April 2021

Indian Railways (IR) has used the hiatus enforced due to the lockdown to reboot and refurbish its infrastructure. IR’s revenues are tied to freight and passenger traffic. Therefore, it suffered huge losses during the lockdown and afterwards too, as economic activity was below par for many months. However, it could get on with the task of repair and maintenance as traffic pressure was off the network.

IR has now laid out very ambitious plans for future growth. These plans include the creation of three new dedicated freight corridors and seven new high speed rail corridors. In addition, there are plans for the redevelopment of around 400 stations, which will enhance the value of IR’s real estate considerably. The multi-tracking of existing lines and the construction of many new bridges will also be carried out. Further, it targets 100 per cent electrification, which will make it the first major railway system with a fully electrified network. This requires the electrification of nearly 9,500 rkm annually. However, this target will be missed in 2021-22.

Implementing these plans would require well over Rs 13 trillion in investments over the next four years. The newly created Project Development Cell in the Railway Board is expected to increase investments and encourage FDI inflow. The Make in India initiative will also support these plans.

Projects worth about Rs 12 trillion will be executed in the EPC mode, whereas the remaining projects involving investments worth Rs 1.6 trillion will be implemented on a PPP basis.

This is a massive opportunity for private enterprises as the PSU transporter intends to tap private resources (financial, technical and managerial) via the PPP route. The huge pipeline of projects and a positive attitude towards private sector participation will help create business opportunities for EPC players, rolling stock providers, signalling and telecom players, electrification equipment manufacturers, and consultants.

The outlook for rail development remains positive in the long term. The contribution of IR will be a key component in the country’s overall economic recovery and the revival of GDP growth. All big-ticket projects will increase the capacity and efficiency of the rail network, and the sector’s positive externalities will help kick-start other economic activity.

However, the deadly second wave of the pandemic has clouded the short-term outlook. IR will take a financial hit again in 2021-22, as revenues are going to be affected due to the inevitable slowdown. On the ground progress on projects is also likely to be impacted due to supply chain disruptions and labour shortages. Policymakers may have to review the timelines and be more proactive to enable the sector to move forward during this period of unprecedented hurdles.

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