
## Demand For Grants 2022-23 Analysis Railways

The Railways finances were presented on February 1, 2022, by the Finance Minister Ms. Nirmala Sitharaman along with the Union Budget 2022-23. 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 and station redevelopment) is financed through internal resources, budgetary support from the central government, and extra-budgetary resources. This note looks at the proposed expenditure of Railways for the year 2022-23, its finances over the last few years, and issues with the same.   

## Highlights

- 
Revenue:  Railways' internal revenue for 
2022-23 is estimated at Rs 2,40,000 crore, an increase of 19% over the revised estimates of 
2021-22.  In 2021-22, revenue is estimated to 
be 7% lower than the budget estimate. 
- 
Traffic revenue:  Total revenue from traffic 
for 2022-23 is estimated to be Rs 2,39,600 crore, an increase of 19% over revised estimates of 2021-22.  Freight revenue is estimated to be Rs 1,65,000 crore in 2022-23, an increase of 14% over the revised estimates of 2021-22.  The passenger revenue is estimated to be Rs 58,500 crore, an increase of 32% over a low base in 2021-22 (due to COVID-19).  In 2021-22, passenger revenue is estimated to be 27% lower than the budget estimate, whereas freight revenue is estimated to be 5% higher than the budget estimate. 
- 
Expenditure:  The total revenue expenditure 
by Railways for 2022-23 is projected to be Rs 2,34,640 crore, an increase of 17% over revised estimates of 2021-22.  In 2021-22, revenue expenditure is estimated to be 5% lower than the budget estimate.  In 2022-23, capital expenditure is projected at Rs 2,45,800 
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crore, an increase of 14% over the revised 
estimates of 2021-22.  The revised estimates 
for capital expenditure in 2021-22 is 
marginally higher than the budget estimate. 

- 
Operating Ratio:  Operating Ratio is a ratio of 
working expenses to the receipts from traffic. A lower ratio implies better profitability and availability of resources for capital spending. In 2022-23, the Railways' Operating Ratio is estimated to be 96.98%.  This would be an improvement over the operating ratio of 98.93% in 2021-22 (revised estimates). Operating ratio of 96.15% was estimated at the budget stage in 2021-22.   

## 2022-23 Budget Announcements2

Key announcements and proposals related to Railways made in Budget 2022-23 include:  

- 
Railways will develop new products and efficient logistics services for small farmers, and small and medium enterprises.  It will also take steps towards integration of postal and railway networks to provide seamless solutions for movement of parcels. 
- 
100 PM-GatiShakti Cargo Terminals for multimodal logistics facilities will be developed over next three years.   
- 
Multimodal connectivity between mass urban transport and railway stations will be facilitated on priority. 
- 
400 new-generation Vande Bharat trains will be manufactured over next three years. 
- 
2,000 km of network will be brought under Kavach, the indigenous technology for safety and capacity augmentation. 
- 
'One Station-One Product' concept will be popularised to help local businesses and supply chains. 
For information on status of 2021-22 budget announcements, please see Table 12 in Annexure. 

## Overview Of Finances Railways' Internal Revenue

Railways earns its internal revenue primarily from 
passenger and freight traffic.  In 2022-23, Railways 
is estimated to earn 69% of its internal revenue 
from freight and 24% from passenger traffic.  The 
remaining 7% will be earned from other 

miscellaneous sources such as parcel service, coaching receipts, and sale of platform tickets. 

## Growth In Revenue

Railways' total internal revenue for 2022-23 is estimated at Rs 2,40,000 crore, an increase of 19% over the revised estimates of 2021-22.  In 2021-22, total internal revenue is estimated to be 7% lower than the budget estimate.  While freight earnings are estimated to be 5% higher than the budgeted, passenger earnings are estimated to be 27% lower. In both 2019-20 and 2020-21, Railways' internal revenue registered a negative growth year-on-year (Figure 1 on next page).  In 2019-20, freight revenue was 11% lower than the previous year, whereas passenger revenue was severely hit in 2020-21.  Passenger services were suspended for about 10 days in March 2020 and through April- May 2020 to mitigate the impact of COVID-19.3 After that, services were resumed in a phased manner.4  Railways ran special trains in place of regular trains up until November 2021.5  Pre- COVID regular trains have been resumed since then.5  The second class of such trains continue to run as reserved, except if any relaxation permitted 
 

