In today’s Finshots, we look at the viability of complete electrification of Indian railways.

But before we begin, if you’re someone who loves to keep tabs on what’s happening in the world of business and finance, then hit subscribe if you haven’t already. If you’re already a subscriber or you’re reading this on the app, you can just go ahead and read the story.

The Story

Have you ever watched an old movie and noticed how loud the trains were?

That deep rumble came from diesel engines. Back then, you could hear a train coming long before you saw it! And if you were sitting inside, you’d feel that slight to-and-fro rocking motion. It was all part of the experience.

Cut to today you hop onto a train, and it’s almost noise-free and stable, so you might not even realise that it’s moving.

That’s the magic of electrification!

But why talk about this today?

Well, Indian Railways is on a mission to go fully electric and become the world’s largest “Green Railway”, with plans to hit net-zero carbon emissions by 2030. And to get there, they plan to add 30,000 MW of renewable energy capacity by FY30.

And they’re going full throttle towards this goal. The proof is the fact that since 2014, railway electrification has shot up nearly tenfold. And today, 97% of the Broad Gauge network runs on electricity. Oh, and if you’re curious, a railway gauge just refers to the width of the track or the distance between the insides of the two steel rails. So broad gauge is simply the widest track.

In fact, India is outpacing many Western nations. For context, 60% of the European Union (EU) railways are electrified, compared to 40% in the UK and a measly 1% in the US. And since most of India’s electricity is produced domestically, the shift to 100% electrification of railways could significantly reduce the need for imported oil, lowering the overall import bill.

Impressive, no?

However, while the progress so far is commendable, this journey has its hurdles.

For example, in the rush to replace diesel locomotives with electric ones, over 700 diesel engines are sitting idle, even though they could be used for another 15 years before reaching retirement. A handful of these old diesel-electric locomotives might even be repurposed and exported to African countries, helping clear the way for rail electrification.

But here’s the catch. In addition to reducing greenhouse gas (GHG) emissions, this transition to electric engines is also a significant economic decision. Electrification isn’t just about stringing up wires and flipping a switch. It requires massive investments, and these assets must be used intensively to justify the cost. Over the years, committees have calculated traffic break-even points or the minimum volume of freight or passenger traffic needed to make electrification economically viable.

And guess what? The results were shocking. Nearly 62% of railway routes fail to meet this threshold, meaning electrification on these routes doesn’t make financial sense.

Why’s that, you ask?

For starters, the Indian Railways play a crucial role in transporting coal from mines to thermal power plants. For perspective, nearly half of the Railways’ freight earnings in FY24 were generated by transporting coal for various purposes. If we reduced our reliance on coal and shifted to other renewable sources, we would not need coal, and thus, the railways would not need to transport such vast amounts of coal, which would hit their revenues hard!

Then comes the issue of emergencies. Electrified routes depend entirely on power infrastructure. In power outages or cases of damage, diesel locomotives are often the unsung heroes, stepping in to keep operations running. And that’s why the railways plan to retain 2,500 diesel engines out of the 4,000 we have today for ‘disaster management and strategic purposes’. Another 1,000 will still be used for the next few years to handle the current level of train traffic and ensure that the railways can meet demand. So we won’t really be moving away from fossil fuel powered trains.

And even though electric locomotives are cleaner than their diesel counterparts, a staggering three-fourths of India’s electricity still comes from fossil fuels, with nearly half of it sourced from coal-fired power plants. So, while complete electrification may reduce diesel emissions near the tracks, the pollution merely shifts to thermal power plants, creating concentrated emissions elsewhere.

Plus, the railways’ argument about cutting down on imported crude oil doesn’t really hold up when you look at the numbers. In FY22, Indian Railways accounted for just 0.6% of the country’s total petroleum consumption and an almost invisible 0.01% of the overall import bill. To put that in perspective, the railways sip on a mere 2% of the high-speed diesel we use. So, it’s hardly moving the needle.

So yeah, at its core, the push for 100% electrification seems a bit far from practical. And until India’s power grid runs predominantly on renewable energy and until economic viability aligns with environmental aspirations, the dream of a fully green railway will remain elusive.

Until then…

Don’t forget to share this story on WhatsApp, LinkedIn and X.

📢Finshots has a new WhatsApp Channel!

If you want the sharpest analysis of all financial news without the jargon, Finshots is the place to be! Click here to join.

Note: We have sourced a few facts from an article by K. Balakesari published in the Hindu and a few from an article in the Wire.

📢WE’RE HIRING!

Ever wondered how content can change lives?

At Ditto, we’re not just talking about “content that ranks.”

We’re talking about content that helps someone choose the right health insurance, secures their family’s future, and empowers them to make informed decisions.

This is the kind of impact you’ll have as our Organic Growth Head and Senior Editor.

With 10,000+ glowing Google reviews and backing from Zerodha, we’re on a mission to make insurance simple, helpful, and even a bit fun. And we want YOU to be part of this movement.

Think you’ve got what it takes? Check out the roles here.