Indian rail runs on a tight budget track – a critical review

Madam Speaker, I rise to present before this august House the Statement of Estimated Receipts and Expenditure for 2014-15 for Railways. As I stand in this Temple of Democracy, I owe this opportunity to the people of this country who have elected us to represent them and to shape their destiny”; this is how Shri D V Sadananda Gowda started his railway budget speech.

The highlights of railway budget are repeated many times in television channels and today’s newspapers. So, I am not going to write about the same points in this article. I have read the entire speech of Mr. Railway Minister. Some of the points which I thought may be shared with you are listed here.


  •  Indian railways (IR) run 12617 trains to carry over 2.30 Crore passengers per day connecting more than 7172 stations. It is equivalent to moving the entire population of Australia every day!!   
  • Indian railways (IR) carry over 3 Million Tonnes of freight such as coal, cement, steel, salt, milk etc. every day. Thus Indian railways carry anything and everything and it never says no to ‘a thing’ if it fits in the wagons; it will carry it!
  • Total Revenue budgeted for FY 2014-15 is Rs.1,64,374 Crore and expenditure is pegged to Rs.1,49,176 Crore, leaving an operating profit of Rs.15,198 Crore.
  • IR has a track length of 1.16 lakh kilometers and 13.1 Lakh employees. IR spends 91% of its earnings on fuel, salary and pension, track and coach maintenance. (Which means they are working with 9% operating margins; so where is the money for development?)
  • About Rs.50,000 Crore is required per year to meet the cost of ongoing development projects. But the operating profits left (after meeting the expenses) out of railway earnings is only Rs.15,198 Crore.
  • Passenger Rates (populist measure) was kept very low (less than the cost) and to compensate the loss on passenger rates, the freight carrying rates have been increased over the last 10 years. So what is the impact? The freight carrying business of the railways has come down by 30% and also the cost of goods have gone up (indirectly resulting in higher inflation) 
  • All previous governments have focused on sanctioning new projects rather than completing the existing projects. (Most of the projects, worth Rs.1,83,000 Crores, are stuck due to non-availability of funds). In the last 10 years, 99 New Line projects worth Rs.66,000 Crores were sanctioned out of which only one project is complete till date.
  • The fee revision (done recently before the budget) will bring additional revenue of Rs.8000 Crore; but what railways need is more than Rs.9.60 Lakh Crore to complete the existing projects and also the proposed Golden quadrilateral railway corridor. So, increasing the fare is nowhere sufficient to meet the capital investments. From where will the money come?

Sourcing of Funds through

  • Private investment including FDI in rail infrastructure
  • Public Private Partnership

My Comments – Looking at the macro picture, I am very skeptical about the progress and growth of railways in the short to medium term. There is no match to what we need and what we have. When will our railways become world class?  Or can I rephrase the question as “Will we ever have world class railways?” I will leave this to your imagination.

Other highlights of the budget such as increasing the speed of the rails, e-booking, providing water, catering, providing pre-cooked food, creating food courts, cleaning the platforms, toilets etc. are mentioned a lot in today’s  and yesterday’s media shows and reports.

Some other highlights like railway tourism, revamping the railway systems, bringing safety measures etc. are common statements mostly copied from previous budget speeches. So, there is no point in covering those aspects in this article.

Mr. Railway Minister ends his speech by quoting Kannada Poet Shri D V Gundappa’s verse ‘Mankutimmana Kagga. The English version of the verse is as under –

It is not that after reading this book, there will be no more doubts.

It is not that what we believe today will hold up forever.

If someone points at some shortcoming,

I have an open mind to correct.

But for now, I believe this is right!

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About B E Kumar Prasad

B E Kumar Prasad
He is a Practicing Chartered Accountant in Bengaluru, India. He has 25+ years of experience in income tax, business setup, and NRI matters. He is also an Insolvency Professional and Registered Valuer (F&SA).Prasad welcomes your comments and questions. Please email him at

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