A record budget for the Railways on track
PremiumAfter decades of supporting revenue expenditure, gross budgetary support has focused on supporting capex in the past few year
NEW DELHI : The budget allocation for the railways is set to hit a record level next fiscal as the government gears up to support a major makeover for the national transporter.
Budget 2022-23 is likely to raise the plan size for Indian Railways by up to 20% of FY22 budget estimates, which would take up its allocations to close to ₹2.5 trillion, two people aware of the development said.
The railway ministry sought an increase in its plan capex as it has set its eyes on long-term infrastructure projects of freight corridors and speedier trains while modernizing the fleet with the introduction of new-age trains, wagons and locos.
It is also carrying out electrification of all routes and overhauling the signalling systems to make train journeys smoother and safer.
Questions sent to the finance and railway ministries remained unanswered till press time.
“Higher plan capex allocation for railways is the need of the hour as the national transporter reaches a critical stage of implementing key infrastructure projects. The government supported it with a record increase in gross budgetary support (GBS) last year, and the expectation is that this level would be breached in FY23," said a former railway board chairman asking not to be named.
Last year’s allocation of ₹2.15 trillion too was the highest ever for the railways—with ₹7,500 crore coming from internal resources, ₹1 trillion from extra-budgetary resources and another ₹1.07 trillion as gross budgetary support.
Gross budgetary support is the amount that Indian Railways receives from the government’s general budget.
The plan is to keep Indian Railways adequately funded to build new infrastructure.
The people cited above said that out of the proposed ₹2.5 trillion capex plan, a higher ₹1.25 trillion may come as gross budgetary support from the Centre. Also, railways’ earnings from its PSUs may help raise its extra-budgetary resources.
To be sure, gross budgetary support remained at much lower levels at ₹70,250 crore in FY21, ₹69,967 crore in FY20 and ₹55,088 crore in FY19.
Last year, more than 90% of gross budgetary support went into capital expenditure.
After decades of supporting revenue expenditure, gross budgetary support has focused on supporting capital expenditure over the last few years.
The people privy to the development said that of the higher gross budgetary support extended to Indian Railways in the budget, a good portion might be kept for the Ahmedabad-Mumbai bullet train project, work on which is going on at full pace for the Gujarat leg.
The government is also looking to work on the planned Delhi-Varanasi high-speed train.
“For railways or any infrastructure sector, most funds should go towards capex. That has been a challenge in railways through the years. A significant amount of money always goes to maintenance and other routine expenditure. If the capex composition increases, it will also have a positive impact on the overall development of the economy. Because the trickling effect only happens if it is capital investment," said independent infrastructure analyst Vaibhav Dange.
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Over 75% of railways’ expenditure goes into paying wages. This is the reason the operating ratio—a measure of efficiency—is at more than 96% at the railways. This means Indian Railways spends over ₹96 for every ₹100 it earns.
The railways also funds part of its capex through its internal accruals, and the effort is now to prevent higher revenue expenditure from crimping its ability to pay for infrastructure and modernization.
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