Budget 2025-26: Indian Railways gets silently sidetracked

The Budget speeches of Finance Minister Nirmala Sitharaman — eight now and counting — have been peppered with the words ‘infrastructure’ and capital expenditure for many years. And, increased allocation for Indian Railways, year on year, has been a regular feature of her speeches.

But this morning, as the focus seemed to be on measures to boost consumption demand, Sitharaman did not mention the Indian Railways (IR) even once.

A look at the fine print of the Budget for 2025-26 explains this omission. For the first time in many years under the Modi government, IR’s budgetary allocation has not been increased by even a rupee over the amount provided in the current fiscal.

Stalled investments

So, like 2024-25, the budgetary allocation has been retained at Rs 2,52,200 crore. With nothing to flaunt in terms of a capex increase, perhaps omitting mention of IR altogether was a wise move by Sitharaman.

With the fiscal glide path being maintained and fiscal deficit target of 4.4 per cent of GDP firmly on the radar for FY26, the government has sidestepped the posturing of earlier years about mega infrastructure spends this time, instead allowing taxpayers some relief and foraging about Rs 1 lakh-crore in income tax receipts.

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IR’s extra-budgetary resources (IEBR) or borrowings have also been left unchanged at Rs 10,000 crore for FY26 while the transporter’s ordinary working expenses have breached the BE (budget estimate) by about Rs 2,000 crore at Rs 2,08,000 crore (Rs 2,05,000 crore).

Traffic receipts up

In another first after many, many years, the national transporter’s gross traffic receipts are expected to exceed the BE for FY25 by a small amount instead of falling short. The increase of Rs 500 crore is expected from ‘sundry other revenue’.

This revenue head includes receipts from reimbursement of operating losses on strategic lines by the government, advertisements and publicity, commercial exploitation of surplus railway land, catering receipts, way leave charges, parking fees, siding charges etc.

Gross traffic receipts for FY25 RE are at Rs 2,78,600 crore versus BE of Rs 2,78,100 crore. The GTR in FY25 is higher by Rs 23,327 crore from the previous fiscal or by about Rs 64 crore daily. The increased earnings from traffic are due to an increase in earnings from both, passengers as well as freight.

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Record revenues

The BE for gross traffic receipts for the next fiscal is about 8 per cent higher at Rs 301400 crore. If this target is achieved, it will be the first time ever that the IR has breached the Rs 30,000 crore mark in gross traffic receipts.

Interestingly, the increased estimate for GTR for FY26 is based on a far higher number of passengers taking trains than in FY25 while the earnings from freight are projected to grow by just 4 per cent next fiscal. The BE for passenger earnings is Rs 92,800 crore (Rs 80,000 crore), a growth of 16 per cent, while for freight it is Rs 188,000 crore (Rs 180,000 crore).

It is pertinent to remember here that freight earnings have traditionally cross subsidised passenger earnings, as each passenger ticket is subsidised and does not cover the cost of travel.

Operating ratio

The operating ratio, which is a measure of how much the IR spends to earn every rupee, has again fallen short of the target. As per revised estimates for FY25, the OR will be 98.9 instead of the BE of 98.2. It could worsen further, since the actuals - estimates made after the financial year has closed and all numbers are in - are almost always worse than even the revised estimates (RE). The target for FY26 is 98.43%.

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Safety issues

IR is spending more on safety related activities this year and has budgeted for an increased spending plan in FY26. Total capex on safety has been revised upwards in RE of FY25 to Rs 48,570 crore (Rs 44,032 crore) while the BE for FY26 is at Rs 49,609 crore.

This fiscal, expenditure on track renewal and signalling and telecom works have seen largest increases compared to allocations during the BE stage. As for physical targets, RE retains construction of new lines at 700 km, doubling of lines at 2900 km and track renewal at 5000 km.