As India moves towards enhancing its infrastructure and driving economic growth, Indian Railways (IR) is on the brink of a significant transformation, powered by sustained high capex over the past few years, technological innovation and operational reforms. Infrastructure creation, such as track construction and station redevelopment, is expected to provide a fillip to IR’s objectives of achieving higher speeds for trains, improved passenger amenities and robust freight performance. These initiatives, coupled with a focus on streamlining governance, are empowering the Railway Board (RB) and fostering operational flexibility, which bodes well for the future of the national transporter.
Funding railway growth
The Union Budget 2025-26 sets a clear direction for the railway sector, with a significant focus on infrastructure creation and reducing reliance on external budgetary support. The gross budgetary support allocation has nearly quadrupled since 2019-20–increasing from Rs 678 billion to Rs 2,520 billion–signalling a shift towards fiscal prudence by reducing the reliance on internal and extra budgetary resources (IEBR). Of the total allocation for 2025-26, Rs 130 billion is being provided through IEBR, a significant decrease from
Rs 940 billion in 2019-20. Notably, the railway’s capex outlay has almost doubled over the past five years, rising from Rs 1,480 billion in 2019-20 to Rs 2,652 billion in 2025-26 (maintaining the same allocation as the previous year). The current capex level is optimal for the sector’s continued growth and progress.
Additionally, a major focus has been placed on creating track infrastructure with an allocation of Rs 1,046 billion, accounting for around 40 per cent of the total outlay. This includes Rs 322 billion for the construction of new lines, Rs 320 billion for doubling,
Rs 228 billion for track renewals, Rs 46 billion for gauge conversion, Rs 68 billion for signalling and telecommunication, and Rs 62 billion for electrification. Additionally, Rs 455 billion has been earmarked for rolling stock, representing around 17 per cent of the total outlay.
Tracking the performance of key segments
IR’s performance has shown improvements, driven by higher freight and passenger traffic. As per the Economic Survey 2024-25, IR recorded an 8 per cent increase in originating passenger traffic and a 5.2 per cent rise in freight revenue during April-December 2024 over the corresponding period of the previous year. The revenue generated by IR stood at Rs 1.93 trillion during April-December 2024, which includes Rs 1.26 trillion generated through the freight segment and Rs 559.88 billion through the passenger segment, among others, highlighting the dominant role played by the revenue-generating freight segment of IR. Freight loading also grew by 2 per cent, reaching 1,179 million tonnes (mt) during this period. Furthermore, the Ministry of Railways registered capex utilisation of 76 per cent (or Rs 1.92 trillion) during this period, reflecting an increase of 2 per cent over the corresponding period of the previous year. This included Rs 817 billion for capacity augmentation,
Rs 403 billion for rolling stock, Rs 281 billion for safety-related works and Rs 82 billion for passenger amenities, among others.
Increasing focus on capacity expansion
One of the most significant areas of growth for IR has been capacity expansion, especially through track construction and the enhancement of rail infrastructure. There has been a general trend of increased allocation and utilisation of funds over the past five years, both for laying new lines and the maintenance of existing rail lines. The year-wise total capacity addition has more than doubled in this period, increasing from 2,226 km in 2019-20 to 5,309 km in 2023-24, as a result of multiple multitracking initiatives undertaken by IR. During April-December 2024, a total of 3,433 km of tracks, which includes new lines (1,158 km), doubling (2,016 km) and gauge conversion (259 km), have been laid, with an average daily track laying of 12.48 km per day. Further, IR is targeting to add 5,500 km of tracks in 2024-25 at a pace of 15 km of new tracks per day, along with replacing 7,000 km of old tracks annually. As of December 2024, IR has achieved 62 per cent of its annual target. This accelerated infrastructure expansion has helped reduce congestion and enabled faster train speeds, facilitating smoother and more efficient travel for both passengers and freight. Around 23,000 of the total track km (tkm) of IR’s routes can now accommodate trains running at speeds of up to 130 km per hour (kmph), and about 54,337 tkm is capable of supporting trains at speeds of 110 kmph.
