iifl-logo-icon 1
IIFL

Invest wise with Expert advice

By continuing, I accept the T&C and agree to receive communication on Whatsapp

  • Open Demat with exclusive Advice & Services
  • Get a dedicated Relationship Manager to help you grow your wealth
  • Exclusive advisory on 20+ trading & wealth-based investment options
  • One tap Investments, Automated trading & much more
  • Minimum 1 lakh margin required
sidebar image

Budget 2024-25: Pampering the railway lifeline

2 Feb 2024 , 09:51 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.

Related Tags

  • Budget 2024-25
  • capex
  • Finance Minister
  • fiscal deficit
  • Fiscal policy
  • FM
  • Union Budget
sidebar mobile

BLOGS AND PERSONAL FINANCE

Images
15 Apr 2024   |   12:16 PM
Images
15 Apr 2024   |   10:33 AM
Images
15 Apr 2024   |   09:44 AM
Read More
Knowledge Centerplus
Logo

Logo IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000

Logo IIFL Securities Support WhatsApp Number
+91 9892691696

Download The App Now

appapp
Knowledge Centerplus

Follow us on

facebooktwitterrssyoutubeinstagramlinkedin

2024, IIFL Securities Ltd. All Rights Reserved

ATTENTION INVESTORS
  • Prevent Unauthorized Transactions in your demat / trading account Update your Mobile Number/ email Id with your stock broker / Depository Participant. Receive information of your transactions directly from Exchanges on your mobile / email at the end of day and alerts on your registered mobile for all debits and other important transactions in your demat account directly from NSDL/ CDSL on the same day." - Issued in the interest of investors.
  • KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.
  • No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account."

www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.

RISK DISCLOSURE ON DERIVATIVES
  • 9 out of 10 individual traders in equity Futures and Options Segment, incurred net losses.
  • On an average, loss makers registered net trading loss close to Rs. 50,000.
  • Over and above the net trading losses incurred, loss makers expended an additional 28% of net trading losses as transaction costs.
  • Those making net trading profits, incurred between 15% to 50% of such profits as transaction cost.
Copyright © IIFL Securities Ltd. All rights Reserved.

Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248

plus
We are ISO 27001:2013 Certified.

This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.

closeIcon

Get better recommendations & make better investments

Invest wise with Expert advice

By continuing, I accept the T&C and agree to receive communication on Whatsapp