New Delhi: When disasters like the stampede at the New Delhi Railway Station happen, the public is usually told that it is merely an accident caused by unforeseen developments or technical failures. However, a careful examination of the state of Indian Railways reveals that these disasters stem from larger systemic failures – a web of financial constraints, infrastructure gaps, and operational challenges that create conditions where such incidents become increasingly probable.
Fiscal precariousness: Navigating a tightrope of revenue and expenditure
The dual mandate of the Indian Railways, operating as both a commercial enterprise and a public utility, presents a persistent financial quandary. Projected internal revenue for the fiscal year 2025-26 stands at Rs 3,02,100 crore, reflecting an 8.3% increment over the revised estimate of Rs 2,78,000 crore for 2024-25. This revenue stream is predominantly derived from freight operations, contributing Rs 1,88,000 crore (62%), followed by passenger earnings at Rs 92,800 crore (31%). Ancillary sources, including catering and advertisements, constitute Rs 12,000 crore (4%), with miscellaneous receipts amounting to Rs 700 crore, a notable 75% increase from the preceding year.
Despite this substantial revenue, the Railways operates on a razor-thin margin. The projected revenue expenditure for 2025-26 is estimated at Rs 2,99,059 crore, effectively consuming 99% of internal receipts. This expenditure encompasses Rs 2,26,256 crore in ordinary working expenses, Rs 68,603 crore allocated for pensions, and Rs 38,259 crore for fuel, amongst other essential costs.
The operating ratio, a crucial indicator of financial viability, paints a concerning picture. At 98.43% for 2025-26, it signifies that for every Rs 100 earned, Rs 98.43 is immediately expended on operations, leaving a meagre net revenue of Rs 3,041 crore. Although this represents a substantial 126.7% surge from the Rs 10,000 crore in 2024-25, it remains woefully inadequate for a network of such magnitude. Since 2016-17, this ratio has consistently surpassed 96%, reaching a critical juncture of 107% in 2021-22.
The Comptroller and Auditor General (CAG) has observed that even these figures are potentially embellished through accounting adjustments, such as leveraging advance bookings and shifting pension costs, thereby obscuring a more precarious financial reality.
An inherited burden: Safety compromised
The financial stringency directly translates into safety vulnerabilities across the railway network. Between 2000-01 and 2023-24, the system documented 3,953 consequential accidents – incidents resulting in injury, fatality, or significant disruption of traffic. While a decline from 473 incidents in 2000-01 to 40 in 2023-24, with a corresponding reduction in the accident rate per million kilometres travelled from 0.65 to 0.03, is discernible, the objective of zero accidents remains elusive.
Railway year books from 2017-22 highlight a disconcerting trend: staff errors constitute the primary cause of accidents, with derailments being the most prevalent. A 2021 CAG report attributed derailments to a confluence of factors, including excessive speed, deferred track maintenance, defective coaches, and errors in shunting procedures. These issues are exacerbated by systemic inadequacies in safety inspections, with shortfalls ranging from 30% to 100% across various parameters.
Non-air-conditioned coaches, accounting for 66% of non-suburban traffic volume in 2025-26, represent a significant vulnerability. A concerning 63% of these coaches, which cater to the majority of passengers, lack fundamental safety equipment such as fire extinguishers, exposing millions of daily commuters in Sleeper and Second Class compartments to considerable risk.
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The implementation of the Kavach automatic train protection system, while promising, underscores the arduous task of modernising safety infrastructure. As of November 2024, the system covered 3,434 km, entailing an expenditure of Rs 1,547 crore for the installation of 5,133 km of optical fibre, 540 telecom towers, equipment at 533 stations, and the fitting of 707 locomotives. At a cost of Rs 50 lakh per km and Rs 80 lakh per locomotive, this crucial safety measure extends to only a fraction of the network’s extensive route spanning 65,000 km.
Deteriorating infrastructure: A network grappling with obsolescence
The physical infrastructure of the Indian Railways bears the burden of prolonged underinvestment. The Depreciation Reserve Fund (DRF), intended to finance the replacement of ageing assets, suffers from chronic inadequacy.
The allocation for 2025-26 is a mere Rs 1,500 crore, a figure that pales in comparison to the actual requirements. This inadequacy is further underscored by historical trends: the Rs 5,000 crore budgeted in 2017-18 resulted in an actual expenditure of only Rs 1,540 crore, while the allocation of Rs 800 crore in 2021-22 witnessed zero expenditure.
As of March 2022, the CAG estimated a staggering backlog of Rs 34,319 crore in asset renewal, comprising Rs 23,763 crore for rolling stock, Rs 3,542 crore for track renewals, Rs 1,465 crore for signalling systems, and Rs 1,683 crore for staff welfare. While 5,500 km of track renewals are planned for 2025-26, representing a 10% increase from 2024-25, this pace remains insufficient to address the escalating demands and the ongoing deterioration of the network.
The Rashtriya Rail Sanraksha Kosh (RRSK), established in 2017-18 with an ambitious corpus target of Rs 1 lakh crore over five years (subsequently extended to 2027), exemplifies the persistent challenges in funding safety infrastructure. The scheme relies on annual contributions of Rs 15,000 crore from the government and Rs 5,000 crore from Railway revenue. However, internal contributions have consistently fallen short of targets – the budgeted Rs 5,000 crore in 2019-20 yielded a mere Rs 201 crore, while 2021-22 witnessed no contribution whatsoever. The allocation for 2025-26 stands at Rs 2,000 crore, an increase from the revised Rs 920 crore in 2024-25, still significantly below the intended level.
