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Budget 2023: Railways Must Respond With Better Execution As Capital Outlay Is Hiked

The capital outlay has increased by more than 2.5 times over the past seven years.

<div class="paragraphs"><p>(Source:&nbsp;<a href="https://unsplash.com/@anagani_saikiran?utm_source=unsplash&amp;utm_medium=referral&amp;utm_content=creditCopyText">Sai Kiran Anagani</a>/<a href="https://unsplash.com/s/photos/RAILWAYS?utm_source=unsplash&amp;utm_medium=referral&amp;utm_content=creditCopyText">Unsplash</a>)</p></div>
(Source: Sai Kiran Anagani/Unsplash)

The government is indeed treating the railways as the locomotive of the economy. The budget has given it a healthy dose of investment infusion. Of the total capital expenditure of Rs 2.93 lakh crore for the railways in FY24, Rs 2.40 lakh crore is budget support. That's one in every four rupees of the budget’s capital expenditure. Prime Minister Atal Behari Vajpayee had rolled out the highway development programme. This government will be known for expanding the railways. The capital outlay has increased by more than two-and-a-half times over the past seven years.

The outlay for new lines at Rs 31,850 crore is 28% more than the 2022-23 outlay and a threefold increase over that made five years ago. For line doubling, the investment at Rs 30,750 crore is a sizeable increase. On rolling stock, the outlay of Rs 37,600 crore is nine times what it was five years ago. There is substantial spending on track renewals and signalling equipment as well. Some of this is to compensate for low spending during the Covid year of 2020-21.

Revenue from passenger services is budgeted at Rs 70,000 crore, up from the revised estimate of Rs 64,000 crore for this year. The railways say 2.9 billion non-suburban passengers boarded the trains last year. This is a rebound from the Covid years, but lower than the 2018-19 peak of 3.5 billion. Total passengers, including suburban, had touched 8.4 billion that year. The Economic Survey says 418 crore passengers (suburban and long-distance) had boarded the trains till last November. Going by the trends, the 2018-19 number will not be touched or surpassed this year.    

Revenue from goods traffic has been pegged at Rs 174,600 crore, about 15,000 crore more than this year. The freight loading target has been set at 1,600 million tonnes, about 6.5% over this year’s achievement and in line with the project GDP growth rate next year. The increased revenue is likely to come from freight rate hikes.  

Operating expenditure increased by Rs 25,000 crore this year and ate into half of the incremental revenue. The railways blame high diesel prices. The appropriation to pension fund was equal to the expenditure of Rs 56,000 crore this year. In the coming year, the provision is Rs 70,516 crore, which is more than the expected expenditure of Rs 62,000 crore. It will make up to some extent the under provision in previous years. The operating ratio, or the ratio of total expenditure to total revenue, is 98.2%—which indicates that railway finances continue to be precarious. 

The railways have not shown themselves to be good at execution. Observers say there is thrust on achieving targets. But none of the physical targets set for this year were achieved till December. On electrification, only 41% of the target was achieved. Procurement of coaches was half the target number; and 68% for wagons. Even an iconic project like the east-west dedicated freight corridors is going way behind schedule. The project was inaugurated in 2006. Only when the DFC comes into operation and the railways have excess capacity to move freight at fast speeds can they expect to claw back freight from the roads. The sooner they do the better for the economy as the railways have a cost advantage over long distances and their emission intensity per tonne of cargo moved is also lower than that of trucks.

Vivian Fernandes has more than 30 years of practice in journalism and has covered the railways extensively.

The views expressed here are those of the author, and do not necessarily represent the views of BQ Prime or its editorial team.