Sansad TV Perspective: Railway Budget

In the series Sansad TV Perspective, we bring you an analysis of the discussion featured on the insightful programme ‘Perspective’ on Sansad TV, on various important topics affecting India and also the world. This analysis will help you immensely for the IAS exam, especially the mains exam, where a well-rounded understanding of topics is a prerequisite for writing answers that fetch good marks.

In this article, we feature the discussion on the topic: Railway Budget.

Anchor: Vishal Dahiya

Guests:

1. Sudhendu Jyoti Sinha, Advisor, Transport & Infrastructure Connectivity, NITI Aayog
2. Sachin Bhanushali, Chairman, CII National Committee on Railways, (Transport)
3. A.K. Bhattacharya, Editorial Director, Business Standard

Context:  Budget allocation for the Railway sector in 2023-24.

Highlights of the discussion:

• Introduction
• Significance of the Budget allocation
• Response of industry
• Associated concerns 
• Way Ahead

Introduction:

• Finance Minister Nirmala Sitharaman has allocated a capital outlay of Rs 2.40 lakh crore for the Indian Railways in the Union Budget 2023-24. This highest-ever outlay is about nine times the outlay made in Financial Year 2013-14. 
• This record budgetary push is aimed at accelerating projects like the introduction of hydrogen-powered wagons and trains, the laying of additional tracks, electrification of the network, and revamping stations with better amenities for passengers. 
• The maximum increase in allocation this year has been made for passenger amenities, which include the redevelopment of stations with Rs 13350 crore earmarked for this purpose. At Rs 37581 crore, the second-highest increase in the allocation has been proposed for the railway’s rolling stock — trains, locomotives, and wagons. 
• Furthermore, Rs 30749 crore has also been allocated for the doubling of railway lines. 
• Notably, Railways is one of the key drivers of the PM GatiShakti scheme and the National Logistics Policy.

For more information on Budget 2023-24, read here: Union Budget 2023 Summary – Get the Highlights of the Budget 2023-24 for UPSC

Significance of the higher Budget allocation to railways:

• The clear understanding of such a higher allocation to railways shows the significance that is given to the Railways as the mode of transport.
• The confidence is shown that Indian Railways will be able to use the funds for capital expenditure and take it forward. The government of India has clearly shown its intent in developing Indian Railways as the engine of Logistics in India.
• Increasing the budgetary outlay by 51% as compared to 2022-23 reflects the ambition of the government of India for various railway projects.
• There cannot be a complaint for the non-availability of funds as now sufficient funds have been provided. Thus more and more assets should be added and projects should be expanded in all directions like passenger and freight with appropriate interventions.
• It is in line with the other projects launched in previous years like the Dedicated Freight Corridor, National Logistic Policy, PM Gatishakti, etc.
• The sectoral allocation is as follows:
  • Around 47000 crore rupees have been allocated for the rolling stock.
  • Almost 32000 crore rupees have been set aside for building new routes/lines.
  • Approximately 31000 crores have been allocated for the doubling of tracks.
  • For renewals of the existing tracks, nearly 17300 crores have been granted.
  • In order to improve energy independence through electrification 8000 crores have been allocated.
  • Apart from this for improving the traffic facilities, 7000 crores have been issued.
• The commitment and the project performance of Indian Railways will improve with such an amount of allocations.

Response of Industry:

• The industry has always looked forward to Railways playing an extremely important role in the entire process of development.
• As the Indian Railways starts playing a greater role in the manufacturing industries’ logistic requirements and offers better cost efficiency, industries’ trust in the railways would further increase which will result in more private investment.
• If international experiences are considered in terms of the allocation of responsibilities, the private sector takes the role of service provider and importance is given to Engineering, procurement, and Construction (EPC). However, in India, maximum procurement is done by the Indian railways.
• With increased funds, a lot of emphasis will be placed on the privatization of freight service and the industry is ready to take that advantage.
• However, the industry leader is apprehensive about the following aspects:
  • Execution Capabilities: The capital expenditure of 2.4  lakh crores in a matter of one year is a major challenge that would require the ability to procure, execute, and commission various projects.
  • Role of private industries: The role of private industry in the supply chain is very crucial and there is a question of the gestation period also. For instance, the Dedicated Freight Corridor got delayed for a long time.

Associated Concerns:

• Despite a marginal reduction, the Operating ratio (the amount railway needs to spend to earn 100 rupees) is again going up. This implies that the ability of the railways to earn from its investment is not getting better.
• The Indian Government is increasing spending on the railways, but a large and capable organization like railways is not able to generate its own resources is quite worrisome.
• When the capital expenditure is increased by 51%, the pressure on the Indian railways to manage those funds increases considerably.
• Another existing issue is that one-third (approximately 34%) of the total spending of Indian railways goes into wages and pensions. No organization can afford to have such a high expenditure on its human resources.
• Railways would be expected to identify and prioritize the kind of projects that are both cost and time-sensitive.
• The quality of service needs to be improved with better transit time on the existing network and resorting to all Dedicated Freight corridors.
• The modal share of the railway is still low.
• Another existing problem of the Indian railways is the cross-subsidization of tariffs that demotivates freight movement.

Way Ahead:

• Indian railways should decongest its route and strengthen its network to increase the throughput, the mobility of passengers and freight, and improve its revenue.
• The modal share of railways should be improved as once it starts growing, the operation ratio and the economics of scale would enhance further.
• Gradual and calibrated entry of the private sector should be provided in running railways services with a proper regulator in place.
• Internal reforms should be taken up to expedite the process of better management of railways as a mode of transport for both passenger and freight services.
• Ensuring that the wage and pension bills are kept well within the limits.
• Assurance of return on investment along with distribution of risks should be provided.
• Terminal service is the key area where private participation can be increased, as there are significant numbers of passenger terminals (approximately 7170). Moreover, terminal use can be expanded beyond its scope through creative, innovative, and financially viable ways.

Read all the previous Sansad TV Perspective articles in the link.

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