IR: The Collateral Damage in the Union Budget or The Great Indian Rail Budget Vanishing Act

 

Union Budgets are meant to be moments of stock-taking and signal setting. As the Finance Minister speaks, priorities are revealed not merely through allocations, but through emphasis, intent and, at times, carefully choreographed silence. For Indian Railways (IR), that silence has now evolved into a full-fledged policy instrument, not accidental but “carefully budgeted”, with footnotes “strategically camouflaged”, delivering clearer signals than most speeches manage.

Once a standalone spectacle, the Railway Budget was the annual confession booth where ambitions were proclaimed, inconvenient truths reluctantly admitted, and the nation’s transport backbone subjected to public cross-examination. Since its merger with the Union Budget, however, IR has been quietly demoted to a footnote. Vast operations, stubborn structural problems and a permanently fragile financial balance sheet are now squeezed into a few lines and a cluster of tables buried so deep in the documents that their primary purpose appears to be compliance with constitutional etiquette rather than public understanding.

Predictability has also replaced candour. The Operating Ratio continues to be cosmetically held just below the psychologically catastrophic mark of 100 through accounting techniques that are now so familiar they deserve heritage status. With IR unable to generate any meaningful internal surplus, capital expenditure, almost entirely propped up by gross budgetary support, remains the lone fig leaf of optimism for rail watchers. Over the past decade, unprecedented sums have been poured into tracks, electrification, stations and rolling stock. The attempt is to make railways look busier, shinier and more photographed than ever before. Unfortunately, the traffic numbers refuse to share the enthusiasm. Passenger and freight growth continues to limp along at 2 to 3 % CAGR, freight’s modal share keeps slipping away quietly, and passenger volumes have only just managed to crawl back to pre-Covid levels, as if doing the railways a personal favour.

As Budget day approached, expectations were modest and predictability was the only flavour on offer. The script was faithfully followed. The Operating Ratio (OR) was pegged at 98.43 for FY 25-26, achieved by keeping appropriations to the Pension Fund and Depreciation Reserve unrealistically low, ₹65,500 crore against a budgeted ₹68,602 crore and ₹1,000 crore against ₹1,500 crore respectively. This numerical dexterity was essential, because otherwise the revenue expenditure of ₹2.77 lakh crore would have overtaken total revenue of ₹2.78 lakh crore, an arithmetic embarrassment best avoided in official narratives. Revenue performance itself is distinctly underwhelming. Passenger earnings are projected at ₹80,000 crore against a budgeted ₹92,800 crore despite two rounds of fare revisions. Freight earnings stand at ₹1.78 lakh crore against a budgeted ₹1.88 lakh crore despite the Dedicated Freight Corridors being almost fully operational for nearly two years. I struggled to find the magic OR projection for FY 26-27 but perhaps, anticipating arithmetic discomfort ahead, the overview document prudently avoids showing any OR for FY 26-27, a silence that speaks volumes.

Some examples of extraordinary nimbleness in accounting calisthenics deserve special mention. Other coaching revenue, budgeted at ₹8,500 crore, is revised down to ₹7,500 crore for FY 2025-26, only to be reborn with Olympic confidence at ₹9,500 crore for FY 26-27. Sundry earnings tell a similar tale of fiscal reincarnation. Actuals for FY 25-26 are expected to limp in at ₹12,000 crore, yet the Budget boldly assumes ₹16,000 crore for FY 26-27. This seems to follow what may be called the motivational theory of revenue growth, under which sustained underperformance automatically produces moral uplift and superior results in the following year. Revenue shortfalls are treated not as warning signs but as training weights, designed to build financial muscle through repeated disappointment. One is left to assume that railwaymen, suitably chastened by this year’s numbers, will next year scale revenue Himalayas armed with little more than spreadsheets and optimism, simply because the spreadsheet demands it.

Not directly a Budget announcement but relevant as a performance review, there were positives in the current fiscal. The long-awaited Udhampur Srinagar Baramulla Rail Link was completed, connectivity improved in the North-East, and the Vande Bharat Sleeper train was introduced with much fanfare. Completion of the Western DFC up to JNPT, however, continues to be an article of faith and may spill into the next fiscal. Safety performance has been relatively better, with only one major accident involving over ten fatalities, the MEMU collision with a goods train near Bilaspur on 4 November. This improvement owes much to investments in track renewals, grade separation, elimination of unmanned level crossings and induction of safer LHB coaches. The much advertised leap towards a zero accident regime through large scale deployment of Kavach and AI driven alerts, however, remains firmly in the realm of intent notes and conference presentations.

