Transforming Indian Railways- The Reform Imperative

• 12 Feb 2026

This editorial is based on “At a crossroads” which was published in The Hindu business line on 09/02/2026.The article examines Indian Railways’ record capex push alongside its persistent financial and structural challenges. It argues that without tariff reform, freight diversification, and institutional efficiency, long-term sustainability remains uncertain.

For Prelims:Dedicated Freight Corridor,Amrit Bharat Scheme, Kavach, Transit-Oriented Development,  Net Zero 2030 Railways, 

For Mains:Current Developments in Indian Railways, Key issues Associated with railways, measures needed. 

Indian Railways, often called the lifeline of the nation, today operates at a critical fiscal juncture. Despite record budgetary support of ₹2.5 lakh crore in FY26 and ₹2.78 lakh crore projected for FY27, its operating ratio remains above 98%, leaving little internal surplus for expansion. Freight earnings remain heavily dependent on coal (around 50%), even as India transitions toward cleaner energy. With salaries and pensions consuming 65-70% of railways’ revenues over the last decade, the Railways faces the twin challenges of financial sustainability and logistics transformation in a rapidly evolving economy. 

What are the Current Developments in the Indian Railway Sector?  

• Fast-tracked DFC & Logistics Cost Reduction: Strengthening freight infrastructure has become central to enhancing India’s economic competitiveness and reducing logistics inefficiencies. 
  • The Western Dedicated Freight Corridor (WDFC) is on the verge of full commissioning, finally linking Dadri to JNPT ports seamlessly.  
  • This separation of freight from passenger tracks is structurally lowering India's logistics cost from 14% to single digits by allowing double-stack container trains to run at average speeds of 50 kmph+. 
    • For instance,In FY-25, freight loading by Indian Railways exceeded 1.6 billion tonnes, witnessing a slight expansion over FY-24. 
• Kavach- Acceleration of Safety Network: Following the accelerated trials in 2025, the deployment of Kavach (indigenous Automatic Train Protection) has reached critical mass on the Delhi-Mumbai and Delhi-Howrah high-density corridors.  
  • The focus has shifted from mere "track coverage" to "loco-integration," ensuring that the safety shield is active on the rolling stock itself to prevent Signal Passing at Danger (SPAD).  
    • As of January 2026, 1,306 route km are fully commissioned with Kavach 4.0. The Safety Fund allocation in Budget 2026-27 stands at a ~₹1.20 lakh crore. 
• Strategic Rail Expansion in India’s Difficult Terrains: Railways has moved beyond commercial viability to strategic integration, conquering the toughest terrains in the Himalayas and the Northeast to secure borders and integrate isolated markets.  
  • This engineering diplomacy acts as a force multiplier for national security and socio-economic assimilation of remote states.  
  • For instance, the New Pamban Vertical-Lift Bridge was commissioned in April 2025, and the USBRL (Kashmir link) became fully functional, connecting Kashmir Valley to the national grid. 
    • Also, the Indian Prime Minister inaugurated Bairabi–Sairang broad gauge railway line in Aizawl, linking landlocked Mizoram with the rest of the country through rail connectivity. 
• Fleet Standardization & Launch of Vande Bharat Sleeper: The long-awaited Vande Bharat Sleeper trainsets were commercially launched in January 2026, marking a structural shift from "speed" to "overnight comfort" to rival domestic air travel.  
  • This move aims to recapture the premium traveler segment by offering superior ride quality (jerk-free rides) and reducing travel time on golden quadrilateral routes by 15-20% compared to Rajdhanis.  
