Advantage India
Growing
Demand
* Increasing urbanisation and rising income (both urban and rural) is driving growth in the passenger segment.
* India is projected to account for 40% of the total global share of rail activity by 2050.
* In 2023-24, traffic revenue is estimated to be Rs 2,64,600 crore (US$ 32.18 billion), comprising 99.8% of the total revenue.
Attractive
Opportunities
* Indian Railways is developing and creating technology in areas such as signaling and telecommunication with 15,000 kms being converted into automatic signaling and 37,000 kms to be fitted with ‘KAVACH’, the domestically developed Train Collision Avoidance System.
Higher
Investments
* FDI inflows in railway-related components stood at US$ 1.40 billion from April 2000-September 2023.
* Rail infrastructure will see an investment of Rs 50 lakh crore (US$ 715.41 billion) by 2030.
* Railway infrastructure investment is expected to increase from US$ 58.96 billion in 2013-17RE to US$ 124.13 billion by 2018-22E.
Policy
Support
* Government has allowed 100% FDI in the railway sector.
* In January 2021, the Ministry of Railways rolled out a new iron ore policy governing allocation of rakes and transportation of iron ore.
Last updated: Feb, 2024
Introduction
The Indian railway system is regarded as the foundation and lifeblood of the economy. Indian railways span thousands of kilometres practically covering the entire nation, making it the fourth largest in the world after the US, China, and Russia. The Railways Board, which has a monopoly over the provision of rail services in India, oversees overseeing the whole infrastructure. Due to its low cost and effective operations, railways continue to be the most popular means of transportation for most Indians when travelling long distances.
India's railway network is recognised as one of the largest railway systems in the world under single management. The railway network is also ideal for long-distance travel and movement of bulk commodities, apart from being an energy-efficient and economic mode of conveyance and transport. Indian Railways is the preferred carrier of automobiles in the country.
The government of India has focused on investing in railway infrastructure by making investor-friendly policies. It has moved quickly to enable Foreign Direct Investment (FDI) in railways to improve infrastructure for freight and high-speed trains. At present, several domestic and foreign companies are also looking to invest in Indian rail projects.
Market Size
India has the fourth largest railway network with over 22,593 operating trains (9141 freight and 13,452 passengers) with a daily passenger count of 24 million passengers and 203.88 million tonnes of freight. In FY22 passenger traffic stood at 3.54 billion as compared to 1.28 billion in FY21. In FY23, railway freight volume stood at 1,509 MT which depicted year-on-year growth of 6.59%. Since August 2020, the Indian Railways has run 450 Kisan Rail services and was able to transport over 1.45 lakh tonnes of agricultural produce & perishables RailTel, a PSU under the Railway Ministry, which provides fast and free Wi-Fi across the In November 2020, India Railways announced that 40% of dedicated freight corridor (DFC) will be opened for traffic by end-FY21. India is among the top 3 exporters of railways globally as of 2022. India’s export of railways has grown at a CAGR of 31.51% during 2010-2018 to US$ 507.90 million. India’s export of railways grew at and reached US$ 1,249.38 million in FY22 as compared to US$ 633.27 million in FY21.
In 2022-23, Railways is estimated to earn 69% of its internal revenue from freight and 24% from passenger traffic. The remaining 7% will be earned from other miscellaneous sources such as parcel service, coaching receipts, and sale of platform tickets.
Total revenue from traffic for 2022-23 is estimated to be Rs. 2,39,803 crore (US$ 29.18 billion), an increase of 25.37% over revised estimates for 2021-22. Freight revenue is estimated to be Rs. 1,62,100 crore (US$ 19.72 billion) in 2022-23, an increase of 14.89% over the revised estimates for 2021-22. The passenger revenue is estimated to be Rs. 63,300 crore (US$ 7.70 billion), an increase of 61.42% over a low base in 2021-22.
Indian Railways is developing and creating technology in areas such as signalling and telecommunication with 15,000 km being converted into automatic signalling and 37,000 km to be fitted with ‘KAVACH’, the domestically developed Train Collision Avoidance System.
