The outlay for the Indian Railways’ capital expenditure (capex) is likely to be close to Rs 2.9 lakh crore for the next financial year, up around 8% over the estimated Rs 2.65 lakh crore for the current year.
This signals an annual rate of growth that is marginally lower than the likely nominal GDP growth. Of FY25’s capex budget for the national transporter, Rs 2 lakh crore, or 76%, had been utilised by January 5.
The railways makes little operational surplus and is reliant chiefly on the Budget for its capex, given the strict controls on fresh borrowings. Of the current year’s capex budget, Rs 2.52 lakh is the budgetary outlay, with the balance being extra budgetary resources, including PPP financing. A little over Rs 3,000 crore is being raised by IRFC from the market. The freeze on borrowings is likely to stay in FY26 as well.
A senior official in the railways ministry told FE that since investment in railway infrastructure is one of the key focus areas for the government, the ministry has recommended that the capex increase for FY26 should be greater than the annual inflation rate.
“The railways is working on multiple fronts which require significant capital expenditure from the government. This includes introducing new trains like Vande Bharat sleeper trains and Namo Bharat Rapid Rail, modernisation of the railways network, construction of the bullet train corridor, and further investments in the area of passenger safety and comfort,” the official said.
“We are on track to fully utilise the allocated resources for the current financial year. The railways is in need for more funds for the next year to keep the momentum going,” the official said.
It is also expected that the Budget for 2025-26 will target for higher extra budgetary resources (EBR) through the PPP (public private partnership) mode. The share of PPP funding in the overall railways budget has been going down over the years. For instance, in FY24, the government estimated to generate Rs 17,000 crore from PPP mode. This number was brought down to Rs 10,000 crore in FY25.
The railways has already generated 87% (or `8,733 crore) of the resources through PPP in the first nine months of FY25, and it is likely that the government could increase the target for FY26. “Because of the robust response for the PPP projects, and given that the next financial year is going to be a non-election year, we are hopeful that there will be some activity on the PPP side,” the official said.
Meanwhile, the railways is aggressively rolling out Kavach safety system on which the ministry has spent Rs 1,500 crore till date as against the allocated budget of Rs 1,100 crore in FY25 budget. “Currently, the work is going on the Delhi-Mumbai and Delhi-Howrah corridors. We expect the newer version Kavach 4.0 to gather pace with higher allocation of resources towards signalling and telecommunications works,” the official said.