    • For instance, the VB Sleeper (Howrah-Guwahati) cut travel time by 3 hours.  
• "SwaRail" Super App & Digital Unification: The Ministry of Railways beta-launched the "SwaRail" Super App (integrating IRCTC, UTS, and Rail Madad) to eliminate digital fragmentation and monetize the massive passenger data ecosystem.  
  • This platform transitions Indian Railways from a "ticket provider" to a "mobility service," offering seamless multi-modal connectivity (rail + last-mile taxi/metro) on a single PNR.  
  • The app integrates 1.5 lakh daily ticket bookings capacity. It also targets reducing the "digital divide" by merging unreserved (UTS) and reserved ticketing into one interface. 
• India’s High-Speed Rail Leap: The Mumbai-Ahmedabad High-Speed Rail (MAHSR) project has entered its final pre-commissioning phase for the Surat-Bilimora section, with 100% land acquisition now complete across Maharashtra and Gujarat.  
  • The focus has moved from civil construction (piers/viaducts) to track-bed laying and signaling, setting the stage for India's entry into the elite club of high-speed rail nations.  
  • Further, Japan reportedly plans to provide India with two Shinkansen train sets, one each from its E5 and E3 series. 
• Fiscal Consolidation via Operating Ratio: Despite heavy capex, Indian Railways has managed to stabilize its financial health by controlling working expenses and increasing the share of non-fare revenue (advertising, asset monetization).  
  • The Operating Ratio (OR) has shown a marginal but vital improvement, signalling that the railways are generating just enough surplus to cover depreciation and pension liabilities without excessive budget reliance.  
  • For instance, the Operating Ratio has improved to 98.32% in FY25 (down from 98.43% in FY24).  
    • Also Gross Traffic Receipts touched ₹2.65 lakh crore driven by a ~7% hike in coal freight earnings. 
• Accelerated Energy Transition: Indian Railways has effectively achieved near-100% electrification of its Broad Gauge network, retiring diesel locos from mainline service to achieve the "Net Zero 2030" goal.  
  • The current thrust is on "Solarizing Stations" and procuring Renewable Energy (RE) via Open Access to reduce the traction power bill, which is the second-largest expenditure head after staff costs.  
  • For instance, as of November 2025, Indian Railways has commissioned 898 MW of solar power. Of this, 629 MW is used directly for traction, and 269 MW for non-traction needs like station lighting. 
• Revitalising Railway Infrastructure through Amrit Bharat Station Scheme: The modernization of 1,300+ stations under the Amrit Bharat Scheme has moved from "facade improvement" to creating "City Centres" that integrate both sides of the city.  
  • This development is not just cosmetic but economic, creating roof plazas and commercial spaces that turn railway stations into 24/7 urban economic hubs rather than just transit points.  
    • For instance, 50 major stations are under active redevelopment with a capex of ₹12,000 crore utilized in FY25. 
• Hyper-Expansion & Regional Integration (RRTS & Metro Mesh): India has transitioned from isolated city-metros to a regionally integrated "Mesh Network" model, effectively connecting suburbs to economic cores via the semi-high-speed RRTS (Namo Bharat) and standardizing access through the "One Nation, One Card" (NCMC) to create economic "Mega-Regions."  
  • This shift from intra-city to inter-city connectivity decentralizes urbanization and reduces pressure on metropolitan housing markets.  
  • For instance, India's operational metro network has soared from 248 km across 5 cities (in 2014) to 1,013 km across 23 cities as of May 2025.

What are the Key Issues Associated with the Indian Railway Sector? 

• Sluggish Implementation of Safety Modernization (Kavach): While safety metrics have improved, the deployment of the indigenous Kavach' protection system has missed critical deadlines on high-density networks.  
  • The slow pace of covering the vast 68,000+ km network leaves the system vulnerable to human error, which remains the primary cause of consequential accidents. 
  • As of early 2026, Kavach Version 4.0 has been commissioned on only around 1,306.3 route kilometres across Indian Railways.  
    • While accidents dropped to 31 in 2024-25, the risk on non-Kavach routes remains significant. 
• Financial Fragility & The "Pension Trap": The Operating Ratio (OR) remains stubbornly high, indicating that the Railways spends nearly everything it earns just to stay afloat, leaving negligible surplus for critical safety capital expenditure (capex).  
  • A massive portion of working expenses is consumed by the pension bill, which acts as a deadweight on the balance sheet, forcing reliance on Gross Budgetary Support (GBS) for any modernization. 
  • For instance, according to Budget documents, expenditure on pensions was Rs 58844.07 crore in 2024-25, which is expected to rise to Rs 74500 crore in 2026-27. 
• The Cross-Subsidization Dilemma : Indian Railways continues to overcharge freight customers to subsidize artificially low passenger fares, a practice that is driving high-value cargo (FMCG, auto) to the road sector.  
  • This distortion makes rail freight uncompetitive for time-sensitive goods, trapping the railways in a "bulk commodity" trap (coal/iron ore) while losing the lucrative logistics market. 
  • Freight rates in India are much higher than global benchmarks, consequently, the rail share of freight has stagnated at 29%, missing the National Rail Plan target of 45%. 
• The General Class Strain amid a Premiumisation Push: There is a growing socio-economic critique that the relentless push for Vande Bharat (premium) trains has come at the cost of reducing General and Sleeper class coaches in standard trains.  
  • This "elitist skew" has led to dangerous overcrowding in non-AC coaches, alienating the migrant workforce demographic which forms the bulk of passenger volume but contributes less to revenue. 
    • For instance, in 2024–25, a staggering 651 crore passengers travelled by general coaches, marking a 17%  surge compared to 2022–23 but they face reduced capacity. 
• Chronic Manpower Shortage in Safety Categories: The delay in filling critical "safety category" vacancies (Track Maintainers, Loco Pilots, Station Masters) has created a dangerous cycle of accumulated fatigue and deferred maintenance.  
  • While recruitment drives are announced, the lag between notification, training, and deployment means the ground-level staff is constantly stretched beyond statutory working hours. 
  • The All India Railwaymen’s Federation (AIRF) stated that the Railway Board’s recent approval to fill 22,000 critical entry-level posts falls significantly short of the actual vacancies and may worsen staff shortages, thereby potentially compromising the safety of rail operations. 
• Infrastructure Overload and Capacity Constraints: The rail network suffers from severe capacity saturation where "mixed traffic" (slow freight + fast passenger) on the same tracks reduces the average speed of both.  
  • Even with the partial commissioning of DFCs, the "feeder routes" connecting to them remain clogged, creating bottlenecks that negate the speed gains achieved on the dedicated corridors. 
  • While the Dedicated Freight Corridors (DFCs) are 96.4% commissioned (as of February 2026), the transition from these high-speed lines to the conventional "feeder" tracks, where freight must once again compete with passenger traffic, reintroduces delays that diminish the corridor's end-to-end speed advantage. 
• Operational Delays in Amrit Bharat Station Redevelopment: The ambitious Amrit Bharat Station Scheme has faced execution hurdles, where simultaneous construction at hundreds of active stations has caused severe passenger inconvenience and safety hazards.  
  • The project suffers from "scope creep" and coordination failures between local municipal bodies and rail authorities, turning stations into chaotic construction zones for prolonged periods. 
  • For instance, the ₹350-crore revamp of Ghaziabad railway station under the Amrit Bharat Station Scheme is facing significant delays, with only 40% of work completed by February 2026. 

What Measures are Needed to Strengthen the Indian Railways?  