Disparities in passenger services: The non-AC predicament
A pronounced structural imbalance is evident in the Railways’ passenger operations. Projections for 2025-26 indicate 13.1 billion passenger kilometres, a 9% increase, with 91% attributed to non-suburban (long-distance) routes and 9.5% to suburban services. Within this, non-air-conditioned classes account for the majority of traffic volume but exhibit minimal growth – sleeper class (22% of non-suburban volume, generating Rs 16,509 crore in earnings) has grown at a meagre 0.3% annually since 2015-16; second class mail/express (35%, Rs 17,511 crore) at 3%; while second class ordinary (7%, Rs 1,626 crore) has experienced a concerning 10% annual decline, attributed to supply constraints rather than diminished demand.
Conversely, air-conditioned segments demonstrate robust growth: AC 3-tier (20%, Rs 37,115 crore) at 14%, AC chair car (2%, Rs 5,626 crore) at 29%, and AC first class (0.4%, Rs 1,527 crore) at 11%. Suburban traffic, generating 1.24 billion passenger kilometres and Rs 3,071 crore in revenue, operates at a substantial loss of Rs 8,316 crore annually.
Financial losses in passenger services are considerable: in 2021-22, sleeper class incurred a loss of Rs 17,038 crore, second class Rs 16,393 crore, and ordinary class Rs 15,282 crore. Initiatives such as the Amrit Bharat scheme (introducing four non-AC services in 2024, with 12 sleeper and eight general coaches) and plans to augment non-AC coach capacity by 10,000 units by December 2024 represent attempts to address capacity constraints, but their impact remains limited in scope. Meanwhile, premium services like the Vande Bharat Express (136 AC trains operating at 160 kmph) and its proposed sleeper variants (designed for 180 kmph, currently undergoing trials) primarily cater to higher-income segments.
The freight imperative: Cross-subsidisation and its limitations
Freight operations, projected to generate Rs 1,88,000 crore in 2025-26 (a 4.4% increase), constitute the financial bedrock of the railway system. Coal remains the dominant commodity, comprising 51% of tonnage and contributing Rs 98,503 crore with a 64% modal share, exhibiting a 5.8% annual growth since 2022-23.
Other key segments include iron ore (6%, Rs 14,110 crore, 71% modal share), cement (9%, Rs 12,789 crore), containers (8%, Rs 10,170 crore), and food grains (6%, Rs 7,891 crore) – the latter experiencing an 11% decline.
The freight target of 1,700 million tonnes represents a 4.1% annual increase from the 1,509 million tonnes transported in 2022-23. This falls considerably short of the 9% growth required to achieve the ambitious target of 3,000 million tonnes by 2030-31 and elevate the modal share from 26% to 45%. Various schemes, including the General Purpose Wagon Investment Scheme, the Liberalised Wagon Investment Scheme (encompassing Roll-on-Roll-off services), the Automobiles Freight Train Operator Scheme, and the Wagon Leasing Scheme, are designed to encourage private sector participation in freight infrastructure development. However, persistent inefficiencies in freight operations, including delays and elevated container costs, continue to impede track availability for passenger services.
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Freight revenue plays a crucial role in cross-subsidising passenger losses, a model that has drawn criticism from NITI Aayog. Freight rates are triple those of passenger fares, having risen by 91% between 2009 and 2019 compared to a mere 28% increase in passenger fares. Despite this substantial cross-subsidisation, the financial gap remains, leaving passenger infrastructure, particularly station capacity, chronically underfunded and overstretched.
Indebtedness and reliance: The government’s sustaining role
The Railways’ capital expenditure for 2025-26 is pegged at Rs 2,65,200 crore, with 95% (Rs 2,52,200 crore) derived from budgetary support, 1% from internal revenue, and 4% from extra-budgetary resources (EBR). Major allocations include Rs 32,235 crore for 700 km of new lines, Rs 32,000 crore for 2,600 km of track doubling, Rs 58,805 crore for rolling stock (comprising 1,600 electric locomotives and 9,423 coaches), and Rs 22,800 crore for track renewals.
The system’s indebtedness continues to escalate: liabilities to the Indian Railway Finance Corporation have reached Rs 4.4 lakh crore, with lease charges – Rs 27,905 crore in capital and Rs 31,433 crore in interest – now consuming 20% of revenue, a significant increase from Rs 15,598 crore in 2016-17. Private sector participation, which could potentially alleviate this financial strain, remains limited. The Amrit Bharat station redevelopment scheme, targeting 1,337 stations, has received bids for only two out of 23 stations offered through public-private partnerships. This contrasts sharply with the earlier Adarsh scheme, which covered 1,253 stations between 2009 and 2023, with an expenditure of Rs 9,328 crore during 2018-22.
This heavy reliance on government funding sustains basic operations but severely constrains the system’s capacity to address its fundamental challenges, perpetuating a cycle of underinvestment in infrastructure modernisation, safety enhancements, and capacity expansion.
