2026 for January 1970

Indian Railways in 2025: Expansion Achieved, Challenges Ahead

January 2, 2026

Indian Railways Latest News

2025 marked a landmark year for Indian Railways, as it completed rail connectivity to Kashmir Valley and Aizawl (Mizoram), bridged major geographic frontiers, advanced freight corridors and technology.
At the same time, the Railways faced challenges in safety, crowd management, and financial sustainability.

From Kashmir to Mizoram: Railways Reach India’s Final Frontiers

In 2025, Indian Railways achieved historic milestones by extending the rail grid to: Kashmir Valley in the North; Aizawl in the East.
These connections brought the country’s last major unlinked regions into the national railway network, symbolising territorial integration and strategic connectivity.

Kashmir Rail Link: A Century-Old Dream Realised

The idea of a railway line to the Kashmir Valley dates back to 1898, when Maharaja Pratap Singh first conceived it.
However, after Partition, the Jammu–Sialkot rail link went to Pakistan, cutting off Jammu and Kashmir from India’s rail grid.
While Jammu was connected by rail in 1972, the Valley remained unlinked.
The long-cherished dream was realised in June 2025, when PM Modi inaugurated the final 63-km Katra–Sangaldan section of the 272-km Udhampur–Srinagar–Baramulla Rail Link (USBRL).
- A Vande Bharat train began services between Katra and Srinagar.
The project’s most challenging stretch was the 111-km Katra–Banihal section, featuring:
- T-50, India’s longest operational transport tunnel (12.77 km)
- Chenab Bridge, the world’s highest railway arch bridge (359 metres above the riverbed)
- Anji Bridge, Indian Railways’ first cable-stayed bridge

Mizoram: Railways Overcome Geography

Mizoram’s late rail arrival was largely due to its difficult terrain and landlocked location—bordering Myanmar, Bangladesh, and northeastern states.
Until recently, the state depended almost entirely on roads for passenger and freight movement.
The breakthrough came with the inauguration of the Bairabi–Sairang line in September 2025, linking Bairabi to Sairang, near Aizawl.
This marked the first-ever rail connectivity to the Mizoram capital.
With this, Aizawl became the fourth northeastern capital—after Guwahati (Dispur), Agartala, and Itanagar—to be linked to the Indian Railways network.

Pamban Bridge: Reconnecting South India’s Maritime Edge

Another landmark in 2025 was the inauguration of the 2.08-km new Pamban Bridge, replacing the 110-year-old cantilever bridge.
It is India’s first vertical-lift railway sea bridge. It connects Rameswaram to the mainland across the Palk Strait.

Western Dedicated Freight Corridor (WDFC)

First rail car ran on the 102-km Vaitarna–Jawaharlal Nehru Port (JNPT) section.
Marks progress in India’s high-capacity, freight-only rail infrastructure.

Strategic Himalayan Connectivity

Rishikesh–Karnaprayag Line

- 125 km line with strategic and pilgrimage significance
- Includes India’s longest transportation tunnel (14.57 km) (yet to be operational)
- Serves as a gateway to the China border and boosts Char Dham Yatra connectivity

Bhanupalli–Bilaspur–Beri Line

- Connects Punjab to Himachal Pradesh
- Proposed extension up to Ladakh
- Progress delayed due to financial disputes between the state government and Railways

A Year Shadowed by Safety Concerns

The year began with tragedy:
- Stampede at New Delhi Railway Station (February 15, 2025)
- 18 deaths, 15 injuries, during rush for Prayagraj-bound Mahakumbh trains

Railways’ Response

- Launch of a nationwide project to create holding areas on high-passenger platforms
- Renewed emphasis on crowd management and passenger safety

Challenges in Freight Loading: Railways’ Revenue Backbone Under Strain

Freight transport is the financial backbone of Indian Railways, contributing nearly 65% of its total earnings.
However, despite its importance, the system faces persistent challenges, especially in last-mile delivery and competitiveness with road transport.

High Dependence on Bulk Commodities

Indian Railways remains predominantly a bulk commodity transporter.
Coal alone accounts for nearly 50% of total freight loading.
- Seven major commodities—coal, pig iron and steel, iron ore, cement, fertilisers, petroleum, oil and lubricants (POL), and containers—together accounted for 87.3% of total freight loading (in FY 25)
Such heavy reliance exposes Railways to demand fluctuations in a few sectors.

Concerns Raised by the Standing Committee on Railways

The Standing Committee on Railways has flagged structural risks in the freight basket:
- Called for diversification into automobiles, FMCG, and e-commerce to cushion demand volatility.
- Noted that year-on-year revenue growth from coal and iron ore is slowing, raising sustainability concerns.

Need to Raise Rail’s Modal Share

Railways’ modal share in freight transport stands at about 27%, significantly lower than road transport.
Enhancing this share is critical for revenue growth and environmental gains.

