India's Railway: Investing in the Future of Transportation
- Published | 04 March 2024
The Indian railway system is widely recognized as the backbone of the economy, spanning thousands of kilometers and covering the entire nation. It ranks as the fourth largest in the world, following the US, China, and Russia. Oversight of the entire infrastructure is managed by the Railways Board, holding a monopoly over rail services provision in India. Due to its cost-effectiveness and efficient operations, railways remain the preferred mode of long-distance travel for most Indians.
India boasts one of the largest railway systems globally under single management, catering well to both long-distance travel and bulk commodity movement. Not only is it energy-efficient, but it also offers economic transport solutions. Indian Railways stands out as the primary choice for automobile transportation in the country.
The Indian government's focus on railway infrastructure investment is evident through its investor-friendly policies, facilitating Foreign Direct Investment (FDI) to enhance freight services and high-speed train networks. Currently, numerous domestic and international companies are expressing interest in investing in Indian railway projects.
Introduction:
According to IBEF, India boasts the fourth-largest railway network globally, operating over 22,593 trains (9,141 freight and 13,452 passengers). The daily passenger count surpasses 24 million, while freight transportation amounts to 203.88 million tonnes. In FY22, passenger traffic surged to 3.54 billion from 1.28 billion in FY21. Freight volume in FY23 reached 1,509 MT, reflecting a 6.59% year-on-year growth. Since August 2020, Indian Railways has introduced 450 Kisan Rail services, facilitating the transportation of over 1.45 lakh tonnes of agricultural produce and perishables. RailTel, a PSU under the Railway Ministry, offers fast and free Wi-Fi nationwide.
In the fiscal year 2022-23, it is projected that Railways will derive 69% of its internal revenue from freight, 24% from passenger traffic, and the remaining 7% from miscellaneous sources such as parcel service, coaching receipts, and platform ticket sales. The total revenue from traffic for 2022-23 is estimated to amount to Rs. 2,39,803 crore (US$ 29.18 billion), reflecting a 25.37% increase over the revised estimates for 2021-22. Freight revenue is anticipated to reach Rs. 1,62,100 crore (US$ 19.72 billion), representing a 14.89% increase over the revised estimates for 2021-22. Passenger revenue is projected to be Rs. 63,300 crore (US$ 7.70 billion), reflecting a substantial 61.42% increase over the previous year's low base. Indian Railways is actively involved in technological advancements, particularly in signalling and telecommunication. A significant portion of the railway network, totaling 15,000 km, is being converted to automatic signalling. Additionally, 'KAVACH', a domestically developed Train Collision Avoidance System, is set to be implemented across 37,000 km of railway tracks.
Some Major Developments In Indian Railway Sector:
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In October 2023, reports indicated that India's infrastructure investments are projected to escalate to Rs. 143 trillion (US$ 1.71 trillion) between financial years 2024 and 2030, according to analytics firm CRISIL.
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With the aim of enhancing rail connectivity and facilitating commuter travel, the Union Cabinet sanctioned seven projects for the Ministry of Railways in August 2023, with an approximate cost of Rs. 32,500 crore (US$ 3.93 billion). These projects, spanning 35 districts across nine states including Uttar Pradesh, Bihar, Telangana, Andhra Pradesh, Maharashtra, Gujarat, Odisha, Jharkhand, and West Bengal, will extend the existing network by 2,339 km.
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In June 2023, IRCON (formerly Indian Railways Construction Company Limited) entered into a memorandum of understanding (MoU) with the National Investment and Infrastructure Fund Limited and Ayana Renewable Power Limited. This collaboration aims to explore viable opportunities for solar energy generation for Indian Railways as part of their efforts to increase the share of renewable energy in their overall energy mix.
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During FY23, the North Western Railway recorded the highest growth in freight earnings, amounting to Rs. 6,839.93 crore (US$ 832.39 million), marking a significant increase of 30.82% compared to the previous year's earnings of Rs. 5,228.13 crore (US$ 636.3 million). Freight loading also saw an uptick to 32.69 million tonnes, reflecting a 10.07% rise from the previous year's loading of 29.70 million tonnes.
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A noteworthy development is the introduction of the "Vande Bharat Express," India's inaugural semi-high-speed train. This train, capable of reaching speeds up to 160 km/h, has been domestically manufactured by the Indian Railways' Integral Coach Factory. It offers various modern amenities including onboard Wi-Fi, a GPS-based passenger information system, and CCTV cameras.
Future Plans:
The government has set a target for the entire railway network to transition to electric power by 2024, with the pace of electrification steadily increasing. This transition is expected to enhance overall railway operations. Plans are underway to disinvest in IRCTC, involving the sale of some of its stake to private entities. Revenue generation strategies include the addition of more air-conditioned coaches to increase profits. Embracing sustainable development, there are initiatives to install solar panels at numerous railway stations for harnessing solar energy.
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Over the next three years, the aim is to manufacture 400 new Vande Bharat trains, expanding their network beyond the current routes from Delhi to Katra and Delhi to Varanasi.
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Under the PM Gati Shakti Programme, there's a proposal to establish 500 multimodal cargo terminals.
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A significant investment of $17 billion has been earmarked for the introduction of bullet trains by 2022, modernizing the rail network and enhancing global competitiveness.
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Plans are in place to introduce lightweight aluminium coaches to reduce travel time between destinations.
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Numerous stations are slated for redevelopment, with around 400 identified for remodeling and equipped with modern amenities.
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The railway industry is actively pursuing measures to decrease carbon emissions, aiming for India to achieve carbon neutrality by 2070, aligning with national objectives.
Conclusion:
An analysis of the Indian railways industry indicates a consistent growth trajectory in network expansion and capacity enhancement. With a rising population and improving economic conditions, there's a corresponding increase in demand for railway services. To meet this growing demand, the government, in collaboration with the Ministry of Railways, is implementing various measures to enhance supply. Notably, significant improvements have been observed in the condition of trains and railway stations over the years. This trend is expected to continue, fueled by the government's ambitious plans aimed at further enhancing one of its most valuable assets.
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