
## Demand For Grants 2021-22 Analysis Railways

The Railways finances were presented on February 1, 2021, by the Finance Minister Ms. Nirmala Sitharaman along with the Union Budget 2021-22. The Ministry of Railways manages the administration of Indian Railways and policy formation through the Railway Board.  Indian Railways is a commercial undertaking of the central government.1 Expenditure of Railways is financed through: (i) its internal resources (freight and passenger revenue, and leasing of railway land), (ii) budgetary support from the central government, and (iii) extrabudgetary resources (primarily borrowings but also includes institutional financing, public-private partnerships, and foreign direct investment).  
Railways' working expenses (salaries, staff amenities, pension, asset maintenance) are met through its internal resources.  Capital expenditure (such as procurement of wagons, station redevelopment) is financed through extrabudgetary resources, the budgetary support from the central government, and internal resources. This note looks at the proposed expenditure of the Ministry of Railways for the year 2021-22, its finances over the last few years, and issues with the same.   

## Highlights

 
Revenue:  Railways' revenue for 2021-22 is 
estimated at Rs 2,17,460 crore which is an annual increase of 12% over 2019-20. 
 
Traffic revenue:  Total revenue from traffic 
for 2021-22 is estimated to be Rs 2,17,110 crore, an annual increase of 12% over 2019-20. In 2021-22, revenue from both freight and passenger traffic is expected to grow at an annual rate of 10% over 2019-20.  In 2020-21, revenue from freight and passenger traffic is estimated to be 16% and 75% less than the budget estimates, respectively. 
 
Expenditure:  The total revenue expenditure 
by Railways for 2021-22 is projected to be Rs 2,10,899 crore, an annual increase of 10% over 2019-20.  In 2020-21, revenue expenditure is estimated to be 34% lower than the budget estimate.  In 2021-22, capital expenditure is projected at Rs 2,15,058 crore, an annual increase of 21% over 2019-20.  In 2020-21, 
Tel: (011) 2323 4801, 4343 4035  www.prsindia.org capital expenditure is estimated to be 0.4% higher than the budget estimates. 

 
Operating Ratio:  In 2021-22, the Railways' 
Operating Ratio is estimated to be 96.2%.  This is marginally better than the operating ratio of 98.4% in 2019-20.   

## 2021-22 Budget Announcements2

Key announcements and proposals related to Railways made in Budget 2021-22 include:  

 
National Rail Plan 2030 has been prepared for infrastructure development.  Under the plan, following dedicated freight corridors projects will be undertaken: (i) East Coast Corridor from Kharagpur to Vijaywada, (ii) East-West Corridor from Bhusaval to Kharagpur to Dankuni, and (iii) North-South Corridor from Itarsi to Vijaywada. 
 
Railways will monetise dedicated freight corridor assets for operation and maintenance. 
 
High-density network and highly utilised network routes will be provided with an indigenously developed automatic train protection system that eliminates train collision due to human error. 
 
Coaches with enhanced facilities will be introduced on the tourist routes to provide a better experience. 

## Finances In 2020-21: Impact Of Covid3

More than 90% of internal revenue of Railways 
comes from the core business of running freight 
and passenger trains.  In 2020-21, passenger traffic 
volume is estimated to decline by 87% over the 
previous year (Figure 1), as against an increase of 
1% estimated at the budget stage.  During the initial 
phase of the national lockdown (March-April 
2020), passenger services of Railways were 
completely suspended.4  Services have since 
resumed to some extent with provisioning of 
special trains, however, are yet to return to the pre-
COVID level.   

Freight services continued during the lockdown.  
However, due to a decline in the economic 
activities during April-June 2020, the demand for 
freight services may also have been impacted.  In 
2020-21, the freight traffic volume is estimated to 
decline by 7% as compared to the previous year 
(2019-20), as against an increase of 3% estimated 
at the budget stage.  Consequently, in 2020-21, 
Railways' own revenue is estimated to be 35% less 

than the budget estimate (Table 1).  A similar decline is estimated in revenue expenditure (34%). This has helped the operating ratio to remain at a level similar to the budget estimate (97% at the revised stage as against 96.3% at the budget stage).  
Operating ratio is a measure of operational efficiency.  It is the ratio of the working expenditure (day-to-day operational expenses of Railways) to the revenue earned from the traffic.   
year) 
Note: Number for 2020-21 is as per revised estimates.  Traffic volume taken in terms of: (i) NTKM-Net Tonne Kilometre (One NTKM is the net weight of goods carried for a kilometre) for freight, and (ii) PKM –Passenger Kilometre (One PKM is when a passenger is carried for a kilometre) for passenger services; Source: Expenditure Profile; Union Budget Documents; PRS. 

