I. Background

As the world’s fourth-largest rail network and the second-largest freight carrier by tonnage^[1], Indian Railways carry a unique dual mandate i.e., to deliver affordable, mass mobility while modernizing for rising demand, adopting stringent safety measures, and global competitiveness. Historically, Indian Railways operations were characterized by infrastructure bottlenecks and limited private participation. The government’s reform agenda over the last decade has anchored in public-private partnerships (“PPP”), Make in India, and the pursuit of self-reliance in technology and manufacturing has sought to reposition this sector as both, a national logistics enabler and a global industrial hub.

II. Railways (Amendment) Act, 2025

A major step towards India’s railway revolution is the introduction of the Railways (Amendment) Act, 2025 (“Railways Amendment Act”) by the Ministry of Law and Justice on March 29, 2025. The Railways Amendment Act’s primary strength lies in its statutory consolidation and simplification. By repealing the Indian Railway Board Act, 1905 and subsuming its provisions into the Railways Act, 1989, the legislature has rationalized a dual legal regime into a unified framework. This integration removes redundant overlaps, harmonizes administrative powers, and creates a single reference point for governance, adjudication, and policy implementation. The repeal and consolidation process thereby reduces interpretational ambiguities that had historically complicated the delegation of powers between the Ministry of Railways and the Board^[2] and so notably, the most significant amendment was the statutory formalization of the Railway Board since the Railway Board Act, 1905. The Board’s legal existence, composition, appointment procedures, and terms of service are codified within the parent statute rather than delegated to executive notifications or departmental rules. This statutory recognition strengthens governance legitimacy and offers greater procedural transparency regarding qualifications, tenure, and accountability of Board members.

By formalising the Board, this amendment also addresses the concerns regarding the project delays and bureaucratic inefficiencies due to the previous legislations which provided for a highly centralized administrative structure. The Ministry of Railways has also focused on administrative decentralization by empowering General Managers^[3] of zonal railways and Divisional Railway Managers by giving them unencumbered decision-making authority for sanctioning amounts for infrastructure financing. It is pertinent to mention that the Ministry of Railways had issued a circular dated May 8, 2024 which allows General Managers of zonal railways and Divisional Railway Managers to independently sanction projects up to INR 50 crores and INR 5 crores^[4] respectively, thus providing a firm statutory basis for operational autonomy. This delegation of financial authority is intended to accelerate project implementation and enable more context-specific decision-making at the zonal level. This has been further re-affirmed through the insertion of section 2B of the Railways Amendment Act which provides powers to the secretary of the Board to issue directions and/or notices which will now be binding on the Board.

While the Railways Amendment Act comes with its merits, we understand that there are certain institutional and legal weaknesses which scrutinize such merits. A major concern being the executive dominance and the risk to institutional autonomy. The statute vests the appointment, qualification, and service conditions of Railway Board members entirely in the hands of the Central Government. In parallel, the absence of an independent regulatory authority which is a gap highlighted by expert committees and policy analysts^[5] further contests this issue which remains unresolved even after the codification of the Railway Board.

Further, the Railways Amendment Act stops short of introducing corporatization or structural reforms that could have strengthened financial sustainability and managerial flexibility. Unlike certain foreign jurisdictions such as Australia, United States of America, Japan and Canada^[6] where rail infrastructure is governed through distinct corporate entities with statutory accountability, the Indian framework remains embedded within a traditional bureaucratic hierarchy which limits the sector’s ability to adopt commercial practices and access markets efficiently. The entry of private players, though conducive to greater modernisation, also raises concerns about unfair pricing, potentially undermining train maintenance and operational efficiency. The government must, therefore, bring into effect the proposed independent, quasi-judicial tariff regulatory authority with comprehensive powers (unlike the Railway Tariff Authority, which serves only in an advisory capacity) for regulating the prices of train tickets to ensure accessibility for the masses which is one of the main facets of the Indian Railways i.e., affordability.^[7]

III. Other Updates in the Railway Sector

Amongst other initiatives of integrating sustainability within the Indian Railways, the government through the Public-Private Partnership Policy of April 2025 (“PPP Policy”), represents a major shift in project structuring. By replacing the 2012 framework, it transitions from traditional availability-payment models to usage-fee and revenue-sharing structures, where operators earn through user charges while sharing revenues with Indian Railways. This approach reduces the State’s revenue exposure but increases commercial and market risks for private players and financiers.

