways in Budget 2026-27: Time to realise capex benefits

Budget 2026-27 reflects reassuring continuity in the Railways’ performance. Coal continues to support freight. Passenger business too is growing. By total ridership count, the Indian Railways (IR) is the world’s largest Passenger Rail System. The current Lower Middle Income Group status of India has compelled IR to equilibrate its public service role with the difficult task of financial sustainability. Rail Passenger business, whether Amtrak of USA, PRASA of South Africa or IR- faces a low-margin market. 

 

India is set to join the Upper-Middle Income Group of Countries by 2030. Nearly 350 million Indian households, buying 7400 million Railway journeys in 2025, can sense a transition in IR, towards higher train speeds, improved passenger comforts and station upgrades.

 

Massive infusion of funds has been made in Railways by the government during the past 4 years and continues with budgetary support of Rs 2.78 trillion in 2026-27. Two Dedicated Freight Corridors (DFCs) are operational. Now there is a promise of one more important DFC between Surat-Dankuni. Though the present government provided significant funds for track upgradation, IR has not disclosed any improvement in track speeds, in conformity with technical standards of true semi-high speed. Track speed upgrades must be linked to safer, better commercial cruise speed –- typically around 80 per cent of designed top speed. Ideally, in the medium term, future–proof, Semi-High Speed Rail (S-HSR) track design must fall between 160-200 kmph top speed, to meet operational speeds of 130-160 kmph. Full operational speed optimisation of Semi-High-Speed Vande and Amrit Bharat trains should not be constrained by low track speeds. There should be a Capital Investment Plan specifically for track speeds upgrades. Our indigenous T-18 trains (1st Generation Vande and Amrit Bharat trains) have test speed of 180 kmph but commercial operating speed of 130-140 kmph. 

 

When IR completes upgradation of existing track network, adding planned third and fourth lines, the added capacity should enable introducing T20- 2nd Generation Vande and Amrit Bharat trains with commercial cruise speeds up to 160-180 kmph. By 2028, India’s High Speed Rail route from Ahmedabad -Surat -Mumbai too could become commercially operational. With these investments, the stage is set for new revenue streams for IR, if IR were to leverage at least about 5 per cent of cubic metre space in speedy Vande and Amrit Bharat trains and add-on facilities in Amrit Bharat stations for dedicated e-commerce and Express Parcel Freight business. 

 

 

India’s e-commerce market is likely to reach Rs 30 trillion by 2030. Transportation is the largest share of e-commerce operational spending. A speedier Rail Network and Upgraded S-HSR trains hold the promise of much faster, assured, time-sensitive e-commerce logistic business opportunities. Vande and Amrit Bharat trains can connect tier-1 cities (Delhi, Ahmedabad, Mumbai, Bangalore, Chennai, Hyderabad, Kolkata) to a large number of intervening tier-2 and tier-3 Cities in just 4-12 hours carrying general e-commerce and other Express Parcels. In the next five years, these average cruising speeds are expected to increase to 160 Kmph through Generation 2 T20 trains. While first and last mile connectivity is possible through roads, the middle-line transportation involves longer distances, which could be handled by S-HSR Vande and Amrit Bharat trains, offering attractive rates. S-HSR trains can work on creative complementary partnerships with Airlines as well as RRTS Trains routes. In China, perishable cargo including pharmaceutical products, fruits, fish and vegetables are moved on trains in temperature-controlled 5 to 6 feet size reefer containers, in easy-to-handle sizes in muti-modal mode.  S-HSR trains operating in coastal states can reach perishables and temperature regulated products like fish, fruits and vegetables to nearest airports in less than 4 hours and the partner airlines can complete the journey to big cities in North, West and Eastern India within another 4 hours or to export hubs. This will particularly support the priority accorded in the Budget to boost the fisheries sector.

 

 

IRFC has new opportunities for a lease market in new reefer containers of all types- reducing upfront capex cost of logistics players.  This opens the possibility of Quinquepartite Agreements between Lessor (IRFC), IR, RRTS, airlines and e-commerce sorting hubs who could lease space at IR’s stations and Intermodal Transportation Hubs. All this requires development of new services and business models by top developers and professionals, who understand the needs of the Indian e-commerce market. Thus T-18 and T-20 Vande Bharat trains can add a new dimension to commercial throughput of IR- a dual-purpose system for both, passenger and express cargo, as well as cold chain transport, at low marginal cost.

 

The writer is Retd Financial Commissioner (Rlys) and ex officio Secretary to Government of India