Since the discontinuance of a separate Railway Budget in 2017, Indian Railways (IR) and its annual budget have lost significance and spotlight. It has been seen by many as something which was done in view of its size being increasingly smaller vis-à-vis the national Budget and by others as a move which has led to greater budgetary support to railways, further pandering to its financial indiscipline. This year, too, the Budget of the ‘lifeline of the nation’ did not evoke much interest.

Let us look at the numbers first which, unfortunately, were not gone into by the FM; it was important because the financial health of IR is deteriorating and the government must present a vision to restore it towards self-sustenance.

IR had budgeted a gross traffic revenue of ₹2.17-lakh crore and ordinary working expense of ₹2.08-lakh crore this fiscal, the revised estimate has already been lowered to ₹2.01-lakh crore; whereas, the trends show that it would not exceed ₹1.9-lakh crore. With revenue expenditure likely to be in the range of ₹2.10-lakh crore, the operating ratio — the working expense to gross revenue and is a measure of financial heath — is likely to be around 110.

Heavy borrowing

It is another matter that IR had window-dressed it artificially below 100 by meeting the pension expense from government and extra budgetary supports.

IR has leapfrogged to spend multiple times more on infrastructure upgrade since 2014 with the belief that investments would drive growth of the public sector behemoth and the country’s economy by borrowing heavily. Its total outstanding borrowings stand at more than ₹4 lakh crore – this when most of the borrowings had a moratorium on interest. These moratoriums would gradually start ending and the number will skyrocket in coming years putting further strain on its outgo.

This Budget has allotted another ₹2.45-lakh crore on capex, whereas it would have been prudent to cut back on this spend, complete ongoing projects first before committing resources on new projects. Many rail projects do not seem to be contributing commensurately to revenue, traffic or market share as the rise in the revenue of Railways. Since 2014, it is a dismal two per cent y-o-y.

The Budget pegs the estimated revenues to be ₹2.39-lakh crore in 22-23 which is 20 per cent more than what would be achieved in 21-22 and difficult to realise. The saving grace is that the earnings in the first nine months of the present fiscal have recovered to slightly above 19-20 levels, mainly due to improvement in freight and long-distance passenger performance. Long-distance reserved passenger segment revenue has also recovered in December 2021. As part of the Gati Shakti plan, the Budget has declared the intent to seek new rail freight traffic by reducing the transportation cost from 14 per cent of the value of goods transported against a global norm of 6-7 per cent.

Major announcements included setting up 100 multi-modal cargo terminals, which will help win back some modal share from road, 18 Vande Bharat trains, which would help earn more revenues and 2,000 km of Kavach safety system for railway safety.

It was disappointing to note that some major announcements made in earlier Budgets were not mentioned at all.

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