| 2020-21                                       | 2021-22 BE 2021-22 RE                |
|-----------------------------------------------|--------------------------------------|
|                                               |                                      |
|                                               |                                      |
|                                               |                                      |
| Receipts                                      |                                      |
|                                               |                                      |
| 1 Passenger Revenue                           | 15,248                               |
| 2 Freight Revenue                             | 1,17,232                             |
| 3 Other traffic sources                       | 8,090                                |
| 4                                             | Gross Traffic Receipts (1+2+3)       |
| 5 Miscellaneous                               | 213                                  |
| 6                                             | Total Internal Revenue (4+5)         |
| 7                                             | Budgetary Support from Government    |
| 8                                             | Extra Budgetary Resources            |
| 9 Special Loan from Govt.*                    | 79,398                               |
|                                               |                                      |
|                                               |                                      |
| 10                                            | Total Receipts (6+7+8+9)             |
|                                               |                                      |
| Expenditure                                   |                                      |
| 11 Ordinary Working Expenses                  | 1,35,845                             |
| 12 Appropriation to Pension Fund              | 523                                  |
| 13 Appropriation to Depreciation Reserve Fund | 200                                  |
| 14                                            | Total Working Expenditure (11+12+13) |
| 15 Miscellaneous                              | 1,669                                |
| 16                                            | Total Revenue Expenditure (14+15)    |
| 17                                            | Total Capital Expenditure            |
| 18 Appropriation of Special Loan from Govt.*  | 79,398                               |
|                                               |                                      |
|                                               |                                      |
| 19                                            | Total Expenditure (16+17+18)         |
| 20                                            | Net Revenue (6-16)                   |
| 21                                            | Operating Ratio                      |
| #                                             |                                      |
|                                               | 96.15%                               |
|                                               |                                      |

Note: *The central government provided a special loan from its general revenue for COVID related resource gap in 2020-21 and to liquidate adverse balance in Pension Fund in 2019-20. #If the appropriation to the Pension Fund were to be per the requirement, the operating ratio for 2020-21 would have been 131.5%. RE - Revised Estimate, BE - Budget Estimate.   
Source: Expenditure Profile; Union Budget 2022-23; PRS. 

in special case.5  Between 2018-19 and 2022-23, 
Railways' revenue is estimated to grow at a 
compounded annual growth rate (CAGR) of 5.9%.  
This is lower than the CAGR of 7.1% observed 
between 2012-13 and 2018-19.  While revenue 
from freight traffic is estimated to grow at 6.7% 
between 2018-19 and 2022-23, revenue from 
passenger traffic is estimated to grow at 3.5%.  
Between 2012-13 and 2018-19, freight and 
passenger revenue had grown at a CAGR of 6.9% 
and 8.5%, respectively. 

## Shortfall In Revenue

As discussed above, Railways' internal revenue 
registered a negative year-on-year growth in both 
2019-20 and 2020-21.  This resulted in a significant 
difference in actual revenue as compared to the 
budget estimates (Figure 2 on next page).  On 
average, between 2011-12 and 2018-19, internal 
revenue realised by Railways was 6% lower than 
the budget estimates.  While freight revenue saw a 
shortfall of 3% as compared to the budget estimates 
during this period, the corresponding figure for 
passenger services was higher at 8%.   

| % Change       | % Change       |
|----------------|----------------|
| 2022-23 BE     | (2021-22 BE to |
| 2021-22 RE)    |                |
| (2021-22 RE to |                |
| 2022-23 BE)    |                |

## Challenges In Raising Revenue Sluggish Growth In Traffic Volume

In freight traffic volume, there has been an uptick 
during 2021-22, which Railways expects to sustain 
in 2022-23.  In 2022-23, Railways is estimated to 
register freight traffic volume of 868 billion Net 
Tonne km (NTKM), which is 8% higher than the 
revised estimates for 2021-22 (807 billion NTKM).  
This is mainly on account of estimated increase in 
coal freight (Table 2).  In 2021-22, freight traffic 
volume as well as revenue is expected to be 5% 
higher than the budget estimate.  1 NTKM implies 
1 tonne of freight was transported over 1 km.  The 
freight traffic volume is estimated to grow at 
CAGR of 4.1% between 2018-19 and 2022-23.

Over the last decade, both rail-based passenger and freight traffic have grown at a modest rate (see Figure 3 and Figure 4).  Between 2012-13 and 2022-23, freight and passenger traffic volume are estimated to grow at a CAGR of 2.3% and 0.01%, respectively.  This has affected Railways' earnings from its core business of running freight and passenger trains.  Railways is estimated to register passenger traffic volume of 1,099 billion Passenger km (PKM) in 2022-23.  1 PKM implies 1 passenger was transported over 1 km.  Passenger traffic in 2022-23 is estimated to be lower than every year between 2013-14 and 2018-19. 

Note: RE: Revised Estimates; BE: Budget Estimates. Sources: Railways Budget of various years; Union Budget of various years; PRS. 

Note: RE: Revised Estimates; BE: Budget Estimates. various years; PRS. 

