Indian Railways—the second-largest network managed by a single entity worldwide—has been undergoing modernisation programme with a consistent increase in capital expenditure in recent years. Part of the funds is being used for the Railways' ambitious plan to lay approximately 100,000 km of new track over the next 20-25 years. With rail infrastructure expecting an investment of Rs 50 trillion by 2030, this sector will present an abundance of opportunities for industry players.

To know more about growth potential in the railway and metro rail sector, FIRST Construction Council (FCC), an infrastructure think-tank, hosted a virtual discussion forum with three industry experts – Rajesh Gupta, Director (Infrastructure Connectivity Division), NITI Aayog; UJM Rao, MD, AP Metro Rail Corporation; and Karun Raj Singh Sareen, Partner, Major Projects Advisory, KPMG – sharing their views on the future trends.

With over 22,593 active trains and a daily passenger count of 24 million passengers and 203.88 million tonnes of freight, India has the fourth-largest railway network in the world. The target capital budget for Railways is Rs 2.6 lakh crore in 2023–24, an increase of 6% from the previous year. In recent years, despite a small income surplus, the proportion of capital investment in Railways' overall spending has steadily climbed.

This expenditure will be carried out for upgrades and the decongestion of existing lines and around one lakh km of tracks are going to be laid in the next 20-25 years. If metros and rapid Rail transport systems are included, we get an 80 per cent increase in the capex from the last fiscal, stated Gupta.

Gupta added by saying that the railway is undergoing overhaul and modernisation building new projects like the high-speed Rail (bullet train), Rapid Rail Transport Systems and 27-28 metros are being constructed. Moreover, Indian Railways is assisting other countries with building rail infrastructure and has new avenues open in the form of the Middle East Corridor which was announced in the recent G 20 Summit held in New Delhi.

The NITI Aayog Director concluded by noting, “This is an exciting time because not only the Indian Railways capex budget has been enhanced multifold, but also because the entire sector if we take it as a giant tree in which Indian Railways is one big trunk, we have got so many others the DFCS, the state corridors, the metros and of course, the overseas projects. So, in the times to come, the demand for rail infrastructure projects emanating from India is going to grow exponentially.”

Underlining the crucial role of metro systems in cities, Rao highlighted their significance in promoting seamless connectivity, alleviating road congestion, and enhancing productivity.

Speaking on the matter, Rao revealed that the APMRCL is actively engaged in developing four major projects within the state. These projects encompass two metro systems in Vishakhapatnam and Vijayawada, a metrolite system in Vishakhapatnam that will connect the city's outskirts to the seafront, and a high-speed suburban rail network set to traverse in and around the state's new capital, Amaravati. The suburban rail will offer connectivity to adjacent towns and cities.

Rao further expounded on the advantages of metro systems, describing them as one of the most cost-effective modes of public transportation. He stressed the ability of metros to provide seamless and affordable connectivity to commuters, effectively reducing the burden on road networks.

He stated that the metros in these cities initially incur losses but over time with an increase in ridership, population growth and expansion of routes, the lines make up for their losses. Additionally, he said, “According to our research, we have witnessed a 2-3 times growth in the GDP in the cities that have successfully implemented metros.”

Exploring investment opportunities in rail

Sareen discussed the plan to expand the metro rail network in India by 5000 km over the next 25 years. He highlights that this will involve substantial investment and mentions specific cities where a metro network is planned.

He shed light on the immense opportunities that lie ahead for various sectors within the industry. With investments projected to reach a staggering 50 trillion by 2030, there's a multitude of avenues opening up for businesses and professionals in this sector.

Sareen emphasised the significant role of civil contractors and rail system contractors, given the extensive civil work required for upcoming projects. The demand for steel and cement is set to rise, providing ample business opportunities for manufacturers and suppliers in the rail sector. Logistics and O&M players will also see substantial growth prospects.

Moreover, as funding may pose a challenge at the state level, private-sector developers are likely to play a more prominent role. The increasing involvement of private investors in railway infrastructure projects is expected to spur further growth in the sector. Additionally, technology players will play a vital role in ensuring the successful implementation and operation of these projects.

Sareen's insights reflect the dynamic and evolving landscape of the railway infrastructure sector, which is set to undergo significant transformations and present a wealth of opportunities for a wide range of stakeholders.

Gupta highlighted the potential for small and medium-sized enterprises (SMEs) to expand and grow into large manufacturing enterprises (LMEs). The sector is poised for significant growth, with an estimated investment of Rs 50 trillion over the next decade.

The opportunities within this colossal investment can be divided into three main categories. Firstly, new projects include the railway, Regional Rapid Transit System (RRTS), and metro projects. Secondly, the renewal of existing lines and infrastructure is crucial, as many components of the railway system have exceeded their operational life. Lastly, numerous smaller opportunities for upgrading specific aspects of the rail network are available.

He concluded, “I think the maximum opportunity for SMEs lies in the second and the third basket, that is, the upgradation and maintenance of the existing infrastructure; whereas the large players have an immense role to play in the new project. But there is nothing stopping SMEs from growing bigger out of this sector, bringing in new technologies, expertise, ideas and innovations.”