Ferrying passengers is taking Indian Railways nowhere, govt data suggests

The Indian Railways (IR), the country’s transport lifeline, continues to chug along amid growing concerns over the state of its finances and a question mark over its ability to generate enhanced revenues.

The much-hyped public private partnership (PPP) model for train operations has been a non-starter. Its application in station redevelopment has also been sub-optimal.

The report of the Standing Committee on Railways examining the demand for grants for FY26, and its report on action taken on its recommendations on demand for grants for FY25, suggest the state transporter has been unable to stem the losses it generates from ferrying passengers. And, the revenue it earns from transporting freight has also not grown at the required rate for IR to realise its ambition of cornering 45 per cent share of the modal transport market by 2030-31.

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Unless the Railways undertakes sweeping reforms — with targeted fares hikes, enhanced expenditure on upgrading infrastructure, using the PPP route for station redevelopment and significantly improving its internal resource generation through non-fare streams — the state of affairs is unlikely to improve.

The Standing Committee on Railways presented the report to the Lok Sabha on Monday (March 10).

Demand for Grants

The annual expenditure of the IR is financed through Gross Budgetary Support (GBS), internal revenue and extra-budgetary resources.

For 2025-26, the IR’s plan outlay is Rs 2,62,200 crore. GBS is pegged at Rs 2,52,200 crore, the exact amount the IR was given per revised estimates (RE) for FY25. So, the government has not seen fit to increase the budgetary support this time despite the continued emphasis on infrastructure development.

For FY26, the IR is targeting just Rs 3,000 crore in internal resource generation. In FY24, too, the target for internal resource generation was Rs 3,000 crore but the organisation fell short by Rs 57 crore; in the current fiscal, against the Rs 3,000 crore target, only Rs 767 crore had been earned by January.

Outstanding liabilities

As for extra budgetary resources, the target is unchanged over FY25 at Rs 10,000 crore. The IR has showed no fresh borrowing from the Indian Railway Finance Corp (IRFC) for FY26, the Standing Committee on Railways report suggests.

But an analysis by PRS Legislative Research shows that there is already an almost four-fold increase in the outstanding liabilities of the IRFC to Rs 4.4 lakh-crore in FY26, from Rs 1.1 lakh-crore in 2016-17.

IRFC borrows from the market on behalf of the IR and follows a leasing model to finance rolling stock assets of the IR.

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Lease charges

So, even if there is fresh borrowing planned in FY26 by the IR, the amount the IR has to pay IRFC towards lease charges (as principal and interest) will rise as a percentage of internal revenue. The interest payment alone has risen from about 5 per cent in FY17 to over 10 per cent in FY26.

“In FY26, total expenditure towards lease charges is expected to be 20 per cent of internal revenue,” the PRS analysis said.

The Standing Committee noted that unless the IR improves its internal resource generation, its indebtedness through interest and principal repayment to IRFC will likely increase further.

Internal resource generation

Till January 31 this year, not even a third of the target for internal resource generation had been met by the IR. This, when the target at Rs 3,000 crore has remained unchanged over the last three fiscal years.

The Standing Committee noted that actual internal resource generation was Rs 3,400 crore in FY23 against the revised target of Rs 4,300 crore; Rs 2,943 crores in FY24 against the target of Rs 3,000 crore; and Rs 767 crore in FY25 till January 31 against the Rs 3,000 crore target.

It is obvious that internal resource generation has been on a downward trajectory. The committee has exhorted the IR to generate more revenue from non-fare activities like monetising land parcels and other railway assets.

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Passenger fares

What about raising passenger fares? In an action taken report for the IR’s demands in FY25, the Standing Committee has stressed the need for “targeted” increase in fares for the air-conditioned class and gradual and “affordable” adjustment in fares for non-AC travel.

The IR ferries passengers at a significant disadvantage, incurring a loss on passenger services, which then have to be cross-subsidised through freight earnings.

In FY25, the IR’s suburban services recovered only about a third of the cost, non-AC services recovered just about 39 per cent of the cost. The AC services provided a negligible surplus of just about 3.5 per cent.

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Freight issues

As for freight, which accounts for two-thirds of the IR’s revenue, the Standing Committee has underlined the need to improve the speed of freight trains from the 25 kmph figure in 2024.

Though the IR is trying to diversify its freight basket, it is still heavily dependent on coal (over 50 per cent).

Per the PRS analysis, in 2022, the IR had set itself a target of almost doubling its freight carriage to 3,000 tonnes of freight by 2030. But freight loading is not growing at the required run rate to achieve this target.