Investments/ Developments
Following are some of the major investments and developments in India’s railways sector:
- In October 2023, it was reported that, India’s investments in infrastructure will rise to Rs. 143 trillion (US$ 1.71 trillion) between financial years 2024 and 2030, as per analytics firm CRISIL.
- With a view to improve rail connectivity and ease travel for commuters, the Union Cabinet approved seven projects for Ministry of Railways in August 2023 at a cost of around Rs. 32,500 crore (US$ 3.93 billion). Spanning 35 districts in nine States - Uttar Pradesh, Bihar, Telangana, Andhra Pradesh, Maharashtra, Gujarat, Odisha, Jharkhand, and West Bengal, the projects will add 2,339 km to the existing network.
- In June 2023, IRCON (formerly Indian Railways Construction Company Limited) signed a memorandum of understanding (MoU) with the National Investment and Infrastructure Fund Limited and Ayana Renewable Power Limited. This partnership will consider suitable opportunities for solar energy production for the Indian Railways as they intend to increase the share of renewables in their overall energy mix.
- In FY23, North Western Railway registered the highest growth in freight earnings at Rs. 6,839.93 crore (US$ 832.39 million), which is 30.82% higher than last year’s earnings of Rs. 5,228.13 crore (US$ 636.3 million). Freight loading also increased to 32.69 million tonnes, which is 10.07% higher than last year’s loading of 29.70 million tonnes.
- One major development is the launch of the “Vande Bharat Express“, India’s first semi-high speed train. This train, which can reach speeds of up to 160 km/h, has been manufactured indigenously by the Indian Railways’ Integral Coach Factory. It features several modern amenities such as onboard Wi-Fi, GPS-based passenger information system, and CCTV cameras.
- The focus on increasing the use of technology to improve safety and efficiency. This includes the use of CCTV cameras in trains and at stations, the implementation of an Automatic Train Protection (ATP) system to prevent collisions, and the use of GPS-based systems for real-time tracking of trains.
- Indian Railways is also working on upgrading its infrastructure, with a focus on electrification of lines, the construction of new lines, and the redevelopment of existing stations. The government has also announced plans to invest in high-speed trains, such as the Mumbai-Ahmedabad High-Speed Rail project, which is being implemented with the assistance of Japan.
- Revenue growth has been strong over the years. Indian Railways’ revenue reached US$ 5.21 billion in the third quarter of FY 2023.
- The total passenger revenue stood at US$ 8.51 billion during 2022-23.
- In FY 2023 (until October 2022) passenger traffic stood at 3.61 billion.
- Total revenue from traffic is estimated to be Rs. 2,64,600 crore (US$ 32.18 billion), which comprises 99.8% of the total revenue.
- On a cumulative basis in FY23, railways freight earnings stood at US$ 16.3 billion against US$ 19.72 billion over last year which is an improvement of 14.89% as compared to the same period of last year.
- FDI inflows in railway-related components stood at US$ 1.40 billion from April 2000-September 2023.
- In the case of freight earnings, it experienced a year-on-year growth of 20.84%. It stood at US$ 18.55 billion in FY22 as compared to FY21 which was at US$ 15.35 billion.
- Freight remains the key revenue-earning segment for Indian Railways, accounting for 75.2% of the total revenue in FY22, followed by the passenger segment.
- Indian Railways aims to achieve 100% electrification of all broad-gauge routes by 2023.
- In November 2021, Indian Railways announced that ~102 semi-high-speed Vande Bharat Expresses are expected to commence operations by 2024.
- In July 2021, the South-Central Railway zone announced infrastructure development by doubling the maximum permissible speed to 100 km per hour on the Godavari Bridge. The initiative gave a major boost to the Indian Railways on infrastructure modernisation.
- Since the launch of first ‘Kisan Rail’ service on August 7, 2020, the Indian Railways have operated a total of 1,040 Kisan Rail services by transporting ~3.38 lakh tonnes of consignment across 72 routes in the country until July 30, 2021.