% change 
21-22 to 
18-19 
21-22 
RE 
22-23 
BE 
22-23 
CAGR 
18-19 to 
22-23 
Coal 
311 
314 
354 
13% 
3.3% 
Cement 
68 
77 
84 
9% 
5.4% 
Other goods 
59 
77 
81 
5% 
8.2% 
Iron ore 
43 
66 
72 
9% 
13.5% 
Foodgrains 
58 
77 
65 
-15% 
3.3% 
Container services 
58 
58 
63 
9% 
2.1% 
Pig iron & finished steel 
50 
51 
57 
10% 
3.3% 
Fertilisers 
47 
42 
44 
4% 
-1.5% 
Petroleum & lubricants 
29 
30 
31 
6% 
1.7% 
15 
16 
17 
7% 
2.4% 
Raw material for steel plants Total 
739 
807 
868 
8% 
4.1% 

Note: RE: Revised Estimates, BE: Budget Estimates. Sources: Union Budget of various years; PRS. 

Note that over the years, Railways has steadily lost freight traffic share to other modes of transport. Share of Railways in total freight traffic had declined from 89% in 1950-51 to 30% in 2011-12.6 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 (NRP), the share of Railways in total freight traffic stood at 27% in 2020.7  NRP aims to increase Railways' modal share in freight traffic to 45% by 2050.  NITI Aayog (2018) had highlighted a shortfall in carrying capacity and a lack of price competitiveness as some of the reasons for the decline in freight share.8  It had 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.  Note that various dedicated freight corridors have been planned by Railways for improvement in facilities for freight. It has taken certain initiatives to attract freight including: (i) operation of Kisan Rail to attract freight for agricultural produce (1,806 trains on 153 routes as of December 2021), and.(ii) time tabled parcel services for courier and e-commerce companies. 9,10 

## Dependence On Coal For Freight Revenue

The freight basket has mostly been limited to raw materials for certain industries such as power plants, and the iron and steel plants (Figure 5).  In 2022-23, three commodities are estimated to contribute 63% of the total freight revenue: (i) coal (47%), (ii) iron ore (9%), and (iii) cement (7%).   
 
Source: Expenditure Profile, Union Budget 2022-23; PRS. 

While the share of coal in freight volume has been 
slowly coming down (from 43% in 2015-16 to 39% 
in 2021-22), its contribution to revenue has been 
increasing (from 45% in 2015-16 to 47% in 2021-
22).  This may be indicative of an increasing 
dependency on coal for revenue as compared to 
other items in the freight basket.  However, as per 
the budget estimates, share of coal in traffic volume 
is estimated to increase in 2022-23, whereas its 
contribution to revenue is estimated to decrease. 

Implications of clean energy transition on Railways' freight revenue 

In 2022-23, about 46% of the total coal freight 
volume is estimated to be for thermal power plants.  
As part of its initiatives in response to climate 
change, India has pledged to: (i) install 500 GW of 
non-fossil energy capacity by 2030, (ii) meet 50% 
of energy requirements from renewable energy by 
2030, (iii) reduce carbon emissions by one billion 
tonnes by 2030, (iv) reduce carbon intensity of its 
economy to less than 45% by 2030, and (v) achieve 
target of net zero emission by 2070.11  Action 
towards these targets would involve phasing down 
coal-fired power plants and other usage of coal.  
Any significant shift in coal usage in the country 
might pose a challenge for Railways' freight 
revenue and overall sustainability of its finances.12 

## Widening Losses From Passenger Services

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).  Over the years, Railways has been unable to meet its operational cost of passenger services. Except AC-3 Tier segment, all other segments of passenger services have registered losses during the 2015-20 period (Table 3).  These losses are compensated by earnings from freight services. NITI Aayog (2016) noted that such crosssubsidisation has resulted in high freight tariffs.14 It also observed (2018) that high freight tariffs are one of the reasons for a sub-optimal share of Railways in freight.8  

|                                         |                                         |                                |        | Class    |   2015-16 2016-17 2017-18 2018-19 2019-20  |
|-----------------------------------------|-----------------------------------------|--------------------------------|--------|----------|--------------------------------------------|
| AC-1st Class                            | -176                                    | -139                           | -165   | -249     |                                      -403  |
| 1st Class                               | -58                                     | -53                            | -35    | -39      |                                       -38  |
| AC 2 Tier                               | -463                                    | -559                           | -604   | -908     |                                     -1378  |
| AC 3 Tier                               | 898                                     | 1,041                          | 739    | 318      |                                        65  |
| AC Chair car                            | -6                                      | 118                            | 98     | 243      |                                      -182  |
| Sleeper Class                           | -8,301                                  | -9,313 -11,003 -13,012 -16,056 |        |          |                                            |
| Second class                            | -8,570 -10,025 -11,524 -13,214 -14,457  |                                |        |          |                                            |
| Ordinary                                |                                         |                                |        |          |                                            |
| Class                                   |                                         |                                |        |          |                                            |
| -13,238 -14,648 -16,568 -19,124 -20,450 |                                         |                                |        |          |                                            |
| -5,125                                  | -5,324                                  | -6,184                         | -6,754 | -6,938   |                                            |
| EMU                                     |                                         |                                |        |          |                                            |
| suburban                                |                                         |                                |        |          |                                            |
| services                                |                                         |                                |        |          |                                            |
| Total                                   | -36,286 -37,937 -46,025 -55,020 -63,364 |                                |        |          |                                            |
| Source: CAG; PRS.                       |                                         |                                |        |          |                                            |

