Tag: Rashtriya Rail Sanraksha Kosh

The sidelining of the Indian Railways, historically a part of the Indian budget-making process, is now complete. Finance minister Nirmala Sitharaman’s seventh edition of the budget is historic for not attempting even a token pretence of a reference to the Indian Railways in her presentation. Not even the spate of railway accidents since her last full-year budget has moved her. “Railways” figured just once in the entire speech – that too in relation to her general concern about infrastructure and industrial development.

One of the first steps initiated in this direction by the Narendra Modi government after assuming office in 2014 was to eliminate the practice of a separate budget. Ironically, the justification for this “smart” move – that this was a vestige of the colonial past – came from a political formation that singularly stood aside from the national independence movement.

The most striking aspect of the budget – in the context of the collapse of capital formation and investment in the wider economy – is that it utterly belies the expectation that there would be larger capital outlays. And, naturally, this is reflected in the continuing neglect of investment in the Indian Railways.

This is not some incidental expectation; it arises from the fact that the railways is the single largest Indian enterprise – private or government-owned – not just in terms of contribution to output or in terms of employment, but also because the scale and scope of its impact is unlike in any other activity.

In fact, a chief economic adviser to the Modi regime in its early days had pointed out that the multiplier effect works with a factor of five in the case of the railways – one rupee of investment in it generates activity that is five times greater.

One of the trademark features of budget-crafting in the Modi kaal – perfected by Arun Jaitley when he helmed the finance ministry – was to cynically undermine the sanctity of budgetary numbers. The trick was simply to promise a large-sounding number as an outlay, quietly slip it down in the revised figures presented the following year, and then tweak them even lower when the actuals arrived a couple of years later.

Bereft of media attention or scrutiny, the regime could bask immediately in the glow of a “massive” increase in outlay without delivering anything substantial at all. This tested model was applied to the railway finances.

Also read: On Board a ‘Ghulam Express’ of the Indian Railways

The capex mirage

Overall capital expenditure in the wider budget is projected to amount to a nice-sounding Rs 11,11,111 crore in 2024-25, but if the past is any guide, one can safely assume it would be lower when the next budget comes along. Here is why: the budget estimate of capex for 2023-24 was Rs 10 lakh crore but was revised to Rs 9.5 lakh crore and now, the latest “provisional revised” estimates place them even lower, at Rs 9.49 lakh crore.

In effect, between the budgetary promise of last year and what is estimated now, there is a slippage of 5%. But even more important, the increase between now and last year is just about 10%, barely enough to cover inflation. This approach to capex is mirrored in the way the needs of the railways have been addressed.

The capital outlay for the railways in 2023-24 was significantly higher than in the previous year, an increase of almost 51% over the previous year’s budgetary allocation. However, in the current fiscal year, 2024-25, the outlay has been increased to Rs 2.51 lakh crore — an increase of just about 5 per cent — not even enough to keep pace with inflation (see table).

This apparently sharp increase in the railways’ capex needs to be qualified on two counts. First, it happened after the complete collapse of investment during the pandemic; in effect, normalising the spike would have meant that there was nothing remarkable.

Second, this came after several years of waffling during which the Modi regime moved the goalposts for investments several times – first on account of its plans for the railways under the National Infrastructure Pipeline and then a National Rail Plan – promising investments over a stretched timescale, but which it never adhered to. This apparent one-year uptick in investment thus came after a prolonged period in which investment in critical infrastructure was strangled.

Fundamental crisis of network capacity

The fundamental constraint on the operations of the Indian Railways arises from the acute shortage of physical capacity, which has resulted in the severe congestion on the network. In several major trunk routes, tracks are handling capacities that are in excess of 140-150% of the rated capacity.

Investment in capital expenditures is thus urgently needed to resolve this capacity constraint. The neglect of capital investments has meant that the shortage of railway network capacity has been snowballing into the (emphasis added) fundamental constraint on the operations of the Indian railways under the watch of the Modi regime. In fact, this is essentially what is at play, creating the systemic risks that lurk behind the issue of safety in the railways’ operations.

Over the years, as the network has become more congested – caused by more and frequent trains, a widening mix of different kinds of trains with varying speeds running on the same tracks – the needs of maintaining train operations and traffic requirements have dictated terms that are ever in danger of running afoul of normative safety standards (by the way, very well-defined in the Indian Railways’ rulebooks and manuals).

