Capex overdrive, healthy growth in passenger earnings, flat earnings in freight segment sums up this year’s budget allocation for the railways. Major increase in budgetary support for railway infrastructure, which has more than doubled to ₹2.4-lakh crore from last year is a notable feature. However, the less than 2 per cent growth in freight earnings despite the unprecedented coal loading projected for FY23 over FY22 is a dampener for any organisation that is targeting to double originating freight loading in five years under Mission 3,000 million tonnes.
Disturbing trends in safety, less than targeted production are also not encouraging. Similarly, instead of reduction, there is an increase in expenditure on High speed diesel (HSD) oil purchase in FY23 over FY22, despite more than 80 per cent traffic having been switched to electric traction. In fact, expenditure on purchase of HSD is more than that on electricity purchase for traction.
On the other hand, Railways is estimated to spend ₹5.25-lakh crore in 23-24 with opex being ₹2.65-lakh crore and capex at ₹2.60 lakh crore. In a major boost to railway infrastructure creation, the government has provided a budgetary support of ₹2.4-lakh crores in FY24 as against FY23’s figure of ₹1.17-lakh crore. Consequently, estimated borrowings for capex has come down from ₹1.1-lakh crores for FY23 to ₹17,000 crore for FY24. Remaining ₹3,000 crore will come from Railways’ internal sources. Both opex and capex are estimated 8-9 per cent higher for FY24 over FY23.
Staff costs and pension liabilities, accounting for 65 per cent of opex, needs pruning. Similarly, expenditure on purchase of HSD oil at ₹19.3-lakh crore defies logic as it is not only more than last year’s figure by almost 10 per cent, but is also higher than the expenditure on purchase of electricity by 10 per cent, despite the fact that almost 80 per cent of rail traffic has switched over to electric traction.
Growth in passenger traffic in FY23 at ₹70,000 crore is a hefty increase of 60 per cent over FY22’s figures, which was impacted by train cancellations due to Covid restrictions. For FY24 too, a growth of 10 per cent has been projected.
Trend for freight, however, is disappointing with projected earnings for FY23 at ₹1.6-lakh crore, just a 2 per cent hike from FY22. An increase of 10 per cent, however, has been projected at ₹1.75-lakh crore for FY 24. A CAGR of 14 per cent is needed for achieving the target of Mission 3,000 million tonnes by 2027.
Infra Focus
Towards network expansion (new lines, gauge conversion and doubling) a sum of ₹67,000 crore has been allocated. Provision has also been made for track renewal – ₹17,000 crore, rolling stock acquisition – ₹37,000 crore, signalling – ₹4,000 crores and electrification – ₹8,000 crore. This fund allocation levels should propel infrastructure creation activities to a higher orbit. The goal of 100 per cent electrification of tracks will be achieved in FY23-24.
Repayment of capital portion of borrowed assets, eats up ₹22,000 crore, in addition to ₹24,000 crore required towards payment of lease charges to IRFC.
While the fund allocation is decent, the strategy for speedy track upgrades, providing momentum to freight loading and improving safety needs focussed attention. Setting up of Gati Shakti Terminals expeditiously, early commissioning of DFCC, execution of track speed up-gradation projects, devising strategy for a higher CAGR for freight loading, and bringing down the cost of staff, are the need of the hour.
The author is retired General Manager, East Central Railway. Views expressed are personal.