In 2019-20, Railways made losses of Rs 63,364 crore on passenger and other coaching services, a 15% increase in losses over the previous year (Rs 55,020 crore).12,13  Profit from freight services in 2019-20 was Rs 28,746 crore, inadequate to completely subsidise the losses from passenger services.13  The revenue from passenger services was Rs 50,669 crore.  Thus, Railways spent Rs 2.3 to earn one rupee from passenger services.13   

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.).14  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.16  The Standing 
Committee on Railways (2020) had recommended 
that both freight and passenger fares should be 
rationalised prudently.15  It observed that any fare 
increase needs to take into account the competition 
from other transport modes.15  The Committee 
recommended that the social service obligations of 
Railways should be revisited.15  

## Expenditure

Over the last decade, Railways' expenditure has 
increased at a comparatively higher rate than its 
internal revenue.  This is mainly on account of a 
higher capital spending supported by grants from 
the central government and extra-budgetary 
resources (Figure 8).  Between 2012-13 and 2022-
23, the internal revenue is estimated to increase at a 
CAGR of 6.6%, whereas revenue and capital 
expenditure are estimated to increase at a CAGR of 
7.1% and 17.4%, respectively. 

Note: RE: Revised Estimates; BE: Budget Estimates. Sources: Railways Budget of various years; Union Budget of various years; PRS. 

## Reliance On Budgetary Support And Extrabudgetary Resources To Fund Capital Expenditure

Owing to modest revenue surplus observed by 
Railways, capital expenditure has largely been 
funded through: (i) budgetary support from the 
central government, and (ii) extra-budgetary 
resources.  For instance, only 2.8% of the total 
estimated capital expenditure in 2022-23 will be 
funded through internal revenue of Railways.  
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. Up until 2014-15, budgetary support from the central government used to be the primary source for funding capital expenditure (Figure 9). However, between 2015-16 and 2020-21, the increase in capital expenditure was sustained through an increased reliance on extra budgetary resources.  The Committee on Restructuring Railways (2015) had observed that increased reliance on borrowings could further exacerbate the financial situation of Railways.16  
Note: RE: Revised Estimates; BE: Budget Estimates. Sources: Railways Budget of various years; Union Budget of various years; PRS. 

In 2021-22 and 2022-23, budgetary support from the central government has seen a significant increase.  However, note that this might have been made possible due to the central government running a large fiscal deficit in these two years (6.9% and 6.4% of GDP respectively).2  The central government aims to bring down its fiscal deficit to 4.5% of GDP by 2025-26.2  This might pose a challenge in sustaining the budgetary support levels seen in 2021-22 and 2022-23. 

 
2020-21 
Actuals 
2021-22 
Revised 
2022-23 
Budget 
% Change 
(21-22 RE to 
22-23 BE) 
29,926 
1,17,300 
1,37,300 
17% 
Gross Budgetary Support 
1,23,196 
95,200 
1,01,500 
7% 
Extra Budgetary Resources Internal Resources 
2,059 
2,500 
7,000 
180% 
Total 
1,55,181 
2,15,000 
2,45,800 
14% 

Source: Expenditure Profile, Union Budget 2022-23; PRS. 

## Inadequate Resources For Debt Servicing

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 
2022-23, allocation towards payment of principal 
component of lease charges is estimated at Rs 
22,188 crore, an increase of 51% over 2021-22 (Rs 
14,702 crore as per revised estimates).   

CAG (2020) had observed that ideally, the 
principal component of lease charges should be 
paid from the Capital Fund.12  Capital Fund is a 
dedicated fund of Railways to repay the principal 
component of market borrowing and financing 
works of capital nature.  However, no allocation 
has been made to this fund between 2015-16 and 
2021-22.  In 2022-23, apportionment to capital 
fund is estimated to be Rs 2,360 crore.  The 
Ministry of Railways noted that appropriation to 
the Capital Fund is made from net revenue after 
meeting obligatory revenue expenditure.12  The 
Ministry further observed that no appropriation is 
being made to the Capital Fund due to inadequate 
internal resources.  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.12  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.17   

## Future Capital Expenditure Requirements

The Ministry of Railways has prepared the 
National Rail Plan 2030 for augmenting its 
infrastructure during the 2021-51 period.7  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.7  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.7  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 5 on next page).  The draft 
National Rail Plan envisages an additional capital 
expenditure worth Rs 5.8 lakh crore during the 
2021-26 period (Table 6 on next page).7  However, 
note that there may be some overlap in projects 
envisaged under the National Rail Plan and the 
National Infrastructure Pipeline.7 

Table 5: Capital Expenditure Requirement for 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 

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

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.7  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.7 

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 2022-23, the total revenue expenditure by Railways is estimated at Rs 2,34,640 crore, which is an increase of 17% over the revised estimates of 2021-22 (Rs 2,01,125 crore).  In 2022-23, key items of revenue expenditure include: (i) staff costs (43%), (ii) pension (22%), (iii) fuel (15%), and (iv) interest component of lease charges (9%). 