Infrastructure expansion through new divisions
To support the growing demand for rail services, the government has undertaken significant efforts to improve regional connectivity and expand railway infrastructure. Recently, in January 2025, the centre inaugurated the new Jammu railway division of IR. The division covers an area of 742 km and includes sections such as Pathankot-Jammu-Udhampur-Srinagar-Baramulla, Bhogpur Sirwal-Pathankot, Batala-Pathankot, and Pathankot-Joginder Nagar. This move is expected to enhance operational efficiency by improving rail connectivity across key regions in Jammu & Kashmir, facilitating smoother passenger services and better infrastructure management. Additionally, the foundation stone for the South Coast Railway zone’s headquarters in Visakhapatnam, Andhra Pradesh, was also laid in January 2025. The zone will facilitate trade by connecting major ports such as Visakhapatnam, Kakinada and Krishnapatnam, which handle large volumes of cargo traffic and contribute significantly to the railway’s revenue. In addition, the zone will include important divisions, such as the Guntur division, the Vijayawada division and parts of the Waltair division.
The government is also planning to merge Konkan Railway Corporation Limited (KRCL) with IR to streamline services across the coastal regions of Maharashtra, Goa, Karnataka and Kerala. Consultations have already been held with the state governments of Karnataka, Kerala and Goa. As part of this merger, IR is expected to provide KRCL with the necessary capital to implement essential infrastructure upgrades, as KRCL is currently incurring operational losses and lacks the resources to do so. The Karnataka government approved the merger in December 2024 and is now awaiting a proposal from KRCL regarding exit options.
Safety measures and technological upgrades
Safety remains a paramount concern for IR. Recognising this, it has consistently made substantial investments in modernising safety systems. A key safety upgrade has been the deployment of electronic interlocking (EI) systems across stations. During 2024-25, 227 stations have been equipped with EI systems, bringing the total number of stations covered to 3,576. Additionally, 25 of the 62 pending stations were upgraded to EI systems, eliminating mechanical signalling at nine zonal railways. Further, automatic block signalling has been deployed on 720 route km (rkm) of high-density network routes during 2024-25, increasing the coverage to 4,906 rkm.
Another key safety initiative is the deployment of the indigenously developed automatic train protection system Kavach, which has seen investments to the tune of Rs 15.47 billion. As of November 2024, IR has deployed 5,133 km of optical fibre cable for the Kavach system. Further, the progress on Kavach, as of November 2024, includes the installation of 540 telecom towers and 3,434 rkm of track side equipment, and the provision of Kavach in 707 locomotives and 523 stations. Furthermore, in December 2024, IR announced plans to implement the integrated track monitoring system (ITMS) across all its railway zones at an investment of approximately Rs 1.8 billion. The ITMS features contactless track monitoring through laser sensors, high speed cameras, light detection and ranging technology, among others. The implementation of ITMS is expected to reduce the reviewing cycle of rail track health from the current four months to two months.
Challenges plaguing the sector
Despite the progress made, the sector still faces several challenges, including slow network expansion, issues with first-mile and last-mile connectivity, dependency on imports and project delays. There has been a significant focus on multitracking (doubling, tripling, etc.) and gauge conversion projects, which account for 71 per cent of the total capacity addition by IR during 2014-24 (till December 2024). However, these segments do not contribute to the expansion of the route length, and hence IR’s net rail line coverage area has grown at a slower pace, even though the tkm has increased. Further, IR faces intense competition from the road network, which offers better first-mile and last-mile connectivity and has expanded at more than double the rate of the rail network in the past two decades.
While the government has successfully embraced public-private partnerships (PPPs) in sectors such as roads and aviation, attempts to attract private players in railways have not been successful. This could be due to the high-risk, low-reward revenue-sharing pattern of the railways. Meanwhile, the persistent issues of land acquisition have continued to hinder the sector, causing project delays. Additionally, the reliance on imported technology, such as forged wheels, European train control systems for the high-speed rail, and bullet train technology from Japan, also lead to significant delays in project completion amid geopolitical uncertainties.
Efforts to streamline operations and governance
IR is making efforts to improve financial practices, refine operations and maintenance (O&M) policies, and advance infrastructure development. In addition, greater autonomy for zones and public sector undertakings (PSUs) is ensuring optimised operations across the network.
