Budgetary support for Indian Railways’ capital expenditure (capex) is likely to witness modest growth in FY27 with transporter likely to get Rs 2.75 lakh crore, up just 3.7% on the Budget Estimate for the current year, an official told FE. The freeze on use of extra budget resources (EBR) to meet the transporter’s investment requirements will continue, the source added.
The marginal increase in budgetary allocation (gross budgetary support) for next fiscal will come in the backdrop of the railways achieving a record capex utilisation of 56.5% or Rs 1.42 lakh crore in the first half of FY26.
Balancing Record Utilisation
After a record budgetary allocation of Rs 2.62 lakh crore in FY25, the ‘ outlay in FY26 was kept the same largely owing to significant under-utilisation of the FY25 funds.
The official said that despite the robust capex spending in the first six months of FY26, the full-year spending will likely be in the range of 80-85% of the BE. “Nearly 10-15% of the committed expenditure is expected to remain unutilised because projects get stalled due to clearance issues, etc. A utilisation rate of over 80% is common in large infrastructure segments like the railways. The railways is also focussing on attracting significant investments through PPP (public-private partnership) mode in FY27, especially to expand track capacity,” the official said.
Out of the current year’s capex budget, oer 96% would come from gross budgetary support (GBS) with the balance Rs 10,000 crore being financed through PPP projects. “The expansion of tracks will be a critical area for the railways over the next few years. Unless the new tracks are added, the congestion is going to get worse affecting train speeds, and affecting the competitiveness of the railways vis-a-vis road transport. As such, there’s a high demand from the passenger segment necessitating an increase in the track capacity,” the official said.
Experts said that the allocation towards railways’ capex is dependent on the sector’s ability to absorb additional investments, fiscal space of the government, the deficit in the railways’ infrastructure, and the ministry’s plan for the next financial year.
“A sub-5% increase in capex seems modest. The railways needs higher budgetary support to bridge the gap with the roads/highways which have received a much bigger government funding over the past 8-10 years,” said the former CEO of a logistics firm.
Till September, the capex utilisation remains patchy across segments. For example, as far as safety works are concerned, 56% of the annual target of Rs 39,456 crore was spent in the first six months of the current fiscal. But on the capacity augmentation front, about 44.6% of the committed amount was spent in areas like adding new lines, doubling of lines, gauge conversion, electrification, and metropolitan transport projects.
The railways barely make an operational surplus. It is losing freight traffic to revenue in areas other than “captive ones” like fertilisers and PDS food. The passenger segment is highly cross-subsidised by freight, while the transporter’s ability to attract more passenger volumes is also undermined.
Passenger Fare Rationalisation
Effective Friday, AC and non-AC coach passengers on mail and express trains will have to pay more for the tickets, as the government seeks to collect Rs 600 crore extra through the current fiscal. A fare increase was implemented in July this year too.