Report on the Demands for Grants for Railways

Report on the Demands for Grants for Railways, 2025-26: Analytical Review

Core Tension: Balancing Modernization, Safety, and Financial Sustainability

The debate around the Demands for Grants for Indian Railways in 2025-26 positions itself at the intersection of capital-intensive modernization goals and the requirement for financial sustainability. While the focus on technology and infrastructure aligns with India's economic aspirations, challenges such as underinvestment in capacity, operational inefficiencies, and rising competition from road freight continue to constrain the system. A critical lens is also warranted on safety enhancements, addressing rising accidents despite modernization efforts.

UPSC Relevance Snapshot

• GS-III: Infrastructure - Railways, economic development, and connectivity.
• GS-III: Budgeting - Analysis of government spending and institutional reforms.
• Essay: Themes on economic superstructure supporting social equity and safety.

Arguments in Favour of the Proposed Grant Allocations

The Demands for Grants for 2025-26 emphasize transformative interventions across infrastructure, technology, safety, and financial reforms. The focus areas reflect alignment with India's long-term vision of a globally competitive railway network.

The specific case for the proposals rests on three primary objectives: (i) boosting capacity utilization and infrastructure adequacy, (ii) capitalizing on indigenous manufacturing capabilities under initiatives such as Make-in-India, and (iii) institutionalizing safety measures to ensure sustainable operations.

• Infrastructure Modernization: The allocation prioritizes doubling of railway lines, near-total electrification, and introduction of 136 Vande Bharat trains, aimed at increasing travel speed and reducing congestion on high-demand routes (National Rail Plan, 2020).
• Indigenous Manufacturing: Expansion of Shinkansen technology production under Make-in-India reduces import dependency and enhances long-term operational sustainability of the Mumbai-Ahmedabad High-Speed Rail Project.
• Safety Enhancements: Implementation of automatic train protection systems like Kavach is expected to reduce train accidents, addressing the 3,953 consequential accidents recorded between 2000-2024 (CAG data).
• Revenue Optimization: An 8.3% projected increase in internal revenue (to Rs 3.02 lakh crore, 2025-26) offers scope to reinvest in operational efficiency and capital projects.
• Freight Corridor Focus: Dedicated Freight Corridors (DFCs) are expected to reduce operational costs and align domestic logistics with global benchmarks.

Criticisms of the Proposed Allocations

Despite substantial commitments, several systemic and structural inefficiencies limit the operational success of the Demands for Grants. Chief among these critiques are financial constraints, project delays, and limited stakeholder engagement for sustainable outcomes.

The issues reflect deeper developmental asymmetries, including fiscal dependence on government allocations and an imbalanced focus on passenger-centric over freight-centric operations—crucial for profitability.

• Underinvestment in Priority Projects: Only 39% physical progress achieved in doubling projects, despite 74% financial utilization. This gap is indicative of resource inefficiency (Standing Committee report on Railways, 2023).
• Safety Gaps: Despite improved technology, 40 accidents were recorded in 2023-24, exposing challenges in institutionalizing safety measures amidst aging infrastructure.
• Financial Unsustainability: Operating expenses averaged 99% of internal revenue in the last decade, offering little budget room for capital works (Economic Survey).
• Competition from Road Freight: Roadways maintain a comparative advantage due to superior first and last-mile connectivity, reducing the Railways' freight transport share.
• Challenges in Station Redevelopment: Poor crowd management and lack of planning exacerbate risks, as seen during recent festive-induced train station overcrowding.

Comparative Table: Indian Railways vs. Japan's Shinkansen

Parameter	Indian Railways	Japan's Shinkansen
Revenue Sources	99.8% from traffic operations; capital via government support and borrowings	Revenue diversification, ticket pricing governance, and private investments
Average Speed	60-80 km/h for passenger trains	240-320 km/h
Safety Mechanisms	Kavach system under rollout	Zero-fatality system since inception (1964)
Funding Model	Heavily dependent on government budgetary support	Private investments; ticket prices reflect costs

What the Latest Evidence Shows

Recent Standing Committee findings reinforce the need for structural reforms—not merely incremental funding boosts. For instance, delays in gauge conversion projects not only inflate costs but also impair India's global trade competitiveness. Additionally, the CAG's 2023 audit exposed suboptimal utilization of track maintenance budgets, which complicates safety compliance targets under the National Rail Plan, 2020. The budget's ambitious operational goals must navigate these constraints through better governance and energy-efficient innovations.

Structured Assessment

• Policy Design: The plan aligns with long-term goals but risks over-reliance on passenger-centric modernization without equivalent freight-sector reforms.
• Governance Capacity: Implementation bottlenecks, evident in infrastructure duplication, continue to undermine government expenditure impact.
• Behavioural/Structural Factors: Resistance to private sector participation and hesitance in fare rationalization reflect socio-political challenges in implementing competitive reforms.

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