The Railways has sizeable capex plans for the five year period 2015-19 involving a capital outlay of Rs.8.56 trillion. The annual capital outlay for FY2016-18 was increased significantly to meet the five-year targets. NITI Aayog has also finalised the three year action agenda (2018-20). As per the document, the budgetary allocation for capital expenditure in the railway sector will increase from around Rs.0.4 trillion in FY2016 to about Rs.1.18 trillion by FY2020, thereby increasing its share of total expenditure from 2.3 per cent to 4.3 per cent.
The Indian Railways is estimated to transport over 1.14 trillion passenger km and 682 billion net tonne km of cargo - the highest passenger and fourth highest freight transporting railway system globally. The Indian rail network is also one of the largest in the world with 66,000 route km. However, transport of goods through roadways have grown at a faster pace resulting in the share of railways in the total surface freight declining from 86.2 per cent in 1950-51 to 35.5 per cent in 2011-12. While railways transportation is more environment-friendly and economical, the reason for this shift is due to capacity constraint in railway infrastructure and high freight fares to cross subsidise the passenger segment. Considering the need for upgrading rail infrastructure, NITI Aayog has suggested increasing the rail network to 80,000 route km by 2032.
Large capex proposed during five year period (2015-19)
A majority of the capex planned is towards decongestion and expansion of the existing network, as well as creation of new lines, including dedicated freight corridors. These projects are aimed at significant capacity enhancements and network decongestion. Major new line capex is towards ongoing dedicated freight corridor (DFC) projects, as well as on parts of the additional freight corridors proposed like Delhi to Chennai (north-south), Kharagpur to Mumbai (east-west) and Kharagpur to Vijayawada (east coast). The two ongoing DFC (eastern and western) projects by themselves are worth Rs 0.8 trillion. The Railways is also working on proposals for other freight corridors on similar lines; however, they will take time to materialise. The other major capex planned is towards station modernisation and development, which are proposed to be undertaken on a public private partnership (PPP) model. The railways is also working on making the high speed rail (HSR) corridor or bullet train a reality.
Increased capex plans need to be supported by corresponding financing plans. The Indian Railways is primarily financed through: (i) gross budgetary support (GBS) from the central government, (ii) its own internal resources, such as freight and passenger revenue and leasing of railway land and (iii) extra budgetary resources, such as market borrowings, institutional financing, PPPs and joint ventures (JVs). To keep pace with the higher capex plan, the budget for the last three years had increased plan outlay for the railways from Rs 1.2 trillion in FY2017 to Rs 1.31 trillion in FY2018 and from Rs 0.67 trillion in FY2015 to Rs 1.0 trillion in FY2016 (actual for FY16 is estimated at Rs 0.85 trillion). Most extra budgetary resources come in the form of market borrowings from the Indian Railways Finance Corporation (IRFC). Indian Railways has also received commitment from Life Insurance Corporation of India (LIC) for the funding of Rs 1.5 trillion in tranches over five years.
Given that a bulk of the funding will be in the form of debt, this would increase the reliance on borrowings. However, sizeable borrowing is project-specific and involves low interest rates like funding from multilateral bodies, such as Japan International Cooperation Agency (JICA) and the World Bank for DFCs and high speed rail.
Railways is also looking to reduce the funding requirement by forming JVs with states and PSUs for projects worth Rs 1.2 trillion.
Apart from the regular capex for the doubling or renewals of tracks, DFCs are among the key capex undertaken by the Railways. Railways is also looking to modernise about 400 railway stations through the PPP mode and start the bullet train and high speed rail corridor project.
Key capex projects planned and undertaken by the railways are as follows: