Rail Resurgence!

  • Industry News
  • Sep 30,23
India Railways has been undergoing modernisation programme with consistent increase in capital expenditure in recent years. In the Union Budget 2023-24, the railway sector was the biggest beneficiary.
Rail Resurgence!

The glass ceiling was broken by Jaya Varma Sinha on September 1, 2023 when she became the first-ever female Chairperson and CEO of Railway Board of the Indian Railways. Indian Railways - the second-largest network managed by a single entity worldwide - never had a female CEO in its 169 years of service. As the head, Sinha will oversee a significant expansion of Indian Railways.

India Railways has been undergoing modernisation programme with consistent increase in capital expenditure in recent years. In the Union Budget 2023-24, the railway sector was the biggest beneficiary. For 2023-24, a record capital expenditure of Rs 2.60 trillion was allocated for railway sector, an increase of 6 per cent over the previous year. Companies involved in railways and its allied activities have benefited from this growth. For example, the France-based Alstom, which is one of the major beneficiaries of the railway modernisation programme, has an order backlog of over Euro 4.2 billion from its India operations. Alstom India's turnover was up by 45 per cent in FY23, compared to the last financial year.

In July 2023, the government launched a National Rail Plan to connect the rail network with other modes of transportation and create a multi-modal transportation network. To encourage micro, small and medium enterprises (MSMEs) participation as suppliers to the railway sector, Indian Railways has reduced its vendor application fee from Rs 2.5 lakh to Rs 15,000 for identified safety items. 

As part of the Atmanirbhar Bharat initiative, the Indian government has announced a production-linked incentive (PLI) scheme for manufacturers of train components giving the railway industry a significant boost. Recently, the made-in-India 1.54 million (m) forged wheels were ordered by the railways - a step to draw in international manufacturers and lessen its reliance on imports.

Being an election season (with a few states slated for election this year followed by general election in May 2024), the government's investment activity in infrastructure has gained momentum. The Railways sector has received the highest ever capex allocation of Rs 2.6 trillion, with many projects aimed at capacity augmentation and traffic decongestion in the Indian Railways (IR) network. In fact, the IR has ended up investing and utilising nearly 39 per cent (Rs 1.018 trillion) of FY24’s budgeted capex amount in April-July 2023 period. In FY23, the total capex utilisation till July 2022 was Rs 638.87 billion, which amounted to 31 per cent of the allocation. For improving safety and well-being of train passengers, Indian Railways has allocated approximately 54 per cent more funds in April-July 2023 compared to the corresponding period in the previous year. The prospects in the upcoming 3 to 4 years include 7,000 km of new lines (Rs 700 billion), doubling / 3rd line expansion of 8,000 km (Rs 800 billion). In the High-Speed Rail (HSR) segment, the electrical system packages and balance track packages of the Mumbai–Ahmedabad Corridor are expected to be tendered during the current financial year. IR has further announced the plan to develop 7 new high-speed rail corridors in the medium to long term, the feasibility studies of which have been initiated. In recent years, there has been a thrust for the development of Semi-HSR Corridors projects, of which Track and Systems packages worth Rs 250 billion are expected to be finalised in the next 5 years.

There are opportunities for companies producing railway components such as wheelsets, truck frames, and other structural and stability components for cargo, wagons, and passenger coaches. FDI inflows in railway-related components stood at $ 1.23 billion from April 2000-March 2023. 

With Indian Railways expecting an investment of Rs 50 trillion by 2030, players in this sector will have abundance of opportunities for fast-track growth.

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