## Staff Wages And Pension

Staff wages and pension constitute about 68% of the Railways' estimated revenue expenditure in 
2022-23.  For 2022-23, the expenditure on staff is estimated at Rs 99,840 crore, which is an increase of 10% over 2021-22.  The Committee on Restructuring Railways (2015) had observed that the Railways' expenditure on staff is extremely high and unmanageable.16  It also sees a significant jump every few years due to revisions by the Pay Commission.  In 2021-22, staff wages are  

## National Monetisation Pipeline

In August 2021, the central government launched the National Monetisation Pipeline (NMP).  NITI Aayog (2021) had noted that traditional sources of capital are expected to finance 83-85% of capital expenditure envisaged under National Infrastructure Pipeline.18  About 15%-17% of the aggregate outlay is expected to be met through innovative mechanisms such as asset recycling and monetisation.  For NMP aims to monetise assets which are central to business objectives of a government body and are being utilised for delivering infrastructure services.  The pipeline will be implemented over four years (between 2022-23 and 2024- 25).  Monetisation under NMP will not involve disinvestment and monetisation of non-core assets such as land, building, and pure play real estate assets. Under NMP, value of Railways' assets to be monetised is estimated to be Rs 1,52,496 crore.  This is about 26% of the value of all the assets of the central government covered under NMP (six lakh crore rupees in value terms).  

| Asset Class                  |                         |
|------------------------------|-------------------------|
| Railway Stations             |                         |
| 400 (5.5% of total           |                         |
| stations)                    |                         |
| Passenger Trains             | 90 (5% of total trains) |
| Railway Track                |                         |
| 1 route of 1,400 km          |                         |
| (2% of network)              |                         |
| Konkan Railways              | 741 km                  |
| Hill Railways                |                         |
| four in number (a total      |                         |
| of 244 km route)             |                         |
| Railway owned Goods sheds    |                         |
| 265 (21% of total good       |                         |
| sheds)                       |                         |
| Dedicated Freight Corridor   |                         |
| (DFC) track and allied infra |                         |
| 673 km (20% of total         |                         |
| DFC network)                 |                         |
| Railway colonies and stadia  | 15                      |

Source: NITI Aayog; PRS. 

estimated at Rs 90,619 crore at the revised stage, 
which is 3% less than the budget estimate.  Note 
that Railways has a total of 15,07,694 sanctioned 
posts, out of which around 2,37,295 posts are lying 
vacant, i.e., there is a vacancy of about 16% (as of 
March 2020).19  If all of these posts were to be 
filled, staff costs for Railways would be higher than 
the current level. 

Allocation to the Pension Fund in 2022-23 is 
estimated at Rs 60,000 crore, which is an increase 
of 22% over the revised estimates for 2021-22.  
Appropriation to the pension fund was much less 
than required in 2019-20 and 2020-21 (59% and 
99% less than the budget estimate, respectively).  A 
special loan of Rs 79,398 crore was extended by 
the central government to Railways to meet the 
obligations towards the pension fund for 2019-20 
and 2020-21.  In 2021-22, appropriation to pension 
fund is estimated to be 8% less than the budget 
estimate.  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 2016-17.20  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 2034-35.15  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.15  
The Committee on Restructuring Railways (2015) had also observed that employee costs (including pensions) reduce Railways' ability to generate a surplus and allocate resources towards operations.16 It had recommended that Railways should rationalise its manpower, and make the organisation more business-oriented.  It should be amenable to private participation while retaining an optimal level of functional specialisation within.16   

## Fuel And Electricity

In 2022-23, the expense on fuel and electricity is estimated to be Rs 31,854 crore, an increase of 15% over 2021-22 (Rs 27,629 crore). 

## Lease Charges

The interest component of lease charges forms part of the revenue expenditure of Railways.  In 2022- 23, Rs 20,013 crore is estimated to be spent on the interest component of lease charges, which is an increase of 33% over 2021-22 (Rs 15,068 crore). 

## Appropriation To Funds Depreciation Reserve Fund (Drf)

Appropriation to the DRF is intended to finance the costs of new assets replacing old ones.  In 2022-23, appropriation to DRF is estimated at Rs 2,000 crore.  In the last few years, appropriation to DRF has declined (Figure 10).  In recent years, appropriation has also been lower than the budget estimates.  As per CAG (2021), at the end of 2019- 20, the value of over-aged assets pending for replacement using this fund was estimated to be Rs 95,217 crore.13  This includes: (i) Rs 58,887 crore on track renewal and (ii) Rs 26,547 crore on rolling stock.  It observed that in the backdrop of declining revenue surplus, replacement and renewal of over aged assets could become a burden for the central government.13  
Note: BE: Budget Estimates; RE: Revised Estimates. Revised estimates for 2021-22 shown as Actuals. Sources: Railways Budget of various years; Union Budget of various years; PRS. 