In parallel, the Foreign Direct Investment (“FDI”) regime under Press Note 3 (2020), as issued by the Press Information Bureau on April 17, 2020, subjects investments from countries sharing land borders with India to prior government approval. This measure classifies railway projects as a strategic and sensitive sector, ensuring national security but narrowing the pool of eligible foreign investors. In order to address the reduced investments due to the land-border issue, the government has intensified its initiatives to strengthen the Make in India program. On January 21, 2021, the Indian government marked a major boost under the Make in India mission by issuing a tender for design, development, manufacture, supply, integration, testing and commissioning of equipment for Vande Bharat Train (“VBT”). A tender for the first time required a minimum of 75% local content to be used in manufacturing the total value of the tender. Subsequently, on June 6, 2023 the government notified the eligibility criteria for bidders on the amount of local content used in manufacturing equipment for VBT trains. Indian Railways have seen an increase of 9% in equipment manufacturing focusing largely on non-air-conditioned coaches for mass usage.^[8] Lack of FDI combined with Make in India’s procurement preferences fosters strategic localization, compelling bidders to meet domestic content thresholds and self-certification requirements. From a legal standpoint, these obligations now form integral contractual conditions, with penalties for non-compliance and third-party audit rights for procuring authorities.

Under India’s ‘Mission 100% Electrification’ as of April 2025, 22 out of 29 states have achieved 100% electrification of its railway network^[9] and approximately 98% of Indian Railways broad gauge network has been electrified, reducing India’s dependency on fossil fuels, decreasing diesel consumption resulting in lower carbon emissions and has enabled annual savings of INR 2,960 crores for railways, ensuring greater financial efficiency.^[10]

IV. Conclusion

The Indian Railways is rapidly emerging as a global exporter of bogies, coaches, locomotives and propulsion systems under the Make in India, make for the world vision. However, it is pertinent to note that due to uncertain government policies and restrictive infrastructure, private players may be unwilling to invest in the railway sector. While promoting private train operations, it is imperative that the government also ensures stability in decision-making and enhance the infrastructure and liberalise the charges, damages and priorities associated with it. Frequent shifts in the government stance on sectors that are part of foreign investment may affect future prospects for private sector participation in train operations. This could manifest in the form of delay in project initiation, cautious capital deployment, and higher costs as investors factor in the risks of policy changes into their financial demands. This approach of ensuring stability by the government in terms of regulatory reforms will not only help attract investment but will also ensure smoother project execution and long-term sustainability of PPP framework in railway infrastructure. India’s railway reforms, though not without their challenges such as regulatory overlaps, slow private participation, and gaps in institutional autonomy, nonetheless mark a decisive leap towards modernization and self-reliance.

Endnotes:

[1] https://www.pib.gov.in/PressReleasePage.aspx?PRID=2034955

[2] According to the Railways Amendment Act, “Board” means the Railway Board constituted under sub-section (1) of section 2A.

[3]According to the Railways Act, 1989 “General Manager” means the General Manager of a Zonal Railway appointed under section 4.

[4] A circular issued on May 8, 2024 enlists the delegation of sanction limits for General Managers and Divisional Railway Managers.

[5] India Transport Report: Moving India to 2032: Volume II, National Transport Development Policy Committee 2013 dated June 17, 2014.

[6] Governance and Structure of the Railway Industry: Three Pillars dated December 2011 – World Bank Report.

[7] Issue Brief Private Participation in Indian Railways: A Policy Perspective on Challenges and Opportunities dated September 2025.

[8] Press release titled ‘Indian Railways finalises the tender for Vande Bharat Type train sets’ dated Jan 21, 2021 can be accessed at Press Release: Press Information Bureau.

[9] Government of India, Ministry of Railways notification ‘Make In India’ Policy – Review of minimum local content for procurement of brake disc for VB Train Sets dated June 6, 2023 can be accessed at Press Release: Press Information Bureau.

[10] Ibid.