Union Budget 2025-26: Laying the foundation for improved railways

The Indian Railways needs a well-thought-out business model and a master plan for successfully implementing the light and express cargo transportation...this job must be entrusted to consultants

In the 2025-26 Budget, the Ministry of Finance extended a government budgetary support of Rs 2.52 trillion to the Indian Railways which is a generous capex outlay. Riding on this, the Indian Railways continues rebuilding both moving and fixed infrastructure with improved safety, ushering in a new era of inter-city Vande Bharat trains with substantially enhanced travel comfort, frequency, and consistent punctuality, attracting a rise in ridership from middle class and lower middle class population during the last two years.  

The rise in the share of intercity passenger kilometers travelled in second unreserved and second sleeper classes in mail/express trains, earn a staggering 45 per cent of passenger revenue as against 49 per cent of upper class passenger revenues, out of the total Rs 77,140 crore non-suburban long distance passenger revenue.  While upper class passenger kilometer growth and revenue yield faces serious competition from air travel business, this impressive growth in long and medium distance second class travel is important. With proposed further development of 140 airports, the competition could become tougher. 

  Freight is railways’ breadwinner. Growth in net tonne kilometres (NTKM) projections in 2024-25 and 2025-26 continues to be modest. The Indian Railways reached close to the threshold of 1 trillion mark during the last two years, but continues to remain shy of crossing the magical NTKM-mark, which only three among the G-7 countries’ large rail network systems have achieved so far. Based on the latest developments, coal will remain the mainstay for a decade at least. However, the race to increase freight revenues through more NTKMs from other commodities, like cement, finished steel, iron ore, other goods and containers, cannot be lost. 

  Redesigning and refurbishing double decker passenger coaches to create space for moving light and express cargo announced by railway minister is good news. Turning towards express cargo, using mail and express trains and 7200 railway stations is a sure way to expand railways’ presence in the domestic express cargo market.

In the very first Rail Shivir called by the Prime Minister in 2016, brilliant suggestions on transforming passenger and parcel business were given by officers. It has taken nearly 10 years, but at least now these ideas are translating into reality. Transporting express cargo by the existing time tabled passenger trains is the only way to grab a bigger market share in light cargo and freight. 

  However, redesigning rolling stock alone would not help transform the idea into a sure success. The Indian Railways needs a well-thought-out business model and a master plan for successfully implementing the light and express cargo transportation. In my view, this job must be entrusted to internationally reputed consultants through global bidding rather than depending on railways’ in-house commercial talent pools exposed to inbred and jaded commercial practices.

  Implementing a guaranteed time -sensitive zero-loss, safe and secure transportation at competitive rates for express and light cargo needs the best practices available in the world. The trick is in arriving at sustainable competitive rates, given the wafer-thin margins in the logistics of light cargo. Organising a successful hackathon jointly by all zonal railways would be of great help.

  Another languishing activity is monetisation of railways station-centred land banks. Here again, the piecemeal approach has not been very successful. Railways have to speed up in capturing the data centre and info park marketing.

Instead of seeking very large land parcels, efficiently designed vertical towers need to be leveraged to capture this emerging demand. The location of railway land parcels in densely populated areas is a serious advantage for data latency. Further, source of power and water and transportation are added advantages. Railways is poised to become a major player in this area.

Passenger fares and freight income alone cannot turn around rail revenues. Non-operating revenues, too, have a decisive role. The sharing of PM Gati Shakti portal data with the private sector should be leveraged to form partnerships with private logistics players to boost ail revenues from logistics business.

  The writer is a  former financial commissioner (Rlys) and ex officio secretary to Government of India