The railway sector has been one of the key focus areas of the government for several years now. With the aim of transforming and modernising Indian Railways (IR), the government has made considerable investments in network expansion and modernisation works over the past couple of years. With infrastructure creation at an all-time high, huge investment opportunities are in store with initiatives such as dedicated freight corridors (DFCs), high speed rail (HSR), station redevelopment, and the national monetisation and infrastructure pipeline.
Budgetary outlay
Under Union Budget 2022-23, the Ministry of Railways has received an allocation of Rs 1,403.67 billion. The allocation is 16.92 per cent higher than the revised estimate (Rs 1,200.56 billion) and 27.54 per cent higher than the budget estimate (Rs 1,100.55 billion) for 2021-22. Of the total allocation in 2022-23, Rs 25 billion has been allotted to signalling and telecommunications and Rs 79.78 billion to rolling stock. For infrastructure development, Rs 252.43 billion has been allotted to new lines, Rs 28.5 billion to gauge conversion, Rs 121.08 billion to doubling works, Rs 133.35 billion to track renewals, and Rs 9.4 billion to bridges, tunnel works and approaches.
In another key development, IR’s capital expenditure recorded a compound annual growth rate (CAGR) of 14.36 per cent, increasing from Rs 1,099.35 billion in 2016-17 to Rs 2,150.58 billion in 2021-22. In 2022-23, capital expenditure is projected to be Rs 2.45 trillion, an increase of 14 per cent over the revised estimates of 2021-22.
National Infrastructure Pipeline
As per the National Infrastructure Pipeline released in December 2019, investments worth Rs 13.67 trillion are to be made in the railway sector during the period 2019-20 to 2024-25 for improving freight efficiency, augmenting the speed of trains, improving passenger amenities, enhancing safety and ensuring better connectivity. This is almost 12 per cent of the total investments in infrastructure. Of the total projects to be implemented in the sector, projects worth Rs 11.97 trillion will be executed through the engineering, procurement and construction (EPC) mode. The remaining projects involving an investment of Rs 1.61 trillion will be implemented on a public-private partnership basis.
National Monetisation Pipeline
The government has identified various railway assets for monetisation under the National Monetisation Pipeline (NMP) unveiled in August 2021. Railways is the second biggest sector, after Roads, that has been identified in the ambitious plan. The monetisation of the IR’s brownfield assets is expected to reap over Rs 1,520 billion in four years. Of this, Rs 178.1 billion would be monetised in 2021-22, Rs 572.22 billion in 2022-23, Rs 449.07 billion in 2023-24 and Rs 325.57 billion in 2024-25. Key railway assets identified for monetisation (over the period 2021-22 to 2024-25) include 400 railway stations, 90 passenger trains, one 1,400 km route railway track, 741 km of Konkan Railway, 15 railway stadiums and selected railway colonies, 265 railway-owned good sheds, and four hill railways. According to the NMP, railway assets would contribute 26 per cent of the total estimated Rs 6,000 billion. In four years’ time, monetising railway stations and passenger train operations is expected to garner about Rs 762.5 billion and Rs 216.42 billion respectively. Further, monetising 673 km of DFCs would gather Rs 201.78 billion, while Rs 187 billion is estimated to come from track, signalling and overhead equipment. The monetisation value of Konkan Railway is estimated at Rs 72.81 billion and that of hill railways is Rs 6.3 billion. Meanwhile, the goods sheds identified for monetisation are expected to garner Rs 55.65 billion, while for the redevelopment of the railway colonies the amount would be Rs 22.5 billion.
Investment opportunities
Indian Railways (IR) has been working towards the modernisation of its rail network across the country. To this end, it has undertaken a string of mega projects such as HSR corridor projects and DFCs. The proposed HSR corridors with a cumulative length of approximately 6,000 km will entail an investment of Rs 10 trillion over a period of 10 years. Meanwhile, the Ministry of Railways is preparing a detailed project report for the three new DFCs. The east coast corridor is expected to entail an investment of Rs 403.44 billion, while the east-west sub-corridor will cost nearly Rs 868.05 billion. Meanwhile, the north-south sub-corridor will require an investment to the tune of Rs 895.79 billion.
Further, the Mumbai Urban Transport Project (MUTP) 3, MUTP 3A and Bengaluru suburban rail projects will entail a total investment of more than Rs 800 billion over the next six years. In addition to this, implementation of the regional rail transit system is expected to involve an investment of Rs 972 billion over the next seven years. In another development, the national transporter intends to award around 40 stations for redevelopment in 2022-23. Of the 40, 32 will be redeveloped by different zones of IR while eight will be undertaken by the Rail Land Development Authority. Opportunities to the tune of Rs 1.1 trillion exist in station and commercial development around stations, real estate development and multi modal transit hubs technology and equipment providers, etc.
Apart from this, IR has identified and prioritised a large number of projects designated as supercritical, critical and coal/port connectivity, for completion as per the Vision 2024 document, which is a subset of the National Rail Plan. As many as 58 supercritical projects of a total length of 3,750 km costing Rs 396.63 billion and 68 critical projects of a total length of 6,913 km costing Rs 757.36 billion have been identified for completion by 2024.
Meanwhile, RailTel is set to execute modern signalling projects worth Rs 2.24 billion on the Northern Railway by replacing obsolete mechanical signalling with a state-of-the-art electronic interlocking system. The work for the same has already been commissioned at six stations — three stations of Delhi division (Pehowa Road, Kaithal and Kalayat) and three stations of Ambala division (Bulluana, Malout and Pakki). Meanwhile, it is at an advanced the stage of completion at the remaining six stations of Ambala division. So far, revenue to the tune of Rs 650 million has already been booked and Rs 1.05 billion of revenue will be booked in 2022-23, with the remaining being booked in 2023-24.
With regard to rolling stock, IR plans to invest Rs 80 billion-Rs 110 billion in 2022-23 and another Rs 25 billion-Rs 35 billion in 2023-24 in the production of Linke Hofmann Busch coaches. For the production of wagons, Rs 1.5 billion will be invested in 2022-23 and another Rs 1.5 billion in 2023-24.
In sum
In the next four to five years, the railway sector will see a quantum jump in infrastructure development and investment opportunities. With more than 128,545 km of network expansion and upgradation works in progress, and the mega projects being executed, significant opportunities exist for EPC players, rolling stock providers, signalling and telecom players, electrification equipment manufacturers and consultants.