• Operationalize a "Digital Twin" for Predictive Maintenance: Indian Railways must shift from "calendar-based" to "condition-based" maintenance by creating a real-time Digital Twin of its physical assets (tracks, bridges, and rolling stock).  
  • By deploying IoT sensors and acoustic monitoring on wheels and rails, the system can predict fractures or bearing failures weeks in advance.  
  • This proactive approach eliminates the "blind spots" in safety, drastically reducing derailment risks while optimizing the utilization of maintenance blocks. 
• Rationalize Tariffs via an Independent Regulator: The government must establish a statutory Rail Regulatory Authority to depoliticize fare setting and decouple freight rates from passenger subsidies.  
  • This mechanism should establish a transparent formula for periodic fare revisions based on input costs (energy, staff), ensuring financial sustainability. 
  • By removing the "cross-subsidy burden" from freight, rail can regain its competitiveness against the road sector for high-value logistics. 
• Institutionalize "Minimum Capacity Guarantees" for General Class: To address the "elitist skew," policy must mandate a Minimum Capacity Ratio for unreserved and sleeper coaches on all long-distance trains, irrespective of the push for premium Vande Bharat sets.  
  • This involves deploying high-density "Amrit Bharat" push-pull trains that offer speed parity with premium trains but at affordable price points.  
  • This restores the "social contract" of the railways by preventing overcrowding and ensuring dignity of travel for the migrant workforce. 
• Diversify Freight into "White Goods" & Parcel Logistics: The freight basket must be aggressively diversified beyond bulk commodities (coal/iron ore) by creating a dedicated "Fast-Moving Consumer Goods (FMCG) Ecosystem."  
  • This requires standardizing small-sized containers and introducing time-tabled parcel trains that integrate seamlessly with e-commerce supply chains.  
    • Capturing this high-margin "retail logistics" market is the only way to insulate revenue from the volatility of the core energy and steel sectors. 
• Solve the "Feeder Route" Bottlenecks for DFCs: Investments must pivot from the main Dedicated Freight Corridors (DFCs) to upgrading the "Feeder and Connector" network that links industrial hinterlands to the DFC backbone.  
  • Without upgrading these single-line spurs to double-line electrified tracks, the high-speed potential of the DFCs remains underutilized.  
    • A "Hub-and-Spoke" integration strategy ensures that the logistics velocity gained on the corridor isn't lost in the last-mile congestion. 
• Implement Bio-Mathematical Rostering for Crew Safety: To eliminate human error caused by fatigue, the railways must adopt Bio-Mathematical Rostering Software that scientifically manages crew schedules based on circadian rhythms rather than just duty hours.  
  • This must be paired with mandatory "Simulator-Based Training" using AR/VR tools for Loco Pilots to handle high-speed signaling scenarios.  
    • Prioritizing the cognitive health of safety-critical staff is as vital as upgrading the physical signaling infrastructure. 
• Unlock Value via Transit-Oriented Development (TOD): The focus of station redevelopment must shift from cosmetic facade upgrades to deep Transit-Oriented Development (TOD) that monetizes the vertical airspace above tracks and yards.  
  • By creating mixed-use commercial and residential hubs integrated with stations, railways can generate a recurring, long-term "Non-Fare Revenue" stream.  
  • This "land-value capture" model creates a financial buffer that is independent of ticket sales and government budgetary support. 
• Establish "Captive Green Energy Micro-Grids": Moving beyond simple electrification, the Railways should utilize its massive vacant land bank to set up Captive Solar and Wind Parks, sourcing power directly via Open Access rules.  
  • This strategy creates an internal "Energy Micro-Grid" that insulates the railways from fluctuating commercial tariffs charged by state DISCOMs. Furthermore, piloting Hydrogen-fuel trains on remote heritage routes will close the loop on the "Net Zero 2030" ambition.

Conclusion:

Indian Railways stands at a structural inflection point where record capital investment must translate into systemic efficiency and financial sustainability. While initiatives like Dedicated Freight Corridors, Vande Bharat expansion, and near-100% electrification signal modernization, deep-rooted issues of cross-subsidization, pension burden, and capacity saturation persist. The sector’s long-term viability depends on tariff rationalization, freight diversification, safety-tech integration, and institutional reforms.  

Drishti Mains Question

“Despite record capital expenditure, Indian Railways continue to face structural financial and operational constraints.” Critically examine.

FAQs 

Q. What is the Operating Ratio (OR)?
It is the percentage of revenue spent on working expenses; lower OR indicates better financial health. 

Q. What is Kavach 4.0?
An indigenous Automatic Train Protection system to prevent Signal Passing at Danger (SPAD). 

Q. What is theobjectiveof Dedicated Freight Corridors (DFC)? 
To separate freight and passenger traffic and reduce logistics costs. 

Q. What is cross-subsidization in Railways?
Freight earnings are used to subsidize passenger fares. 

Q. What is the Amrit Bharat Station Scheme?
A project to modernize 1,300+ railway stations into integrated urban hubs. 

 

UPSC Civil Services Examination, Previous Year Question (PYQ)   

Q. With reference to bio-toilets used by the Indian Railways, consider the following statements: (2015)

1. The decomposition of human waste in the bio toilets is initiated by a fungal inoculum.   
2. Ammonia and water vapour are the only end products in this decomposition which are released into the atmosphere.   

Which of the statements given above is/are correct?   

(a) 1 only    

(b) 2 only    

(c) Both 1 and 2   

(d) Neither 1 nor 2   

Ans: (d)