## Table 1: Finances In 2020-21 (Rs Crore)

| Particular               | BE       | RE       |
|--------------------------|----------|----------|
| % change                 |          |          |
| From BE                  |          |          |
| to RE                    |          |          |
| 1. Internal Revenue      | 2,25,913 | 1,46,609 |
| Gross Traffic Receipts   | 2,25,613 | 1,46,309 |
| Freight revenue          | 1,47,000 | 1,24,184 |
| Passenger revenue        | 61,000   | 15,000   |
| 2. Budgetary Support     | 70,250   | 29,250   |
| 3. Extra Budgetary       |          |          |
| Resources                |          |          |
| 83,292                   | 1,28,567 | 54%      |
| 4. Special Loan from the |          |          |
| central government*      |          |          |
| 0                        | 79,398   | -        |
| Total Receipts           |          |          |
| (1+2+3+4)                |          |          |
| 3,79,455                 | 3,83,824 | 1%       |
| 5. Revenue Expenditure   | 2,19,413 | 1,43,809 |
| Ordinary Working         |          |          |
| Expenses                 |          |          |
| 1,62,753                 | 1,40,786 | -13%     |
| Pension Fund             | 53,160   | 523      |
| 6. Capital Expenditure   | 1,61,042 | 1,61,692 |
| 7. Appropriation of      |          |          |
| Special Loan*            |          |          |
| 0                        | 79,398   | -        |
| Total Expenditure        |          |          |
| (5+6+7)                  |          |          |
| 3,80,455                 | 3,84,899 | 1%       |
| Operating Ratio          | 96.3%    | 97.0%    |

Note: *Special Loan from the general revenue of the central government has been provided for COVID-19 related resource gap in 2020-21 and to liquidate adverse balance in Public Account in 2019-20 to Pension Fund. Source: Expenditure Profile; Union Budget 2021-22; PRS. 

However, most of the decrease in revenue expenditure is due to less than required appropriation to the pension fund.  Against the 

budget estimate of Rs 53,160 crore, the 
appropriation to the pension fund is estimated to be 
Rs 523 crore at the revised stage (99% less).  If 
appropriation were to be as per the requirement, the 
operating ratio will worsen to 131.5%.5   

In 2019-20 also, appropriation to the pension fund 
was 60% less than the budget estimate (Rs 20,708 
crore as against the budget estimate of Rs 50,000 
crore).  The operating ratio in 2019-20 was 98.4%.  
If appropriation to the pension fund were to be as 
per the requirement, the operating ratio in 2019-20 
will be 114.2%.5   

Usually, Railways runs only a marginal revenue 
surplus.  Hence, it finances most of its capital 
expenditure from: (i) budgetary support provided 
by the central government, and (ii) extra budgetary 
resources.  In 2020-21, while capital expenditure 
target has not seen any notable change from the 
budget to the revised stage, the budgetary support 
by the central government is estimated to decline 
by 58%.  As a result, the dependency on extra 
budgetary resources for financing capital 
expenditure will increase further.  Extra budgetary 
resources are estimated to be 54% higher than the 
budget estimate.  

The Standing Committee on Railways (2020) had 
observed that the allocation for capital expenditure 
at the budget stage in 2020-21 (Rs 1,61,042 crore) 
was about 18% less than the demand (Rs 1,97,295 
crore).6  It further observed that these funds may 
not be adequate for enforcing the ambitious 
investment plan of Railways as well as expeditious 
completion of pending projects.6    

As per the revised estimates, in 2020-21, Railways 
will receive a special loan of Rs 79,398 crore from 
the central government to: (i) meet the resource gap 
due to COVID-19 in 2020-21, and (ii) meet 
pension fund obligations for 2019-20.5  

## Overview Of Finances3 Railways' Revenue Internal Resources

Railways earns its internal revenue primarily from 
passenger and freight traffic.  In 2019-20 (latest 
actuals), freight and passenger traffic contributed to 
about 65% and 29% of the internal revenue, 
respectively.  In 2021-22, Railways expects to earn 
63% of its internal revenue from freight and 28% 
from passenger traffic.  The remaining 9% will be 
earned from other miscellaneous sources such as 
parcel service, coaching receipts, and sale of 
platform tickets.  For details, please see Table 9 in 
the Annexure. 

Freight traffic:  In 2019-20, Railways generated 
most of its freight revenue from the transportation 
of coal (48%), followed by iron ore (10%), and 
cement (8%) (see Figure 2).  Railways mostly 
transports bulk freight, and the freight basket has 

mostly been limited to raw materials for certain industries such as power plants, and the iron and steel plants.  In 2021-22, Railways expects to earn Rs 1,37,810 crore from goods traffic, an annual increase of 10% over 2019-20.  
While the share of coal in freight volume has been slowly coming down (from 43% in 2015-16 to 37% in 2021-22), its contribution to revenue has remained consistent (45% in 2015-16 as well as 
2021-22).  This may be indicative of an increasing dependency on coal for revenue as compared to other items in the freight basket. 

