The Union Budget plays a decisive role in shaping India’s infrastructure trajectory, but this year’s expectations go beyond headline capital expenditure figures. For Indian Railways, the Budget marks a decade since the merger of the Railway Budget with the General Budget, making it a moment to reassess long-term sustainability and reform. For roads and highways, the focus is likely to be continuity with sharper priorities, aligned with logistics efficiency and growth imperatives.
Why this Budget matters for Indian Railways
For the Railways, the central concern is financial sustainability. With the operating ratio crossing 98 per cent, almost the entire revenue is consumed by operating expenses, leaving negligible surplus for capacity expansion or service upgrades. This constrains the Railways’ ability to respond to rising freight demand and passenger expectations.
Experts increasingly argue that incremental reform is no longer sufficient. Structural changes, including greater private participation, are being seen as unavoidable to restore financial health and operational efficiency.
The case for privatisation and strategic disinvestment
Privatisation is being advocated not as a blanket solution, but as a targeted strategy beginning with non-core activities. This includes strategic disinvestment of Railway public sector undertakings, production units, and construction-heavy projects such as Dedicated Freight Corridors and high-speed rail.
Private capital and execution expertise are considered better suited for managing time-bound, risk-intensive infrastructure projects. This approach could also free the Railways from project execution risks while allowing it to focus on regulation, safety, and core public service delivery.
Freight reforms and reducing cross-subsidisation
Freight operations represent a major opportunity for reform. Allowing private players to operate commodity-specific freight trains on the same footing as container trains — starting with the Dedicated Freight Corridors — could significantly improve efficiency and asset utilisation.
Such reforms would also ease the long-standing burden of cross-subsidisation, where freight revenues subsidise passenger fares. Reducing this distortion would enable the Railways to price services more rationally and refocus on providing safe, affordable passenger transport.
Investment priorities and project discipline
There is a strong argument for using capital expenditure strictly for capacity augmentation rather than spreading it thin across projects. Early sanctioning of three new Dedicated Freight Corridors, executed with private participation, could catalyse freight growth.
Equally important is addressing chronic cost and time overruns. Analysts have called for a critical evaluation of all major projects to enforce fiscal discipline and improve project management. Long-pending decisions, such as the strategic disinvestment of CONCOR, approved in 2019, also need expeditious resolution.
Non-fare revenue and land monetisation
To supplement revenues, the Railways is being urged to aggressively expand non-fare income. Commercial exploitation of surplus land through transit-oriented development offers significant potential, particularly along high-speed rail corridors and the Mumbai suburban network.
These measures could create steady revenue streams without burdening passengers or freight users.
Manufacturing, regulation, and pension stress
Structural reforms are also being proposed in manufacturing and regulation. Railway production units could be hived off as independent corporate entities operating as cost and profit centres, similar to global wagon and locomotive manufacturers.
The creation of an empowered Rail Tariff Regulatory Authority is seen as essential for bringing transparency and rationality to fare and freight pricing. Meanwhile, with over 60 per cent of revenue expenditure going towards wages and pensions, there is growing support for direct budgetary compensation for passenger losses or separate financing of pension liabilities.
Roads and highways: continuity with sharper focus
For roads and highways, the Budget is expected to reinforce the infrastructure-led growth strategy. Innovative financing models to improve ease of doing business for private players and assured funding for projects under the National Infrastructure Pipeline will be key.
Higher allocations are likely for rural road connectivity, given its strong multiplier effect on employment, trade efficiency, and development of aspirational districts. Expressways and highways that reduce logistics costs and support national growth are also expected to remain priorities, alongside increased spending on road safety and maintenance.
Aligning highways with national master plans
Major programmes such as Bharatmala Pariyojana will need closer alignment with the PM Gati Shakti National Master Plan. Flagship projects like the Delhi–Mumbai Expressway, Frontier Highways, and the Char Dham Mahamarg Vikas Pariyojana are expected to receive assured funding to meet completion timelines.
Integration across transport modes
A key opportunity before the Budget lies in strengthening multimodal integration. As envisaged under PM Gati Shakti and the National Logistics Policy, this includes accelerated support for multimodal logistics parks, last-mile rail connectivity to ports and industrial clusters, and urban freight solutions to reduce congestion and emissions.
The broader debate, analysts suggest, must now shift from how much is spent to what kind of infrastructure is built, how it is financed, and how effectively it is governed.
What to note for Prelims?
- Operating ratio of Indian Railways and its significance.
- Dedicated Freight Corridors and their role in logistics.
- Bharatmala Pariyojana and PM Gati Shakti.
- National Infrastructure Pipeline.
What to note for Mains?
- Financial sustainability challenges of Indian Railways.
- Role of private sector in rail and road infrastructure.
- Cross-subsidisation in railways and its impact.
- Importance of multimodal integration for reducing logistics costs.