Operational Focus Areas in 2025

Indian Railways prioritised:
- Removal of traffic bottlenecks
- Track expansion and capacity augmentation
- Passenger amenities under the Amrit Bharat Station Scheme
- Safety upgrades across high-density routes

Ambitious Traffic and Freight Targets

With expanded infrastructure, Railways aims to achieve by 2030:
- 3 billion tonnes of freight loading - Up from 1.6 billion tonnes in FY25
- 10 billion passengers annually - A 42% increase from nearly 7 billion passengers in FY25
These targets reflect Railways’ central role in India’s logistics and mobility strategy.

Technological Advancements

Commissioning of Kavach 4.0 (advanced Automatic Train Protection system)
Deployed over 738 route kilometres on two high-density corridors
Rollout of: 13 Amrit Bharat trains for migrant workers; 2 Namo Bharat Rapid Rail Services for intercity commuters.
Trials of Vande Bharat sleeper trains, signalling next-generation long-distance travel.

Financial Stress vs Green Promise

Persistent Challenges - High revenue expenditure; Low earnings per route, affecting long-term financial health
Green Mobility Advantage
- Despite financial strain, Railways remains one of India’s cleanest transport modes:
  - Accounts for only ~1% of transport emissions
  - Near-100% electrification of broad-gauge network
  - Hydrogen-powered trains under development
  - 2,626 solar-powered stations
  - 898 MW of solar power used nationwide
  - ~70% used for traction

Source: IE | PIB

Indian Railways FAQs

Q1: Why was 2025 a landmark year for Indian Railways?

Ans: Indian Railways achieved historic connectivity to Kashmir Valley and Aizawl, completing links to India’s last major unconnected regions.

Q2: What were the major infrastructure achievements in 2025?

Ans: Key milestones included the Kashmir rail link, Mizoram connectivity, new Pamban Bridge, and progress on the Western Dedicated Freight Corridor.

Q3: What safety challenges did Railways face in 2025?

Ans: A fatal stampede at New Delhi Railway Station exposed crowd management gaps, prompting nationwide holding areas on high-passenger platforms.

Q4: Why is freight loading a challenge for Indian Railways?

Ans: Freight depends heavily on coal, which limits diversification, while rail’s modal share remains low compared to road transport.

Q5: How is Indian Railways contributing to green mobility?

Ans: Railways account for about 1% of transport emissions, with near-total electrification, solar-powered stations, and plans for hydrogen trains.

EU’s CBAM Begins: Impact on India’s Steel and Aluminium Exports

January 2, 2026

CBAM Latest News

The European Union implemented its carbon tax on selected carbon-intensive metals from January 1, a move expected to impact India’s steel exports.
The tax applies to goods whose manufacturing processes generate significant carbon emissions, reflecting the EU’s push to curb carbon leakage and promote cleaner production.

EU’s Carbon Border Tax Comes into Force

The European Union has begun implementing the world’s first carbon tax under the Carbon Border Adjustment Mechanism (CBAM) from January 1.
The move has drawn criticism from developing countries, including India, as it imposes a levy on carbon-intensive imports entering the EU.

What CBAM Covers

CBAM applies a carbon-related charge on imports from:
- Power sector
- Energy-intensive industries such as cement, steel, aluminium, oil refining, paper, glass, chemicals, and fertilisers
The mechanism targets goods originating from countries with lower environmental standards than the EU.
Importantly, EU lawmakers retain the power to expand the product list in future.

Impact on India and Developing Countries

India’s exports to the EU are dominated by steel, iron, and aluminium, making them particularly vulnerable to CBAM-related costs.
Beyond India, the measure is expected to raise trade barriers for many developing economies.
A similar carbon border regulation is expected to be implemented by the United Kingdom this year, compounding pressures that already exist due to high US tariffs on metals imposed by the United States.

Global Pushback and Legal Challenges

Russia formally launched a dispute against CBAM in May last year, joined by other developing nations.
The United Nations Conference on Trade and Development (UNCTAD) has warned that CBAM could:
- Hurt export-led development
- Reduce market access for poorer countries
- Worsen global trade inequalities, especially if countries with carbon taxes and greener production are exempted

Developed vs Developing World Argument

EU’s position: CBAM merely extends domestic environmental standards to imports, preventing “carbon leakage” and ensuring fair competition.
Developing countries’ concern: CBAM violates the principle of Common But Differentiated Responsibilities (CBDR), a core concept in international environmental law recognised by the World Trade Organization.
- Under CBDR, all countries share responsibility for addressing environmental challenges, but obligations must differ based on: Level of development; Historical contribution to environmental damage; Capacity to respond.

CBAM and the Shift in Steelmaking Technology

To comply with the EU’s CBAM, Indian steel exporters are seeking government support to transition from blast furnace–basic oxygen furnace (BF–BOF) routes to electric arc furnaces (EAFs), which use steel scrap and are significantly cleaner.