- The Indian Railways is likely to deliver 58 supercritical as well as 68 critical projects worth more than Rs.1,15,000 crore (US$ 15.44 billion) in the next few years. 29 supercritical projects—spanning 1,044 km and costing Rs. 11,588 crore (US$ 1.5 billion)—have been commissioned. Four projects worth Rs. 1,408 crore (US$ 189.05 million) have been completed and the remaining projects are targeted for completion by March 2024.
- On July 25, 2021, the Indian Railways Station Development Corporation (IRSDC), a nodal agency of the Ministry of Railways spearheading the re-development of railway stations across the country, claimed that the two railway stations will be redeveloped at an indicative cost of Rs. 1,285 crore (US$ 172.54 million) in four years.
- The Indian Railways has decided to undertake electrification of Broad Gauge (BG) rail lines in a mission mode and is likely to complete the process by 2023-24. Indian Railways electrified 58,812 Route Kilometers (RKMs) till March 31, 2023, which is about 90% of the total broad-gauge network (65,300 RKMs) of Indian Railways. About Rs. 21,000 crore (US$ 2.8 billion) is estimated to be spent on electrification of the remaining BG routes.
- In January 2021, Hyundai Motor India Ltd. (HMIL) announced that it has exported 125 cars to Nepal via the Indian Railways. The export is claimed to be eco-friendly and the first-ever by the company. With this step, the company is aiming to reduce its carbon footprint by 20,260 tonnes.
- The Indian Railways completed eight major capacity enhancement projects by taking advantage of the coronavirus lockdown. These projects included three supercritical projects with a combined length of 68km, three critical projects with a combined length of 45km, upgradation of the entire 389km railway line from Jhajha in Bihar to Pandit Deen Dayal Upadhyaya Junction in Uttar Pradesh and a new 82km port connectivity line to Paradip.
- As a part of the Railways’ plans to upgrade its network, the Ministry announced that all non-AC sleeper coaches will be replaced by AC coaches for trains running >130 kmph. This move has been taken as a technical necessity for high-speed trains with the bonus of improving the passenger experience.
Government Initiatives
The Government of India has adopted few initiatives for the Railways sector in the recent past, some of these are as follows:
- Indian Railways (IR) is proactively working towards the achievement of Net Zero Carbon Emission by 2030.
- As part of its commitment to reduce carbon footprints, Indian Railways is taking several initiatives. In line with this, a Memorandum of Understanding (MoU) was signed between Indian Railways, Government of India and United States Agency for International Development/India (USAID/India) on 14th June, 2023 for collaboration on Renewable energy and Energy Efficiency. The MoU was signed by Shri Naveen Gulati, Member (Traction and Rolling Stock), Railway Board, Indian Railways and Ms. Isabel Coleman, Deputy Administrator, USAID, in the presence of Sh. Anil Kumar Lahoti, Chairman & CEO, Railway Board.
- Under the Union Budget 2023-24, capital outlay of Rs. 2.40 lakh crore (US$ 29 billion) has been allocated to the Ministry of Railways, which is the highest ever outlay and about nine times the outlay made in 2013-14.
- Under the Union Budget 2023-24, the government allocated US$ 29 billion to the Ministry of Railways.
- The Bairabi-Sairang project aims to create an additional 51.38 km of railway track in northeast India.
- In the Union Budget 2022-23:
- The government allocated Rs. 140,367.13 crore (US$ 18.40 billion) to the Ministry of Railways.
- Indian Railways will develop new products and efficient logistics services for small farmers, and small and medium enterprises. It will also take steps towards integration of postal and railway networks to provide seamless solutions for movement of parcels.
- 100 PM-GatiShakti Cargo Terminals for multimodal logistics facilities will be developed over next three years.
- Multimodal connectivity between mass urban transport and railway stations will be facilitated on priority.
- 2,000 km of network will be brought under Kavach, the indigenous technology for safety and capacity augmentation.
