Why Indian Railways Is Going To Miss Asset Monetisation Target Yet Again This Year

Indian Railways (IR) is set to miss the asset monetisation target again in financial year (FY) 2022-23. Against the target of Rs 57,222 crore in FY23, the railways may only raise Rs 30,000 crore. In FY22, which was the first year of the implementation of the National Monetisation Pipeline (NMP), IR managed to rake in Rs 800 crore against a target of Rs 17,810 crore — 4.5 per cent of the goal.

National Monetisation Pipeline

Under the Union Budget 2021-22, monetisation of assets has been identified as one of the three pillars for enhanced and sustainable infrastructure financing in the country. The budget also envisioned preparation of a NMP to provide a direction to the monetisation initiative and visibility of investors.

The NMP has proposed to mobilise about Rs 6 lakh crore over the four-year period, FY 2022-2025, by way of monetising 20-plus brownfield asset classes, with the top three sectors in terms of value being roads (27 per cent), railways (26 per cent) and power (15 per cent) held by it and its PSUs.

Asset Base Of Railways

India has the fourth-largest railway system in the world, behind only US, Russia and China. The railway sector of India has 126,366 km of total tracks over a 67,956 km route and about 7,335 stations. The railways run close to 13,523 passenger trains and 9,146 freight trains daily on its network.

With IR’s focus on augmenting railway infrastructure to facilitate freight and passenger movement, significant investments will be needed to address capacity constraints, states the NMP.

Railway asset classes that have been identified in the pipeline include station redevelopment programme; private participation in passenger train operations; track, signalling, and overhead equipment (OHE) infrastructure; redevelopment of good sheds; hill railways; dedicated freight corridor (DFC) and railway colony redevelopment.

The asset base considered for monetisation includes assets owned and operated under the Ministry of Railways (MoR) (including identified PSUs and entities under MoR). The railway assets considered for monetisation over FY 2022-25 are as explained below.

Monetisation Value Of Assets

Of the Rs 6 lakh crore, the NMP has estimated a potential asset monetisation of Rs 152,496 crore for Indian Railways. This is around 26 per cent of the total NMP plan for the next 4 years and less only to roadways which has been pegged at Rs 160,200 crore. The figure below represents the year-wise split up of the railway assets by total value generated.

Railway station development forms the major chunk of asset monetisation plans of Indian Railways, with more than 50 per cent share in the indicative monetisation target of Rs 152,496 crore. Station redevelopment programme and private participation in passenger train operations together contribute Rs 97,892 crore — around 65 per cent of the indicative target of Rs 152,496 crore.

The asset-wise phasing and values are provided in the table below.

What explains the missed targets?

This is the second consecutive year when IR has fallen short of the monetisation targets. The shortfall is being attributed to reluctance on the part of railways to let the private sector run trains and inability to modernise stations.

The government's plan to monetise railway assets by allowing private companies to operate trains on certain routes on the basis of revenue-sharing and payment for using the Indian Railways’ infrastructure did not attract enough investors due to lack of proper structuring and the Railway Ministry is looking at it afresh.

The plan had only two takers because prospective bidders for train operations had concerns over various aspects, including higher premium deciding the winning bidder, haulage charges in addition to the premium, restrictions on routes and train timings and the absence of a regulator.

Attempts to let private companies redevelop railway stations have faltered similarly. This has prompted the Centre to consider linking the release of the annual allocation to the fund generation through asset monetisation.