Passenger traffic and revenue:  Passenger traffic is broadly divided into two categories: suburban and non-suburban traffic.  Suburban trains are passenger trains that cover short distances of up to 150 km and help move passengers within cities and suburbs.  Majority of the passenger revenue (94.4% in 2019-20) comes from the non-suburban traffic (or the long-distance trains). In 2021-22, Railways expects to earn Rs 61,000 crore from passenger traffic, an annual increase of 10% over 2019-20.  In 2021-22, passenger traffic is estimated to grow at an annual rate of 2% over 2019-20.  Note that due to the prevalence of COVID-19, there may be uncertainties in the return of passenger traffic volume to its normal level in 2021-22, this could impact these estimates. 

## Challenges In Raising Revenue

Over the last few years, there has been a decline in 
the growth of both rail-based freight and passenger 
traffic (see Figure 4).  This affects Railways' 
earnings from its core business of running freight 
and passenger trains.  In 2021-22, Railways 
estimates a decline in some of its key revenue 
earning traffic.  For example, coal traffic is 
estimated to register an annual decrease of 5% over 
2019-20.  Overall freight traffic is estimated to 
have an annual increase of only 1% over 2019-20. 

## Passenger (Year-On-Year)

as it was a non-standard year. Sources:  Expenditure Profile, Union Budget Documents; PRS. 

Railways is also steadily losing freight traffic share 
to other modes of transport.  The share of Railways 
in total freight traffic has declined from 89% in 
1950-51 to 30% in 2011-12.7  During the same 
period, the share of roads on total freight traffic 
increased from 11% to 61%.  As per the draft 
National Rail Plan 2030, the share of Railways in 
total freight traffic stood at 27% in 2020.8   

NITI Aayog (2018) had highlighted shortfall in 
carrying capacity and lack of price competitiveness 
as some of the reasons for the decline in freight 
share.9  It further observed that since passenger and 
freight traffic run on the same tracks, India has not 
been able to increase speed or capacity in a 
significant manner when compared to global 
benchmarks.9  Note that various dedicated freight 
corridors have been planned by Railways for 
improvement in facilities for freight.   

The freight basket is also limited to a few 
commodities, most of which are bulk in nature (see 
Figure 2).  For example, in 2019-20, coal 
contributed to about 48% of freight revenue.  
Therefore, any shift in transport patterns of any of 
these bulk commodities (coal, cement, iron ore) 
could affect Railways' finances significantly.10   

## Freight Cross-Subsidises Passenger Traffic

In 2017-18, passenger and other coaching services 
incurred losses of Rs 46,025 crore, whereas freight 
operations made a profit of Rs 45,923 crore.10  
Hence, all of the profit earned from freight 

operations was utilised to compensate for the loss from passenger and other coaching services.  The total passenger revenue during this period was Rs 48,643 crore.  This implies that losses in the passenger business were about 94.6% of its revenue.  Therefore, in 2017-18, for every one rupee earned from its passenger business, Indian Railways ended up spending Rs 1.95.  As of 2017- 18, except AC third tier and AC chair car services, all other classes of passenger services registered operational losses (Table 2). NITI Aayog (2016) noted that such crosssubsidisation has resulted in high freight tariffs.11 It also observed (2018) that high freight tariffs are one of the reasons for a sub-optimal share of Railways in freight.9   
Source: CAG; PRS. 

| Class          | 2014    | -       | 15 2015-16    | 2016-17    |
|----------------|---------|---------|---------------|------------|
| AC-1st Class   | -127    | -176    | -139          | -165       |
| 1st Class      | -70     | -58     | -53           | -35        |
| AC 2 Tier      | -496    | -463    | -559          | -604       |
| AC 3 Tier      | 882     | 898     | 1,041         | 739        |
| AC Chair car   | -142    | -6      | 118           | 98         |
| Sleeper Class  | -8,510  | -8,301  | -9,313        | -11,003    |
| Second class   | -7,642  | -8,570  | -10,025       | -11,524    |
| Ordinary Class | -11,674 | -13,238 | -14,648       | -16,568    |
| EMU suburban   |         |         |               |            |
| services       |         |         |               |            |
| -4,679         | -5,125  | -5,324  | -6,184        |            |

Source: CAG; PRS. 

Losses in passenger services are primarily caused due to: (i) passenger fares being lower than the costs, and (ii) concessions to various categories of passengers (senior citizens, National award winners etc.).11  Railways classifies these provisions as social service obligations.  The Committee on Restructuring Railways (2015) had observed that several decisions on the Indian Railways such as increase in fares, introduction of new trains, and provision of halts are not taken based on commercial considerations.12 

The Standing Committee on Railways (2020) had 
recommended that both freight and passenger fares 
should be rationalised prudently.6  It observed that 
any fare increase needs to take into account the 
competition from other transport modes.6  The 
Committee recommended that the social service 
obligations of Railways should be revisited.6 

Budgetary support from central government 

The central government supports Railways in the 
expansion of its network and investments.  Until 
recently, this budgetary support from the central 
government used to be the primary source of funds 
for capital expenditure for Railways.  However, 
since 2015-16, an increasingly higher proportion of 
the capital expenditure is being met through extra 
budgetary resources.  In 2019-20, 53% of the 
capital expenditure was met through extra-
budgetary resources.  In 2021-22, the gross 
budgetary support from the central government is 
proposed at Rs 1,07,300 crore.  This is an annual 
increase of 26% over 2019-20 (Rs 67,842 crore).   