## Private Sector Participation In Operating Trains

In July 2020, proposals were invited for private participation in the operation of passenger train services over 109 origindestination pairs of routes through the introduction of 151 trains across 12 clusters.21  The private entity would be responsible for financing, procuring, operating, and maintaining these trains.  Bids were opened in July 2021.22 In all, five bids were received for three clusters.22   No bids were received for the remaining nine clusters.22 

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).15  RRSK was created in 
2017-18 to finance critical safety-related works of 
renewal, replacement, and augmentation of assets.  

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.15  The Ministry observed that RRSK will not 
continue beyond 2021-22.  Beyond 2021-22, all 
renewal and replacement works will be financed 
from DRF.  This could lead to an increase in 
appropriation to DRF in the coming years.  Note 
that allocation has been made towards RRSK in 
2022-23 at the budget stage. 

## Rashtriya Rail Sanraksha Kosh (Rrsk)

In 2022-23, Railways has allocated Rs 2,000 crore 
towards RRSK.  However, the actual appropriation 
to RRSK has been less than the requirement of Rs 
5,000 crore in all four years between 2018-19 and 
2021-22.  In 2021-22, at the revised stage, no 
allocation has been made towards the fund.  The 
Ministry of Railways noted that the desired level of 
appropriation to RRSK has not been made due to 
adverse resource position.15  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.15  

| Year               | Budget    | Actual    | % change    |
|--------------------|-----------|-----------|-------------|
| (Budget to Actual) |           |           |             |
| 2017-18            | 1,000     | 0         | -100%       |
| 2018-19            | 5,000     | 3,024     | -40%        |
| 2019-20            | 5,000     | 201       | -96%        |
| 2020-21            | 5,000     | 1,000     | -60%        |
| 2021-22 RE         | 5,000     | 0         | -100%       |
| 2022-23 BE         | 2,000     | -         | -           |

Note: RE: Revised Estimates, BE: Budget Estimates. Sources: Union Budget of various years; PRS. 

## Revenue Surplus And Operating Ratio

Railways' surplus is calculated as the difference 
between its total internal revenue and its total 
expenditure (this includes working expenses and 
appropriation to pension and depreciation funds).  
In 2022-23, Railways expects to generate a surplus 
of Rs 5,360 crore.  This is an increase of 513% 

over revised estimates for 2021-22 (Rs 875 crore). In 2021-22, Railways had estimated a surplus of Rs 6,561 crore at the budget stage. 

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.  Operating Ratio of Railways has consistently been higher than 90% for more than a decade (Figure 11).  In 2022-23, Railways has estimated an operating ratio of 97.0%, an improvement over operating ratio of 98.9% estimated in 2021-22.  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 101.8%.12   If appropriation to the pension fund were to be as per the requirement, the operating ratio for 2019-20 and 2020-21 would have been 114.2% and 131.5%, respectively.23,24  

## 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 2020-21 for: (i) 
construction of new lines, and (ii) gauge conversion 
(Table 9).  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.15  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.  As per revised estimates for 2021-
22, achievement will be less than the initial target 
in case of wagons and track renewals.  Table 13 in 
annexure provides details on key physical targets. 

| 2018-           | 2019-   | 2020-   |
|-----------------|---------|---------|
| Indicator       |         |         |
| 2017-           |         |         |
| 18              | 19      | 20      |
| 2021-           |         |         |
| 22 RE           |         |         |
| -49%            | -52%    | -28%    |
| Construction    |         |         |
| of new lines    |         |         |
| (Route Kms)     |         |         |
| -50%            | -40%    | -32%    |
| Gauge           |         |         |
| conversion      |         |         |
| (Route Kms)     |         |         |
| -45%            | 20%     | -45%    |
| Doubling of     |         |         |
| lines (Route    |         |         |
| Kms)            |         |         |
| Wagons          |         |         |
| (vehicle units) |         |         |
| -48%            | -20%    | -24%    |
| 12%             | 7%      | 15%     |
| Track           |         |         |
| renewals        |         |         |
| (Route Kms)     |         |         |
| Electrification |         |         |
| (Route Kms)     |         |         |
| 2%              | -12%    | -37%    |

Note: RE: Revised Estimates.  Positive number means higher achievement than targeted. Sources: Union Budget of various years; PRS. 

