Budget 2024-25: Pampering the railway lifeline

2 Feb 2024 , 09:47 AM

BIG ALLOCATIONS, BIGGER DREAMS

It is interesting to recollect that till the year 2017, the Railways had an independent budget of its own. Not surprisingly, the railway minister almost carried the same aura as the finance minister on the day of the Railway Budget. All that changed from 2017. Along with changing the date of the Union Budget from February 28 to February 01; the year 2017 also saw the scrapping the separation of the railway budget and it got subsumed into the main budget. The interesting thing is that the outlays to the Indian Railways has increased substantially, since it became an integral part of the main Union Budget.

Consider these numbers. For FY24, the last Union Budget had allocated a record Rs2.41 trillion for the Indian Railways. The interim budget 2024-25 allocation has bettered that record and assigned Rs2.55 trillion to the Indian Railways. That is a year-on-year increase of 5.8%. However, what is material is that, despite being an interim budget, there has been a very specific and granular focus on the Indian Railways. So, what exactly has been the focus of the budgetary allocations in the Interim Budget 2024-25 as far as the Indian Railways are concerned? 

BIG STORY: MAJOR ECONOMIC RAIL CORRIDOR PROGRAM

India has been working freight corridors along with Golden Quadrilateral for quite some time now. In the Interim Budget 20242-5, the finance minister announced the setting up of dedicated freight corridors for 3 specific purposes. The first such corridor will be the energy, mineral and cement corridors. This will be dedicated to the movement of specific minerals and materials only. The second corridor will be the port connectivity corridors, which will connect the various hubs directly to the ports. 

One of the challenges that will be addressed is the last mile of getting goods to and from the port to the main cities. The time to market will be substantially minimised. The third will be the high traffic density corridors; specifically for sector sectors where the demand is very high anecdotally. All these projects have been identified under the PM Gati Shakti program to enable multi-modal connectivity. These corridors will improve logistics efficiency and reduce cost. But, what exactly is a dedicated freight corridor.

UNDERSTANDING A DEDICATED FREIGHT CORRIDOR

The Dedicated Freight Corridor concept was first conceived after the Golden Quadrilateral project linking the four metro cities of India by rail and road. Apart from the quadrilateral, there were also two diagonals (Delhi-Chennai and Mumbai-Howrah). Why are these segments important. They may just comprise 16% of the route map but carry more than 52% of the passenger traffic and 58% of revenue earning freight traffic of the Indian Railways. This trunk route was already highly saturated with line capacity utilization varying between an incredible 115% to 150%. As a result, the Indian Railways was consistently losing out on freight traffic. Between 1951 and 2022, the share of the Indian Railways in freight traffic fell from 88% to just 26%, as the less eco-friendly road freight took over.

Dedicated freight corridors (DFC), with appropriate technology, enables the Indian Railways to regain its market share of freight transport. It also creates additional capacity and assures efficient, reliable, safe, and cheaper options for mobility to customers. In addition, the government will also catalyse the setting up of multimodal logistic parks along the DFC to provide complete transport solution to customers. But more importantly, this is a lot more eco friendly as trains on this route will run on electricity and at much higher speeds; being a dedicated freight corridor.

MORE MEASURES BEYOND THE FREIGHT CORRIDOR

One can be blamed for becoming overenthusiastic, but remember, this is an interim budget and hence there are limits to what the government can really do. However, there are some more railway truths to chew over.

• A total of 40,000 normal rail bogies will be converted to Vande Bharat standards. Thais basically means enhanced levels of safety, convenience, and comfort for the passengers of the trail. This will be funded with the additional allocation in the current rail budget over the previous year. 

   

• The government is also likely to use additional funding from buying modern Vande Bharat trains, laying new tracks, doubling the number of lines on existing routes, and deploying automated train safety technology across the length and breadth of the Indian Railway network pan-India. 

   

• In the first 9 months of FY24 (till December 2023), the total railway capex has been to the tune of Rs1.96 trillion. This is the highest ever capex and the capex outlay in the first 9 months is 33% higher than the corresponding period in the previous year. After all, under the National Rail Plan 2030, the total freight movement is expected to cross 8,000 MTPA, double of the current volume of 4,000 MTPA. 

   

• The decongestion of the high-traffic zones after the creation of dedicated freight corridors (DFC) will also aid in improving the operation of passenger trains, resulting in safety and higher travel speed for passengers. 

The stock market reaction to the Railway announcements may have been tepid. However, we need to appreciate that railway stocks have rallied anywhere between 400% and 600% on an average in the last 1 year. You cannot really fault the Interim Budget for a 3-5% correction from such higher levels.