Extra Budgetary Resources  

Extra Budgetary Resources include market 
borrowings such as financing from banks, 
institutional financing, and external investments.  
External investments in Railways could be in the 
form of public-private partnerships (PPPs), joint 
ventures, or market financing by attracting private 
investors to potentially buy bonds or equity shares 
in Railways.  Railways mostly borrows funds 
through the Indian Railways Finance Corporation 
(IRFC).   IRFC borrows funds from the market 
(through taxable and tax-free bond issuances, term 
loans from banks and financial institutions), and 
then follows a leasing model to finance the rolling 
stock assets and project assets of Indian Railways. 

In the past few years, borrowings have increased 
sharply to bridge the gap between the available 
resources and expenditure.  In 2021-22, Rs 
1,00,258 crore is estimated to be raised through 
extra-budgetary resources, which is an annual 
increase of 13% over 2019-20.  The Committee on 
Restructuring Railways (2015) had observed that 
increased reliance on borrowings could further 
exacerbate the financial situation of Railways.12  

 
2019-20 
Actuals 
2020-21 
Revised 
2021-22 
Budget 
CAGR  
(19-20 to 
21-22) 
67,842  
 29,250   1,07,300  
26% 
Gross Budgetary Support Internal Resources 
1,321  
 3,875  
 7,500  
138% 
78,902  
83,292  
1,28,567  
13% 
Extra Budgetary Resources Total 
1,48,064  1,61,692   2,15,058  
21% 

Sources:  Expenditure Profile, Union Budget 2021-22; PRS.   
Sources:  Expenditure Profile, Union Budget 2021-22; PRS. 

## Capital Expenditure

The total proposed capital expenditure for 2021-22 is Rs 2,15,058 crore.  This is an annual increase of 21% over 2019-20.  Majority of the capital expenditure will be financed through the budgetary support from the central government (50%) followed by extra budgetary resources (47%).  For the first time since 2015-16, the budgetary support from the central government will be higher than the borrowings.  Railways will fund only 3% of this capital expenditure from its own resources. Railways' capability to fund its capital expenditure from its own revenue stream has been declining (Figure 6).  Over the last few years, actual capital expenditure has been considerably less than the budget estimates (Figure 7).  
Source: Expenditure Profile; Union Budget Documents; PRS. 

Debt repayment 

Railways pays lease charges to IRFC.  The lease charges have a principal and interest component. The principal component of the lease charges forms part of the capital expenditure of Railways.  In 2021-22, allocation towards payment of principal component of lease charges is Rs 19,459 crore (9% of the total capital expenditure), an annual increase of 36% over 2019-20 (Rs 10,462 crore). CAG (2020) had observed that ideally, the principal component of lease charges should be paid from the Capital Fund.10  Capital Fund is a dedicated fund of Railways to repay the principal component of market borrowing and financing works of capital nature.6  However, no allocation has been made to this fund since 2015-16.   

The Ministry of Railways noted that appropriation 
to the Capital Fund is made from net revenue after 
meeting obligatory revenue expenditure.6  The 
Ministry further observed that no appropriation is 
being made to the Capital Fund due to inadequate 
internal resources.6  Hence, gross budgetary 
support provided by the central government has 
been used to pay the principal component of lease 
charges.  CAG (2020) observed that utilisation of 
gross budgetary support for repayment of lease 
charges is not a healthy trend as it deprives 
Railways of additional investments in capital 
works.10  CAG (2019) had observed that if 
obligations towards IRFC have to be met from 
budgetary support, the government might as well 
borrow directly from the market, as the cost of 
borrowings would be lower.10 

## Future Capital Expenditure Requirements

The Ministry of Railways has prepared the 
National Rail Plan 2030 for augmenting its 
infrastructure during the 2021-51 period.8  The 
draft of the National Rail Plan 2030 (NRP), 
released in December 2020, noted that Railways 
could be left with a financing gap of over two lakh 
crore rupees for its capital expenditure projects in 
next five years.8  This relates to the funding gap for 
projects under the annual work plan of Railways 
and the National Infrastructure Pipeline prior to the 
National Rail Plan.8  The National Infrastructure 
Pipeline is a plan of infrastructure projects worth 
Rs 102 lakh crore between 2019-20 and 2024-25.  
It includes projects worth Rs 13.7 lakh crore for 
Railways pertaining to track infrastructure, terminal 
infrastructure, rolling stock, and urban public 
transport (Table 4).  The draft National Rail Plan 
envisages an additional capital expenditure worth 
Rs 5.8 lakh crore during the 2021-26 period (Table 
5).8  However, note that there may be some overlap 
in projects envisaged under the National Rail Plan 
and the National Infrastructure Pipeline.8 

