The Railways finances were presented on February 1, 2025, by the Finance Minister Ms. Nirmala Sitharaman along with the Union Budget.  Indian Railways is a commercial undertaking of the central government. The Ministry of Railways administers Railways through the Railway Board.[i]   

Expenditure of Railways is financed through: (i) its own internal revenue (mainly goods and passenger earnings), (ii) budgetary support from the central government, and (iii) extra-budgetary resources (includes borrowings, institutional financing, and public-private partnerships).  Working expenditure including salaries, pension, and maintenance of assets is covered through its internal resources.  The surplus generated by the Railways after this expenditure is insufficient to cover capital expenditure (such as construction of lines, track renewals, and wagon procurement).  Capital expenditure is supported by grant from the central government and extra-budgetary resources.  This note looks at the proposed expenditure of Railways for 2025-26, and the state of its finances.

Budget Overview

• Revenue:  Railways’ internal revenue for 2025-26 is estimated to be Rs 3,02,100 crore. This an increase of 8.3% over the revised estimate for 2024-25.

• Traffic revenue:  In 2025-26, 99.8% of revenue is estimated to be raised from traffic operations (Rs 3,01,400 crore).  62% of traffic revenue is estimated to come from freight services (Rs 1,88,000 crore), and 31% from passenger services (Rs 92,800 crore).  In 2025-26, revenue from freight and passenger services are estimated to increase by 4.4% and 16% over the previous year, respectively.

• Revenue Expenditure:  The total revenue expenditure in 2025-26 is estimated at Rs 2,99,059 crore, an increase of 7.7% over the revised estimate of 2024-25.

• Capital expenditure:  In 2025-26, capital expenditure is estimated at Rs 2,65,200 crore, same as the revised estimate for 2024-25.  In both 2024-25 and 2025-26, the budgetary support from the central government is estimated at Rs 2,52,200 crore, financing 95% of the capital expenditure in these years.

• Operating Ratio:  In 2025-26, the Railways’ operating ratio is estimated to be 98.43%.  This is slightly lower than the revised estimate for operating ratio in 2024-25 (98.9%).  Operating Ratio is the ratio of working expenses to the receipts from traffic.  A lower ratio implies better profitability and availability of resources for capital spending.

Railway Revenue

Railway earns its internal revenue through: (i) passenger train operations, (ii) goods train operations, and (iii) sundry revenue.  Sundry revenue includes rent, catering receipts, revenue from commercial utilisation of land, and advertisements on coaches and stations.  Freight revenue is estimated to constitute 62% of total internal revenue in 2025-26.  This is followed by earnings from passenger train operations at 31% of total revenue.   Sundry revenue is estimated to constitute 4% of the total internal revenue.