Also read: Five Reasons Why the Indian Railways Have Gone Off-Track

Indeed, the recent preliminary report of the chief commissioner of railway safety (CRS) on the June 17 accident involving a passenger train and a goods train near New Jalpaiguri is absolutely on point here, remarking that this was “an accident-in-waiting”. As we have seen after every accident, Kavach has been waved as a magic wand that would usher in an amrit kaal of sorts for railway safety, but there is nothing – absolutely nothing – in the budget for this grand pipe dream of a project.

The capacity constraint that has built up over the last decade has arisen from the systematic neglect of investment in the railways. Soon after Modi made the grandiose announcement of the Infrastructure Pipeline in 2015 from the ramparts of the Red Fort, it became clear that the money it was allocating was nowhere near what it said it was committed to.

The annual shortfall in the railways’ component in the first four years of the NIP from 2015-16 were 45%, 35%, 22% and 15%. These were to be made in critical areas that would have augmented network capacity, modernised equipment and made for more efficient train operations, apart from crucially adding an additional margin of safety to the operations of the railways.

As the accompanying charts and tables show, investments in each of the areas – signalling, track renewal (a euphemism for the replacement of ageing track assets), track doubling and the special railway safety scheme that is named the RRSK (Rashtriya Rail Sanraksha Kosh) – allocations have either not been consistent or kept pace with normative requirements set by this government.

Added to this have been two additional layers of complexity, arising entirely from the Modi regime’s uniquely whimsical method of functioning (see charts on safety-related investments and outcomes).

Skewed priorities, overloaded capacity

First, it turns out that the increase in outlays for 2023-24, which appear to flatter at first sight, have actually arisen from the way the regime has painted itself into a corner.

Given the Modi regime’s first instinct to leave things to the market, it was natural that it banked on mobilising capital from sources other than its own coffers via the budgetary process. In doing this it relied on the Indian Railway Finance Corporation (IRFC) to fund its rolling stock acquisition programme, via leases. It also had an abiding faith in Public Private Partnerships (PPP); it waited in vain for several years before giving up on this front as well.

The other sources of funds were from internal resources of the railways, but because the operational surplus was too meagre, nothing much came of it. The spike of 2023-24 thus came when the government ran out of options. The IRFC could no longer lease because its balance sheet was stretched; the government also found interest payments for leased assets was mounting.

In fact, what happened in 2023-24 was simply a rearrangement of the sources of funding, not a significant additional increase in capex for the railways. In effect, if one aggregates internal resources, funding from IRFC, expected investments in PPP and funding from other institutional sources of funding, all of which had not materialised, and substitute them with budgetary allocations that were made, the increase would be just about a paltry Rs 15,000 crore.

The much-needed additionality in investments to free capacity never materialised and continues to add even more bottlenecks for the movement of passenger and freight traffic and for safety.

But, bad as this was, things have been worsened by the whimsical arrangement of priorities in the overall constrained environment. This relates to the emphasis placed on select marquee projects – most notably the Vande Bharat trains or the over-the-top station beautification projects at arbitrarily select locations that cannot be justified by any objective criteria.

The misalignment of priorities has implied that roughly one-fifth of the allocations since 2022-23 have been earmarked for rolling stock acquisition. But the question to ask is: what is the point in adding more trains, locomotives and wagons when the track and trackside infrastructure they need to run along and the signals that guide them languish?

The introduction of the Vande Bharat trains, for instance, distorts the traffic priorities of the railways because they actually lower (emphasis added) the capacity of the network on which they run. This is because these faster trains require many other trains – which are slower, including the many goods trains – to be moved off the track when these fancier trains need the tracks for their runs.

Recall, the average speed of a passenger train on the Indian railways system is about 50 km/hr and the average speed of a goods train is just about 25 km/hr. It is also significant that the freight traffic is what earns net revenues for the railways. In effect, these marquee projects add several layers of complexity to a system that is already creaking.

One had almost given up hope that this government would do anything meaningful by way of actually making investments to solve the capacity constraint that is choking the railways. A possibility for hope emerged with the elections, in the expectation that the limited mandate may force the regime to change course, if not make a U-turn. Nirmala Sitharaman’s latest salvo has emphatically ruled out any such possibility.

V. Sridhar is a journalist based in Bengaluru.