% change  
(2021-22 RE  
2020-21 
2021-22 
Revised 
2022-23 
Budget 
% share in  
2022-23 BE 
to 2022-23 BE) 
Commodity 
Earning Volume Earning Volume Earning Volume Earning Volume Earning Volume 
Coal 
49,578 2,39,390 
68,520 3,13,869 
77,250 3,54,008 
12.7% 
12.8% 
47% 
41% 
Iron Ore 
12,661 
62,523 
13,690 
65,640 
14,949 
71,843 
9.2% 
9.5% 
9% 
8% 
Cement 
9,714 
73,605 
11,069 
77,117 
12,022 
83,752 
8.6% 
8.6% 
7% 
10% 
Other Goods 
8,510 
66,465 
10,493 
77,305 
11,019 
81,180 
5.0% 
5.0% 
7% 
9% 
Miscellaneous earnings 
1,493 
- 
2,600 
- 
10,000 
- 284.6% 
- 
6% 
- 
Pig Iron & finished steel 
7,417 
49,123 
9,036 
51,437 
9,970 
56,755 
10.3% 
10.3% 
6% 
7% 
Foodgrains 
9,213 
80,681 
9,605 
76,691 
8,196 
65,434 
-14.7% -14.7% 
5% 
8% 
Container Service 
5,114 
55,331 
6,452 
57,653 
7,042 
62,815 
9.1% 
9.0% 
4% 
7% 
Petroleum & Lubricants 
5,727 
29,970 
5,879 
29,644 
6,227 
31,396 
5.9% 
5.9% 
4% 
4% 
Fertilisers 
5,826 
49,011 
5,436 
42,258 
5,666 
44,044 
4.2% 
4.2% 
3% 
5% 
Raw Material for Steel Plants 
1,979 
13,663 
2,494 
15,616 
2,659 
16,650 
6.6% 
6.6% 
2% 
2% 
Total 
1,17,232 7,19,762 1,45,275 8,07,230 1,65,000 8,67,877 
13.6% 
7.5% 
100% 
100% 

Note: 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 2022-23; PRS. 

% change (2021-22 RE 
2020-21 
2021-22 
Revised 
2022-23 
Budget 
to 2022-23 BE) 
 
Earning 
Volume 
Earning 
Volume 
Earning 
Volume 
Earning 
Volume 
Total Suburban 
589 
30,075 
1,259 
73,721 
2,623 
1,57,435 
108% 
114% 
Total Non-Suburban 
14,659 
2,01,051 
43,116 
5,68,914 
55,877 
9,41,692 
30% 
66% 
Sleeper Class (M&E) 
5,436 
98,476 
15,840 
2,59,098 
18,181 
3,04,243 
15% 
17% 
Second Class (M&E) 
2,132 
55,447 
6,667 
1,63,835 
14,521 
3,65,063 
118% 
123% 
AC 3 Tier 
4,750 
32,174 
14,128 
97,538 
12,905 
91,149 
-9% 
-7% 
AC 2 Tier 
1,472 
7,609 
4,023 
20,288 
4,679 
24,137 
16% 
19% 
Second Class (Ordinary) 
217 
4,456 
374 
18,930 
2,758 
1,42,806 
637% 
654% 
AC Chair Car 
390 
2,153 
1,299 
7,028 
1,904 
10,537 
47% 
50% 
AC First class 
233 
671 
612 
1,751 
636 
1,860 
4% 
6% 
Executive Class 
28 
72 
156 
386 
205 
520 
32% 
35% 
Sleeper Class (Ordinary) 
-2 
-14 
1 
21 
45 
972 
4,424% 
4,529% 
First Class (M&E) 
2 
1 
15 
16 
25 
27 
65% 
69% 
First Class (Ordinary) 
1 
6 
1 
23 
17 
378 
1,507% 
1,543% 
Total 
15,248 
2,31,126 
44,375 
6,42,635 
58,500 
10,99,127 
32% 
71% 

Note: 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 2022-23; PRS. 