In a landmark move aimed at enhancing the operational efficiency and governance of IR, the government passed the Railways (Amendment) Bill, 2024 in the Lok Sabha on December 11, 2024. This amendment seeks to streamline governance by decentralising powers and granting more autonomy and operational flexibility to the RB, thus enabling faster decision-making processes and improved service delivery across the network. The primary objective of the amendment is to simplify IR’s legal framework by merging the provisions of the Indian Railway Board Act, 1905 with the Railways Act, 1989. The amended bill empowers the government to determine the composition of the board.
Further, to improve railway operations, an independent regulator will now be appointed to oversee tariffs and safety, and ensure the competitiveness of IR. The amendment focuses on accelerating the approval process for train services and fast-tracking infrastructure projects. This includes extending the Arunachal Express through regions such as Siwan, Thawe, Kaptanganj and Gorakhpur, and rerouting superfast train services from Thawe junction in Bihar to major cities, including Delhi. The bill also proposes improving operational efficiencies by granting greater autonomy to railway zones. Following this, the RB announced plans to grant greater authority to PSUs in the O&M of new depots, sheds, workshops and rolling stock. Reportedly, all 17 zones of IR have been directed to conduct a limited tendering process, which will be pursued through competitive bidding for the authorisation of these PSUs. The RB has set 29 specific conditions for the PSUs, which include maintaining the existing infrastructure at these locations, augmenting infrastructure for rolling stock maintenance and conducting annual safety audits. Furthermore, the railway zones will have the authority to terminate the contracts with PSUs if their performance does not meet standards. Currently, there are over 700 workshops and 300 depots across the IR network, all of which will undergo this restructuring. Overall, this is a welcome move for the sector.
Another significant development in December 2024 was the announcement of the implementation of an accrual-based accounting system across all IR zones for 2024-25. This shift from traditional accounting methods is designed to bring greater financial transparency to IR’s operations, making it easier to mobilise funds from multilateral organisations and attract green financing. This places IR on par with government entities in developed economies, which have already adopted accrual accounting for greater fiscal transparency.
Further, in July 2024, the RB introduced a power car maintenance policy aimed at boosting the performance of power cars, which supply electricity to various systems such as air conditioners, fans and lighting in train coaches. Under this policy, a new contract based on original equipment manufacturer standards will be signed, ensuring timely maintenance and repairs. Additionally, maintenance has been shifted to a kit-based system, with contracts being finalised to ensure the efficient and reliable servicing of power cars, which play a critical role in ensuring the smooth functioning of IR’s long-distance trains.
Future prospects and potential private sector participation
IR currently operates about 18,000 trains every day, of which 8,000 are freight trains. The sector is undertaking various initiatives to boost revenue by focusing on the freight segment. While the average speed of freight trains on general routes has remained unchanged since 2019-20 (23.6 kmph), freight trains on dedicated freight corridors (DFCs) operate at almost double the speed–44.6 kmph on the eastern DFC and 51.3 kmph on the western DFC. Additionally, IR plans to develop 200 new Gati Shakti cargo terminals (GCTs), with an investment of Rs 140 billion, to facilitate the growing demand for freight services. By November 2024, 91 GCTs had already been commissioned, with 100 GCTs targeted for 2024-25. This positions IR to now hold a larger share of freight transportation in the logistics market. However, the target of reaching 3,000 mt by 2030 appears challenging, as it requires freight traffic to grow at a CAGR of 11 per cent between 2024-25 and 2029-30, which is double the current rate of 5.4 per cent (between 2017-18 and 2023-24).
The budget announcements, including sharing selected data and maps from the PM Gati Shakti portal with the private sector and establishing a three-year pipeline of projects in the PPP mode, are expected to encourage greater private sector participation. Further, in January 2025, IR announced plans to adopt the PPP model for the development of commercial lines, such as mineral transportation corridors, which are essential for meeting the increasing demand for industrial goods. The development of these corridors, which are a part of the economic corridor programme, is expected to entail investments of over Rs 5.25 trillion by 2031. The shift towards the engineering, procurement and construction (EPC) model for station redevelopment is promising for private sector involvement, particularly EPC contractors. Tenders have been awarded, and work is in progress for 1,198 stations of the total 1,337 stations planned for redevelopment. As per ICRA, EPC companies will have business opportunities worth Rs 300 billion over the next two years related to railway station redevelopment. With a comprehensive set of reforms, infrastructure expansion, safety upgrades and an increased focus on private sector engagement, IR is poised for a new era of growth and operational excellence.
