Railways in India play a crucial role in aiding economic and social development through connectivity, mobility and commercial activities. The sector comes under the control of single entity, the Ministry of Railways. Indian Railways has the fourth largest network in the world after US, Russia and China. It is the single largest employer in India and eighth largest in the world, employing close to 1.4 million people in the country. It contributes to 1.4% of India’s GDP by building infrastructure to support 40% modal freight share of the economy.
Coaches and locomotives are primarily manufactured in production units (PUs) which are under the administrative control of the Ministry of Railways. Private sector firms supply the sub-components and sub-systems to the railway PUs. While freight wagons, signaling and railway line electrification equipment are manufactured by the private sector, rails, concrete sleepers and other components of the rail tracks are manufactured by both public sector units and private sector firms in India.
Capacity and Production
The production of coach and locomotives stood at 6,713 units in 2018-19, up from 3,289 units in 2013-14. During 2017-18, the Railways handled a total of 11,77,699 million passenger kilometers as compared to 11,49,835 million passenger kilometers in 2016-17. On the commercial front, with growing industrialization, the freight traffic of the Indian Railways has increased to 1221.4 million tonnes in 2018-19, from 836.6 million tonnes in 2008-09.
The export of railway/ tramway locomotives, etc stood at 502.6 million in 2018-19, as compared to 135.3 million in 2014-15. Major exporting destinations for India were Australia (69.6%), USA (11.08%), Sri Lanka (5.73%), Germany (2.04%) and Mexico (1.8%) in 2018-19.
Foreign Direct Investments
The Government has allowed 100% FDI in railway sector under automatic route for permitted list of projects. However, in joint venture projects under Participative Policy 2012, 26% equity will continue to be held by Ministry of Railway or its PSUs.
The total FDI inflow in the Railway related components sector stood at US$ 977.24 million during April 2000- June 2019.
The Indian Railways sector is poised to become one of the major drivers for economic growth of India. There exists huge opportunities for project developers, EPC contractors, technology providers, manufacturers of rolling stock, renewable energy developers and transmission and distribution equipment providers on the back of network expansion and decongestion plans by Indian Railways. A report on ‘Indian Infrastructure Research’ highlights investment opportunity of more than INR 10 trillion across various railway segments of which 80% is constituted by rail tunnels, doubling works and new line projects combined together.
Growing industrialization across the country has increased freight traffic over the last decades. During 2013-14 to 2017-18, freight traffic and earnings have grown at a CAGR of 2.47% and 5.66%, respectively. Inadequate capacity, however, remains a major roadblock for IR. Congestion on the railway network has also led to the inability to increase the number of trains, especially freight, to enhance revenues. Even with all the challenges, freight traffic is set to increase significantly due to rising investments and private sector participation.