- ‘One Station-One Product’ concept will be popularized to help local businesses and supply chains.
- The new & upgraded version of Vande Bharat Express between Gandhinagar Capital & Mumbai Central was inaugurated by Prime Minister Mr. Narendra Modi on September 30, 2022.
- In August 2022, the government launched Mission Raftaar for speed enhancement and to achieve a target of doubling average speed of freight trains and increasing the average speed of superfast /mail/express trains by 25 kmph
- In October 2021, India and Nepal signed a MoU (Memorandum of Understanding), for a proposed US$ 3.15 billion railway line project, to connect Kathmandu and the Indian border town, Raxaul.
- Indian Railways has logged the highest ever electrification of sections covering 6,015 Route Kilometer (RKM) in a single year during 2020-21. More than 5 times electrification was achieved during (2014-21) last seven years as compared to during 2007-14.
- In April 2021, Indian Railways completed the arch closure of the under-construction Chenab Bridge which is the world’s highest railway bridge. Chenab Bridge is 1315 m long and will be 35 meters higher than Eiffel Tower in Paris. The total cost of the bridge is estimated to be Rs. 1,486 crore (US$ 200.46 million) and the design life of the bridge is said to be 120 years.
- To boost rail infrastructure and make the Indian Railways network future ready, Indian Railways has identified 56 projects across the country in various zones to be completed by Feb-Mar 2021 and FY22.
- In July 2020, the Ministry of Railways has invited Request for Qualifications (RFQ) for private participation in operating passenger train services across 109 Origin Destination (OD) routes. As part of the plan, the railways will introduce 12 trains in FY23, 45 in FY24, 50 in FY26 and 44 more in the next fiscal, taking the total number of trains to 151 by the FY27. The project would entail private sector investments of about Rs. 30,000 crore (US$ 4.09 billion).
- The Government is going to come up with a ‘National Rail Plan’ to enable the country to integrate its rail network with other modes of transport and develop a multi-modal transportation network.
- A 'New Online Vendor Registration System' has been launched by Research Designs & Standards Organisation (RDSO), the research arm of Indian Railways, to have digital and transparent systems and procedures.
- The Ministry of Railways plans to monetize assets including Eastern and Western Dedicated Freight Corridors after commissioning, induction of 150 modern rakes through PPP, station redevelopment through PPP, railway land parcels, multifunctional complexes (MFC), railway colonies, hill railways and stadiums.
Road Ahead
Indian Railway network is growing at a healthy rate. In the next five years, the Indian railway market is expected to be the third largest, accounting for 10% of the global market. The government has announced two key initiatives for seeking private investments-running passenger trains by private operators across the railways network and redevelopment of railway stations across the country. According to Indian Railways, these projects have the potential of bringing an investment of over US$ 7.5 billion in the next five years.
‘Adarsh’ Station Scheme has been started in 2009-10 and presently, railway stations are upgraded/modernised based on identified need of providing better-enhanced passenger amenities at stations. Under the scheme, 1253 stations have been identified for development, out of which 1215 stations so far have been developed. The remaining 38 stations are planned to be developed by 2022-23. Indian Railways is also looking at other areas of revenue generation such as the following: a) Change in composition of coaches so that it can push the more profitable AC coach travel; b) Additional revenue streams by monetising traffic on its digital booking IRCTC; and c) Disinvesting IRCTC.
The Indian Railway launched the National Rail Plan, Vision 2024, to accelerate implementation of critical projects, such as multitrack congested routes, achieve 100% electrification, upgrade the speed to 160 kmph on Delhi-Howrah and Delhi-Mumbai routes, upgrade the speed to 130 kmph on all other golden quadrilateral-golden diagonal (GQ/GD) routes and eliminate all level crossings on the GQ/GD route, by 2024.
References: Press Releases, Department of Industrial Policy and Promotion, Press Information Bureau, Media Reports, Railways Budget 2022-23/2023-24, Indian Railways
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