Indian Railways Asked to Restructure Growth Plans and Prioritise Private Investment

Indian Railways has been asked to revisit its long-term growth assumptions following a review by a government panel.  

A January 21, 2026, report by The Times of India said the panel warned that traffic estimates, especially for coal freight, may not hold as India’s energy use gradually shifts. 

Review Conducted During Budget Exercise 

The observations were made by the Public Investment Board (PIB), which assesses large projects funded through public money.  

During its annual budget review of railway proposals, the board asked the Railways to open more parts of its operations to private companies. 

Private Role Outlined Across Activities 

The PIB said private firms could be brought into areas such as adding new tracks, improving rail links to ports, and supplying trains, wagons and locomotives.  

It noted that while the Union government has pushed private investment in infrastructure over the past decade, the Railways has made limited use of such models compared with sectors like roads and power. 

Government Funding to Remain Unchanged 

The panel clarified that its suggestions do not involve reducing budgetary support. Instead, it said existing government funding could be used to attract private capital and project execution capacity.  

The aim, the board said, is to extend the reach of public spending rather than replace it. 

New Procurement Methods Suggested 

The PIB also suggested alternative ways to procure rolling stock. These include wet leasing, public-private partnership structures and the hybrid annuity model (HAM). Under wet leasing, a private company would supply trains and operating staff.  

Under HAM, the government pays 60% of construction costs, with the remaining 40% paid later in instalments. 

Limits of PPPs Acknowledged 

Reports suggest that private participation in rail projects has faced difficulties due to safety requirements, complex operations and long payback periods. Within these constraints, the hybrid annuity model was seen as more workable.  

The board advised the Railways to consult Niti Aayog and prepare a model concession agreement with the Department of Economic Affairs to clarify risk sharing. 

Coal Dependence Highlighted 

The panel also flagged the Railways’ reliance on coal freight for revenue. With India targeting net-zero emissions by 2070, coal demand from thermal power plants is expected to ease over time.  

The PIB asked the Railways to work with the power ministry on updated demand estimates and adjust expansion plans if needed. It also said last-mile connectivity should generally be handled by roads. 

Read More: Railway Sector Recap 2025: Transformation and Milestones Achieved by the Indian Railways! 

Conclusion 

The review points to a need for revised demand estimates, wider funding participation and closer alignment between railway planning and long-term energy trends. 

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