Railways under the National Infrastructure Pipeline (in Rs crore) 
Year 
Amount 
2019-20 
1,33,387 
2020-21 
2,62,465 
2021-22 
3,08,800 
2022-23 
2,73,831 
2023-24 
2,21,209 
2024-25 
1,67,870 
Total 
13,67,563 

The draft National Rail Plan estimates that on 
average, funds available with Indian Railways for 
capital expenditure over the next five years will be: 
(i) about Rs 60,000 crore per annum as gross 
budgetary support, (ii) about Rs 7,000 crore per 
annum from internal resources, and (iii) a 

maximum of Rs 1,30,000 crore per annum from extra budgetary resources.8  It noted that it would be challenging to fund the projects envisaged under the National Rail Plan from internal resources due to persistently high operating ratio.8 

## (In Rs Lakh Crore)

Head 
2021 
-26 
2026 
-31 
2031 
-41 
2041 
-51 
Total 
Dedicated Freight Corridors 
- 
1.5 
0.5 
0.3 
2.3 
High Speed Rail Corridors 
- 
5.1 
2.9 
7.0 
15.0 
Network improvements 
1.3 
0.7 
2.2 
1.8 
6.0 
Flyovers and Bypasses 
0.8 
- 
- 
- 
0.8 
Terminals 
0.6 
0.2 
0.1 
0.04 
0.9 
Rolling Stock 
3.1 
1.7 
3.6 
4.8 
13.2 
Total 
5.8 
9.2 
9.3 
13.9 
38.2 

Source: Draft National Rail Plan, Ministry of Railways; PRS. 

## Revenue Expenditure

In 2021-22, Indian Railways is estimated to spend a significant portion of its money on staff (45% of its working expenditure), followed by expenses on pension fund (26%), and fuel (13%).  In 2021-22, the total revenue expenditure by Railways is estimated at  Rs 2,10,899 crore which is an annual increase of 10% over 2019-20. 

## Staff Wages And Pension

Staff wages and pension constitute about 70% of the Railways' estimated revenue expenditure in 2021-22.  For 2021-22, the expenditure on staff is estimated at Rs 93,676 crore, which is an annual increase of 4% over 2019-20.  The Committee on Restructuring Railways (2015) had observed that the Railways' expenditure on staff is extremely high and unmanageable.12  It also sees a significant jump every few years due to revisions by the Pay Commission. Allocation to the Pension Fund is estimated at Rs 53,300 crore, which is an annual increase of 6.4% over 2018-19.  As discussed earlier, appropriation to the pension fund was much less than required in 2019-20 and 2020-21 (60% and 99% less than the budget estimate, respectively).  The Standing Committee on Railways (2017) had observed that the pension bill may increase further in the next few years, as about 40% of the Railways staff was above the age of 50 years in 2016-17.13 The Standing Committee on Railways (2020) noted that the new pension scheme implemented in 2004 to reduce the pension bill will show results only around 2034-35.6  The Committee recommended that feasibility of bearing a part of pension liabilities from the general revenue of the central government till 2034-35 should be explored.6  

Further, employee costs (including pensions) 
reduces Railways' ability to generate a surplus and 
allocate resources towards operations.12  The 
Committee on Restructuring Railways (2015) had 
recommended that Railways should rationalise its 
manpower, and make the organisation more 
business-oriented, amenable to private participation 
while retaining an optimal level of functional 
specialisation within.12  Railways has taken steps to 
enhance private participation in the operation of 
passenger train services.  For instance, proposals 
have been invited for private participation in the 
operation of passenger train services over 109 
origin-destination pairs of routes through the 
introduction of 151 trains.14  The private entity will 
be responsible for financing, procuring, operating, 
and maintaining these trains. 

## Lease Charges

The interest component of lease charges forms part 
of the revenue expenditure of Railways.  In 2021-
22, Rs 15,648 crore is estimated to be spent on the 
interest component of lease charges, which is an 
annual increase of 23% over 2019-20 (Rs 10,391 
crore). 

## Fuel And Electricity

In 2021-22, the expense on fuel and electricity is estimated to be Rs 26,085 crore, an annual decrease of 9% over 2019-20 (Rs 31,573 crore). 

## Appropriation To Funds Depreciation Reserve Fund (Drf)

Appropriation to the DRF is intended to finance the 
costs of new assets replacing old ones.6  In 2021-
22, appropriation to DRF is estimated at Rs 800 
crore.  In the last few years, appropriation to DRF 
has declined (Figure 8).  In recent years, 
appropriation has also been less than the budget 
estimates (Figure 9).  As per CAG (2020), at the 
end of 2018-19, the value of over-aged assets 
pending for replacement using this fund was 
estimated to be Rs 96,403 crore.10  CAG (2020) 
observed that provision to DRF for replacement 
and renewal of assets has been inadequate.10  

## Figure 8: Appropriation To Drf (In Rs Crore)

Source: Expenditure Profile; Union Budget Documents; PRS. 