Capital expenditure, which had appeared to plateau over the last three years after a long upward march, has now been increased from ₹2.65 lakh crore to ₹2.93 lakh crore. Any hope that the government might pause to assess whether scale without strategy can truly deliver transformation was misplaced. The belief persists that spending more on rail infrastructure is inherently virtuous, even if the railways’ own finances resemble a chronic patient on life support.

Station redevelopment offers a textbook illustration. Of the 1,337 stations identified, work has been completed at just 160, even as annual outlays exceed ₹12,000 crore. With a distinctly lukewarm public response to redeveloped stations such as Charlapalli in Hyderabad and reports of poor upkeep at Sir M Visvesvaraya Terminal in Bengaluru, a reality check was overdue. A visit to Gomtinagar station near my home in Lucknow, built at a cost of nearly ₹400 crore and officially declared complete, revealed that the main ramp and allied infrastructure remain unfinished and unused, complete with temporary barricades and fading inauguration memories, proudly incomplete yet triumphantly inaugurated.

As for standalone headline announcements, there were none for our increasingly invisible IR. Safely tucked under the generic umbrella of Infrastructure, and that too as a one-liner in paragraph 36, a new Dankuni–Surat freight corridor was ceremoniously unveiled in the name of promoting environmentally sustainable movement of cargo. This announcement arrived as part of a curious exercise in institutional amnesia, quietly pretending that the long list of Dedicated Freight Corridors, energy corridors, mineral corridors, cement corridors, port connectivity corridors and high-density corridors announced with great fanfare in earlier budgets either never existed or have since wandered off.

To add insult to injury, the same paragraph proudly announced a Coastal Cargo Promotion Scheme aimed at incentivising a modal shift away from rail and road in order to double the share of inland waterways and coastal shipping from 6 percent to 12 percent by 2047. This amounts to a neat case of friendly fire. Railways, already bleeding freight to roads with admirable regularity, are now expected to applaud politely as waterways join what can only be described as a triple assault. Apparently, environmentally sustainable transport must flourish, even if it does so by steadily feeding off the railways’ plate.

The environmentally sustainable refrain does not end there. In paragraph 40, almost as an afterthought, the Finance Minister spoke of developing seven high-speed rail corridors between cities as environmentally sustainable growth connectors, a phrase that sounds impressive precisely because it discourages further questions. One may, if sufficiently motivated, compare these newly announced corridors with similarly named corridors unveiled in earlier budgets to confirm a curious pattern of selective amnesia. By now, however, it is evident that announcements without memory or follow-up have become the defining flavour of railway budgeting.

What is certain, however, is that the Dankuni Surat freight corridor and the Varanasi Siliguri high-speed Rail corridor appear less as products of long term transport planning and more as last minute inspirations, generously flavoured with electoral arithmetic. With elections looming in the Didiland (land of the sister Mamata, West Bengal), the railways seem to have been briefly remembered, not as a national transport system in distress, but as a convenient line item in the political timetable.

The Public Investment Board, the inter-ministerial body vetting major publicly funded projects, has recently signalled that railways must rethink both how it builds and how it earns. Private capital, flexible contracting models and sharper assessment of future freight demand were highlighted as central to the next phase of growth. One therefore expected at least a token reference to privatisation in this Budget. Private participation can improve efficiency in station redevelopment, rolling stock manufacture, premium train operations and freight augmentation, while services for the common traveller, core network control and safety remain with the government. Instead, misplaced investments in loss making suburban systems continue, as illustrated by the outlay for the Bengaluru Suburban Rail Project, rather than hiving these off to state governments as was done with Metro systems. With freight growth stagnating, old assumptions, especially around coal traffic, no longer hold in a rapidly changing energy landscape. Capturing a greater share of containers and BOG (Balance Other Goods) is now a necessity, not an option. Corporatisation of railway manufacturing was a stated government objective in 2019 as a step towards gradual privatisation. All these subjects were notable mainly for their absence.

Railway budgets should not be about spectacle or slogans. They should be about clarity and honesty. Indian Railways does not need another headline; it needs a direction. Until that happens, we will continue to celebrate investment while systematically sidelining outcomes, living comfortably in a world where, as Shakespeare warned us long ago, through the witches in Macbeth, “Fair is foul, and foul is fair.”

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A brief, to the point, version of my take appeared in The Hindu BusinessLine:
https://www.thehindubusinessline.com/opinion/lack-for-direction-for-railways/article70578987.ece