## Table 12: Status Of 2021-22 Budget Announcements For Railways

Announcement 
Status 

- **Monetisation of assets**: Monetising operating public 
infrastructure assets is a very important financing option for new infrastructure construction.  A National Monetisation Pipeline of potential brownfield infrastructure assets will be launched.  Railways will monetise Dedicated Freight Corridor (DFC) assets for operations and maintenance, after commissioning. 
- **National Rail Plan (NRP)**: Indian Railways has prepared a 
National Rail Plan for India - 2030.  The Plan is to create a 'future ready' Railway system by 2030. 
- **Capital Expenditure**: I am providing a record sum of Rs 
1,10,055 crore for Railways, of which Rs 1,07,100 crore is for capital expenditure. 
- **Commissioning of DFCs**: It is expected that Western 
Dedicated Freight Corridor (DFC) and Eastern DFC will be commissioned by June 2022.  The Sonnagar - Gomoh Section (263.7 km) of Eastern DFC will be taken up in PPP mode in 2021-22.  Gomoh-Dankuni section of 274.3 km will also be taken up in short succession. 
- **New DFCs**: We will undertake future dedicated freight corridor 
projects namely (i) East Coast corridor from Kharagpur to Vijayawada, (ii) East-West Corridor from Bhusaval to Kharagpur to Dankuni, and (iii) North-South corridor from Itarsi to Vijayawada. 
- **Electrification**: Broad Gauge Route Kilometers (RKM) 
electrified is expected to reach 46,000 RKM by the end of 2021 from 41,548 RKM on October 1, 2021.  100% electrification of Broad-Gauge routes will be completed by December 2023. 
- **Introduction of Vista Dome LHB coaches**: We will introduce 
the aesthetically designed Vista Dome LHB coach on tourist routes to give a better travel experience to passengers. 
- **Safety**: The safety measures undertaken in the past few years 
have borne results.  To further strengthen this effort, high density network and highly utilized network routes of Indian railways will be provided with an indigenously developed automatic train protection system that eliminates train collision due to human error. 
- **Land Monetisation**: Rail Land Development Authority has 
been involved for monetisation of identified Railway assets of: (i) 111 Railway land parcels, (ii) 84 Railway colonies, (iii) four Hill Railways in Darjeeling, Kalka-Shimla, Matheran and Nilgiri, (iv) Karnail Singh Stadium & 15 other stadiums, and (v) 84 Multi-Functional Complexes (MFCs).  13 MFCs have been completed and balance are in different stages. 
- **Monetisation of DFC** is planned to be taken up after the 
Western DFC and Eastern DFC become fully operational. 
- **Private Train Operators**: Bids were invited in July 2021 for 
private sector participation in operating trains in 12 clusters. In all, five bids were received for three clusters.  No bids were received for the remaining nine clusters. 
- **CONCOR Divestment**: Central government is considering 
strategic divestment of 30.8% equity in CONCOR. Department of Investment and Public Asset Management has appointed Advisors for this purpose.  Issuance of Expression of Interest is the next step in this process which will be issued after finalisation of Railway's proposed Land License Policy. 
- The NRP is already being used in prioritising projects as 
super critical/critical and fixing the timelines.  Vision 2024 has been developed as part of NRP for execution of super critical/critical projects.   
- The NRP has also emphasised the justification for new DFC 
corridors for which surveys are underway. 
- In addition, the NRP lays a pipeline of projects to be 
completed by 2030, which are in process for inclusion in future budgets as per timeframe provided in the NRP. 
- In 2021-22, gross budgetary support for capital expenditure is 
estimated to be Rs 1,17,300 crore (revised estimates). 
- As of March 2021, total 1,110 Km has been commissioned 
out of total 2,843 Route km.  Balance to be commissioned section-wise in phases by June 2022.  Approval of Public Private Partnership Appraisal Committee received for Sonnagar-Gomoh section on December 27, 2021.   
- Preliminary reports are targeted by January 2022 including 
FIRR and EIRR, and Final Reports by October 2022. 
- Total 47,807 RKMs (74%) have been electrified up to 
December 31, 2021. 
- 20 LHB VISTADOME coaches have been manufactured till 
December 31, 2021.  (7 in 2020-21 and 13 in 2021-22)  
- 23,215 RKM work has been approved by competent authority. 

## Table 13: Key Physical Targets

| 2020-2021                             | 2021-2022    | 2022-23    |
|---------------------------------------|--------------|------------|
|                                       |              |            |
| Budget                                |              |            |
| Target                                |              |            |
| Achievement                           |              |            |
| Budget                                |              |            |
| Target                                |              |            |
| Revised                               |              |            |
| Target                                |              |            |
| Budget                                |              |            |
| Target                                |              |            |
| Construction of New Lines (Route Kms) | 500          | 286        |
| Gauge conversion (Route Kms)          | 600          | 470        |
| Doubling of Lines (Route Kms)         | 1,900        | 1,614      |
| Rolling Stock                         |              |            |
|                                       |              |            |
|                                       |              |            |
| a (i) Diesel Locomotives              | ...          | 10         |
| a (ii) Electric Locomotives           | 725          | 754        |
| b Coaches                             | 6,534        | 4,903      |
| c Wagons (vehicle units)              | 12,000       | 10,062     |
| Track renewals (Route Kms)            | 4,000        | 4,363      |
| Electrification Projects (Route Kms)  | 6,000        | 6,015      |

Sources: Union budget documents of various years; PRS. 

 
1 "Evolution - About Indian Railways", Ministry of Railways, last accessed on February 5, 2022, http://www.indianrailways.gov.in/railwayboard/view_section.jsp?lang=0&id=0,1,261. 2 Budget Speech 2022-23, February 1, 2022, https://www.indiabudget.gov.in/doc/Budget_Speech.pdf. 3 "Cancellation of all train Services by Indian Railways in the wake of COVID-19", Press Information Bureau, Ministry of Railways, March 22, 2020. 4 "Railways taking steps to normalize passenger services in phased manner", Press Information Bureau, Ministry of Railways, November 14, 2021. 2020. 

22 Statement on Implementation of Budget Announcements of 2021-22, Union Budget 2022-23, https://www.indiabudget.gov.in/doc/impbud2020-21.pdf. 23 Notes on Overview of Receipts and Expenditure- Railways, Expenditure Profile, Union Budget 2022-23, https://www.indiabudget.gov.in/doc/eb/railstat1.pdf.  
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