Source: Expenditure Profile; Union Budget Documents; PRS. 

The Ministry of Railways observed that the decline in appropriation to DRF is due to major part of renewal and replacement works having safety implications being financed through Rashtriya Rail Sanraksha Kosh (RRSK).6  RRSK was created in 2017-18 to finance critical safety-related works of renewal, replacement, and augmentation of assets.6 The fund has a corpus of one lakh crore rupees over five years (partially funded by the central government).  Railways is required to allocate Rs 5,000 crore annually to RRSK during these five years.6  The Ministry observed that RRSK will not continue beyond 2021-22.6  Beyond 2021-22, all renewal and replacement works will be financed from DRF.6  This could lead to an increase in appropriation to DRF in the coming years. 

## Rashtriya Rail Sanraksha Kosh (Rrsk)

In 2021-22, Railways has allocated Rs 5,000 crore towards RRSK.  However, the actual appropriation to RRSK has been less than the requirement in all three years between 2018-19 and 2020-21. 

| Year               | Budget    | Actual    | % change    |
|--------------------|-----------|-----------|-------------|
| (Budget to Actual) |           |           |             |
| 2018-19            | 5,000     | 3,024     | -40%        |
| 2019-20            | 5,000     | 201       | -96%        |
| 2020-21 RE         | 5,000     | 2,000     | -60%        |
| 2021-22 BE         | 5,000     | -         | -           |

Note: RE: Revised Estimates, BE: Budget Estimates. 

Sources: Expenditure Profile; Union Budget Documents; PRS. The Ministry of Railways mentioned that the desired level of appropriation to RRSK has not been made due to adverse resource position.6  The Standing Committee on Railways (2020) observed that the purpose of RRSK is gradually being eroded due to non-appropriation of required funds from internal resources of Railways.6  

## Expenditure On Safety

The expenditure on safety includes revenue expenditure such as repairs and maintenance of tracks and wagons.  It also includes capital expenditure such as track renewals, bridge works, creating level crossings, and road over bridges and under bridges (Table 7).  In 2021-22, Railways estimates to spend Rs 78,716 crore towards safety, an annual increase of 6.6% over 2019-20.  In 2021- 22, the capital expenditure towards safety-related works is estimated to register an annual increase of 18.4% over 2019-20. 

## Table 7: Expenditure On Safety (In Rs Crore)

 
2019-20 Actuals 
2020-21 Revised 
2021-22 Budget 
CAGR  
(19-20 to 
21-22) 
Revenue 
48,194 
43,933 
49,206 
1.0% 
Capital 
21,047 
26,094 
29,510 
18.4% 
Total  
69,241 
70,027 
78,716 
6.6% 

Sources:  Expenditure Profile, Union Budget 2021-22; PRS.   

## Revenue Surplus And Operating Ratio

Railways' surplus is calculated as the difference 
between its total internal revenue and its revenue 
expenditure (this includes working expenses and 
appropriation to pension and depreciation funds).  
Operating Ratio is the ratio of the working 
expenditure (expenses arising from day-to-day 
operations of Railways) to the revenue earned from 
traffic.  Therefore, a higher ratio indicates a poorer 
ability to generate a surplus that can be used for 
capital investments such as laying new lines or 
deploying more coaches.  The CAG (2019) noted 
that in 2017-18, the decline in revenue surplus led 
to a decline in appropriation to the various funds 
managed by Railways from its internal resources.10  
As mentioned earlier, a similar trend has been seen 
in 2019-20 and 2020-21 where appropriation to the 
pension fund, DRF, and RRSK was reduced. 

In the last decade, Railways has been struggling to 
generate a higher surplus.  Consequently, the 
Operating Ratio has consistently been higher than 
90% for more than a decade.  In 2021-22, Railways 
expects to generate a surplus of Rs 6,561 crore.  
This is an annual increase of 103% over 2019-20 
(Rs 1,389 crore).  In 2019-20, the operating ratio 
worsened to 98.4% as compared to the estimated 
ratio of 95%.  The CAG (2020) had noted that if 
certain advances for 2019-20 were not included in 
receipts for 2018-19, the operating ratio for 2018-
19 would have been 101.77%.10   If appropriation to 
the pension fund were to be as per the requirement, 
the operating ratio for 2019-20 and 2020-21 will be 
114.2% and 131.5%, respectively.5 

 
Sources:  Expenditure Profile, Union Budget Documents; PRS.   

