How Rampant Populism Left Indian Railways With Pending Projects Worth $65 Billion

Repeated execution delays over the last decade have pushed railway projects off the road, a report by PhillipCapital Limited revealed. Published on October 7, the report states that the India Railways has pending projects worth Rs. 4,366 Billion ($65 Billion), 83 per cent of which are related to construction of new lines, doubling and gauge conversion. These projects, initiated by the UPA, have remained under construction for the last five years and suffered due to non-execution in the initial days.

The Railway Ministry, which was mostly handed over to the most prominent coalition partners in the UPA, was used more for appeasement and regional leverage than to facilitate users. As a result, what we have today is a long list of carelessly planned and poorly executed projects.

Despite government’s effort to bring these projects back on track, even by reducing the rate of return from 14 per cent to 12 per cent, over 61% remain un-bankable. Further, the report also states that the Indian Railways will have to utilize four years of its budget (on FY17 base of Rs. 1,200 billion) if it plans to execute these projects. In that case, no room will be left for initiation new projects.

According to this report, the ministry has now prioritised projects related to decongestion and safety- accounting for 53 per cent of the work in progress. While the new Land Acquisition Act is now in place, the cost of land has risen in the past five years and adds up to the total cost, making the projects economically nonviable.

Other efforts made by the government include the reduction of approval of time from over 24 months previously to 12 months now. Of the Rs 920 billion projects introduced in the FY16, Rs. 700 billion worth projects have already received approval and over 30 per cent tendered.

A copy of the report is available PhilipCapital’s website and can be found here.

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