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August 29, 2019

Getting back on track

Indian Railways in makeover mode

The Indian Railways operates more than 19,000 trains daily, carrying ~22 million passengers and ~3 million tonne of freight. Although it has been the primary passenger and freight transportation mode in the country, chronic underinvestment in infrastructure augmentation and technological upgradation have exposed it to numerous challenges, including fierce competition from roads in the freight segment and aviation in the passenger segment.


A network of ~67,000 route kilometre (rkm) and a workforce of ~1.3 million indicates the sheer size of this behemoth on tracks. Given its size and legacy issues, it has been a herculean task to undertake transformative initiatives and implement large-scale projects. However, the government’s resolve to transform the sector is evident from the massive Rs 8.56 trillion five-year investment plan that was outlined for fiscals 2016-20. The plan promised a far-reaching impact through initiatives cutting across various aspects of the railways, including introduction of new technology trains, capacity augmentation through new lines, gauge conversion and doubling/tripling projects, electrification of fixed and movable infrastructure, construction of dedicated freight corridors (DFCs), and enhancement of non-fare revenue share through station redevelopment, among others.


However, the total capital outlay in the past five years has fallen short vis-à-vis the planned investments. Assuming the realisation of revised estimates and planned capital outlay, ~Rs 6,322 billion has been invested in the past five years, which is ~26% less than the planned investments under the five-year plan.


One of the major reasons for this shortfall has been limited realisation of public-private participation (PPP) and joint venture (JV) projects as envisaged under the five-year plan. As per the actual investments over fiscals 2016-18 and revised estimates for fiscal 2019, the total investments through extra-budgetary resources have been ~Rs 2,426 billion, comprising only 34% from PPP projects amounting to ~Rs. 816 billion and the rest coming from institutional financing (28%) and market borrowings (38%), respectively.


Although the overall capital investment outlay has fallen short on the five-year plan, the sector has seen a significant uptick in capital investments at 14% compound annual growth from fiscals 2016-20 and a 1.7 times increase in budgetary support to ~Rs 661 billion.


With the considerable increase in available funds, the Indian Railways has formulated several projects and programmes targeting problem areas and potential opportunities. Certain projects have been merged to ease administration and implementation. Additionally, a large number of ongoing projects have been accelerated.