## Network Expansion And Modernisation

Railways has not been able to meet some key physical targets for expansion and modernisation in recent years.  It has missed its budget targets in all three years between 2017-18 and 2019-20 for: (i) 
construction of new lines, and (ii) gauge conversion (Table 8).  In 2018-19 and 2019-20, Railways also missed targets for electrification of railway lines. Note that Railways aims to achieve 100% electrification of all broad gauge routes by 2023.6 As per revised estimates for 2020-21, the achievement will be less than the budget target on almost all the indicators listed in Table 8.  While examining the progress of construction of new lines, the Standing Committee on Railways (2020) had observed that revision in allocation towards capital expenditure requires reworking of priorities and rescheduling of activities, which leads to tardy progress in the construction of new lines.6 

| 2018-           | 2019-   |
|-----------------|---------|
| Indicator       |         |
| 2017-           |         |
| 18              | 19      |
| 2020-           |         |
| 21 RE           |         |
| -49%            | -52%    |
| Construction of |         |
| new lines       |         |
| (Route Kms)     |         |
| -50%            | -40%    |
| Gauge           |         |
| conversion      |         |
| (Route Kms)     |         |
| -45%            | 20%     |
| Doubling of     |         |
| lines (Route    |         |
| Kms)            |         |
| Wagons          |         |
| (vehicle units) |         |
| -48%            | -20%    |
| Track renewals  |         |
| (Route Kms)     |         |
| 12%             | 7%      |
| Electrification |         |
| (Route Kms)     |         |
| 2%              | -12%    |

Note: RE: Revised Estimates. Source: Expenditure Profile; Union Budget Documents; PRS. 

## Annexure Appendix I: Railways Budget 2021-22 Summary

|                                                |                                                   | %       |
|------------------------------------------------|---------------------------------------------------|---------|
| Change                                         |                                                   |         |
| (2020-                                         |                                                   |         |
| 21 BE                                          |                                                   |         |
| CAGR                                           |                                                   |         |
| (2019-                                         |                                                   |         |
| 20 to                                          | 2019-20                                           |         |
| 2020-21                                        |                                                   |         |
| Budget                                         |                                                   |         |
| 2020-21                                        |                                                   |         |
| Revised                                        |                                                   |         |
| 2021-22                                        |                                                   |         |
| Budget                                         |                                                   |         |
| to                                             | 2021-22                                           |         |
| 2020-21                                        | BE)                                               |         |
| RE)                                            |                                                   |         |
|                                                |                                                   |         |
| Receipts                                       |                                                   |         |
|                                                |                                                   |         |
| 1                                              |                                                   |         |
| Passenger                                      | 50,669                 61,000         15,000      | -75%    |
| 2                                              |                                                   |         |
| Freight                                        | 113,488                                           | 147,000 |
| 3                                              |                                                   |         |
| Other traffic sources                          | 10,200                 17,613           7,125     | -60%    |
| 4                                              |                                                   |         |
| Gross Traffic Receipts (1+2+3)                 | 174,357                                           | 225,613 |
| 5                                              |                                                   |         |
| Miscellaneous                                  | 338                      300              300     | 0%      |
| 6                                              |                                                   |         |
| Total Internal Revenue (4+5)                   | 174,695                                           | 225,913 |
|                                                |                                                   |         |
| Expenditure                                    |                                                   |         |
|                                                |                                                   |         |
| 7                                              |                                                   |         |
| Ordinary Working Expenses                      | 150,211               162,753       140,786       | -13%    |
| 8                                              |                                                   |         |
| Appropriation to Pension Fund                  | 20,708                 53,160              523    | -99%    |
| 9                                              |                                                   |         |
| Appropriation to Depreciation Reserve Fund     | 400                      800              200     | -75%    |
| 10                                             |                                                   |         |
| Total Working Expenditure (7+8+9)              | 171,319               216,713       141,509       | -35%    |
| 11                                             |                                                   |         |
| Miscellaneous                                  | 1,786                   2,700           2,300     | -15%    |
| 12                                             |                                                   |         |
| Total Revenue Expenditure (10+11)              | 173,105               219,413       143,809       | -34%    |
| 13                                             |                                                   |         |
| Net Surplus (6-12)                             | 1,590                   6,500           2,800     | -57%    |
| 14                                             |                                                   |         |
| Appropriation to Development Fund              | 1,389                   1,500              800    | -47%    |
| 15                                             |                                                   |         |
| Appropriation to Capital Fund                  | -                           -                   - | -       |
| 16                                             |                                                   |         |
| Appropriation to Debt Service Fund             |                                                   |         |
| 17                                             |                                                   |         |
| Appropriation to Railway Safety Fund           | -                           -                   - |         |
| 18                                             |                                                   |         |
| Appropriation to Rashtriya Rail Sanraksha Kosh | 201                   5,000           2,000       | -60%    |
| 19                                             |                                                   |         |
| Operating Ratio                                | 98.4%                                             | 96.3%   |

Note: RE - Revised Estimate, BE - Budget Estimate. Source: Expenditure Profile; Union Budget 2021-22; PRS.  

## Explanatory Notes Performance Parameters

1. 

'Net Surplus' represents the excess of revenue receipts over revenue expenditure (Railways' internal revenue and expenditure).   
2. 

'Operating Ratio' is the ratio of operating expenses to receipts. A lower ratio indicates a higher surplus availability for investments. 

## Railway Funds

3. 

Depreciation Reserve Fund - Finances the cost of new assets replacing old assets including the cost of any improved features. 

Appropriation to this fund is made on the recommendations of the Railway Convention Committee (RCC).  

4. 
Pension Fund - Finances all pension payments to retired Railway staff.  
5. 
Rashtriya Rail Sanraksha Kosh - Finances critical safety-related works of renewal, replacement and augmentation of assets.   

## Appendix Ii: Details Of Freight And Passenger Traffic

CAGR  
 
| (2019-20 to 2021-         | 2019-20         |
|---------------------------|-----------------|
| 2020-21                   |                 |
| Revised                   |                 |
| 2021-22                   |                 |
| Budget                    |                 |
| % share in                |                 |
| 2021-22 BE                |                 |
| 22 BE)                    |                 |
| Commodity                 | NTKM            |
| Coal                      | 293,051         |
| Iron Ore                  | 50,321          |
| Cement                    | 63,933          |
| Other Goods               | 53,631          |
| Foodgrains                | 52,641          |
| Pig Iron & finished steel | 45,029          |
| Fertilisers               | 47,162          |
| Container Service         | 56,686          |
| Petroleum & Lubricants    | 30,774          |
| Miscellaneous earnings    | -               |
| Raw Material for Steel    |                 |
| Plants                    |                 |
| 14,437                    | 2,216    12,520 |
| Total                     | 707,665         |
| -                         |                 |

Notes: NTKM - Net Tonne Kilometre (One NTKM is the net weight of goods carried for a kilometre); RE - Revised Estimates; BE - Budget Estimates. Source: Expenditure Profile; Union Budget 2021-22; PRS. 

CAGR  
 
2019-20 
2020-21 
Revised 
2021-22 
Budget 
(2019-20 to 2021-22 BE) 
 
PKM 
Earning 
PKM 
Earning 
PKM 
Earning 
PKM 
Earning 
Total Suburban 
137,130 
2,843 
17,189 
345 
157,435 
3,746 
7% 
15% 
Non-Suburban 


AC First class 
1,696 
453 
481 
230 
1,860 
581 
5% 
13% 
AC Sleeper 
22,771 
3,779 
5,257 
1,561 
24,137 
4,879 
3% 
14% 
AC 3 Tier 
95,593 
12,370 
23,518 
5,444 
91,149 
12,778 
-2% 
2% 
Executive Class 
617 
180 
42 
22 
520 
277 
-8% 
24% 
AC Chair Car 
10,669 
1,754 
1,456 
428 
10,537 
2,023 
-1% 
7% 
First Class (M&E) 
20 
13 
 
 
27 
21 
16% 
26% 
First Class (ordinary) 
330 
16 
2 
0 
378 
21 
7% 
16% 
Sleeper Class (M&E) 
267,629 
13,552 
56,836 
5,149 
304,243 
18,596 
7% 
17% 
Sleeper Class (ordinary) 
1,849 
90 
1 
0 
972 
55 
-27% 
-22% 
Second Class (M&E) 
383,858 
12,563 
30,518 
1,787 
365,063 
13,957 
-2% 
5% 
Second Class (Ordinary) 
128,576 
3,057 
817 
34 
142,806 
4,066 
5% 
15% 
Total Non-Suburban 
913,608 
47,826 
118,928 
14,655 
941,692 
57,254 
2% 
9% 
Total 
1,050,738 
50,669 
136,117 
15,000 
1,099,127 
61,000 
2% 
10% 

Notes: PKM - Passenger Kilometre (One PKM is when a passenger is carried for a kilometre); RE - Revised Estimates; BE - Budget Estimates. Source: Expenditure Profile; Union Budget 2021-22; PRS. 

July 20, 2020, https://cag.gov.in/uploads/download_audit_report/2020/Report%20No.%208%20of%202020_English-05f75b32f3ecdc0.39910555.pdf. 11 "Reviewing the Impact of "Social Service Obligations" by Indian Railways", NITI Aayog, http://niti.gov.in/writereaddata/files/document_publication/Social-Costs.pdf. 12 Report of the Committee for Mobilization of Resources for Major Railway Projects and Restructuring of Railway Ministry and Railway Board, Ministry of Railways, June 2015, http://www.indianrailways.gov.in/railwayboard/uploads/directorate/HLSRC/FINAL_FILE_Final.pdf. 13 "13th Report: Demands for Grants (2017-18)", Standing Committee on Railways, March 10, 2017, http://164.100.47.193/lsscommittee/Railways/16_Railways_13.pdf. 14 "Ministry of Railways invites Request for Qualifications (RFQ) for private participation for operation of passenger train services over 109 Origin Destination (OD) pairs of routes", Press Information Bureau, Ministry of Railways, July 1, 2020. DISCLAIMER: This document is being furnished to you for your information.  You may choose to reproduce or redistribute this report for noncommercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research ("PRS").  The opinions expressed herein are entirely those of the author(s).  PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete.  PRS is an independent, not-for-profit group.  This document has been prepared without regard to the objectives or opinions of those who may receive it. 