Emissions Profile of Steel Production Routes

Highest emissions: BF–BOF route
Moderate emissions: Gas-based direct reduced iron (DRI)
Lowest emissions: Scrap-based EAF route
Indian steel production is largely dependent on the blast furnace route, making exports more vulnerable under CBAM.

Industry Demands and Trade Negotiations

Exporters have urged the government to:
- Support compliance with CBAM requirements
- Seek a carve-out for MSMEs in ongoing India–EU trade deal negotiations, expected to conclude early this year
The EU has clarified that CBAM is not negotiable, as it is framed as a climate, not trade, measure.

Scrap Availability and Competitive Disadvantage

Indian exporters have flagged that the EU is regulating steel scrap exports to strengthen domestic capacity.
The US and EU, the world’s largest scrap producers, extensively use arc furnaces, potentially benefiting their steel industries under CBAM while disadvantaging Indian manufacturers.

CBAM Impact: Price Cuts Likely for Indian Exporters

From January 1, 2026, every shipment of Indian steel and aluminium entering the EU will attract a carbon cost under CBAM.
The Global Trade Research Initiative (GTRI) estimates exporters may need to cut prices by 15–22% to absorb the tax burden.
GTRI warns that MSMEs will be hit hardest due to:
- High compliance, data, and verification costs
- Risk of being priced out of the EU market altogether

Data Gaps Inflate Carbon Costs

A key challenge is the lack of plant-level emissions data:
- Large producers often do not share verified emissions data with MSME buyers
- In absence of verified data, EU authorities may apply default (highest) emission values, sharply increasing CBAM costs even if actual emissions are lower
Experts suggest reducing compliance costs through Mutual Recognition Agreements (MRAs):
- An Indian certifying body’s emissions data could be recognised by the EU.
Experts caution that if competitors like China comply faster, Indian exporters could lose competitiveness.

CBAM: Trade Protection or Climate Action

Indian trade experts argue that climate–trade measures like the EU’s CBAM are driven more by import curbs and commercial interests of developed countries than genuine environmental protection.
A United Nations Conference on Trade and Development (UNCTAD) study (2021) estimated that CBAM would reduce global CO₂ emissions by only 0.1%, while significantly restricting exports from developing countries.
Amid concerns that CBAM breaches WTO principles, UNCTAD suggested the EU should use CBAM revenues to support cleaner technologies in developing countries.

India’s Official Position

Finance Minister Nirmala Sitharaman termed CBAM unilateral, arbitrary, and a trade barrier, stating that measures like CBAM and the EU deforestation law undermine energy transition efforts.
India has formally conveyed its concerns to the European Union.

Source: IE | ET

CBAM FAQs

Q1: What is the EU’s Carbon Border Adjustment Mechanism (CBAM)?

Ans: CBAM is the EU’s carbon tax on imports of carbon-intensive goods, aimed at preventing carbon leakage by aligning import costs with EU climate standards.

Q2: Which Indian exports are most affected by CBAM?

Ans: India’s steel, iron, and aluminium exports are most vulnerable, as these sectors are energy-intensive and form the bulk of India’s shipments to the EU.

Q3: Why do developing countries oppose CBAM?

Ans: Developing nations argue CBAM violates Common But Differentiated Responsibilities by imposing uniform climate costs despite differing development levels and historical emissions.

Q4: How could CBAM affect Indian exporters’ competitiveness?

Ans: Exporters may need to cut prices by 15–22% to absorb carbon costs, raising risks of MSMEs being priced out of EU markets.

Q5: What solutions are suggested to reduce CBAM’s impact?

Ans: Experts suggest mutual recognition agreements for emissions certification and using CBAM revenues to support cleaner technologies in developing countries

India’s Tobacco Taxation Reforms – Explained

January 2, 2026

Tobacco Taxation Latest News

India has notified a new taxation regime for tobacco and related sin goods, effective February 1, following legislative changes approved by Parliament.

Taxation on Tobacco and Sin Goods in India

Sin goods such as tobacco, pan masala, and alcohol are taxed heavily in India due to their adverse public health and social impacts.
Tobacco taxation serves a dual policy purpose: discouraging consumption through higher prices and generating revenue for public expenditure, particularly in health and social security.

Structure of Tobacco Taxation in India

India follows a multi-layered taxation framework for tobacco products, involving:
- Goods and Services Tax (GST)
- Central Excise Duty
- Cess (earlier GST Compensation Cess, now replaced for tobacco)
Under GST, tobacco products have always been placed in the highest tax slabs due to their classification as demerit goods.
However, despite high nominal tax rates, tobacco products, especially cigarettes, remained relatively affordable for consumers over the past decade.

Public Health Rationale

Global public health bodies, including the WHO, recommend that tobacco prices should rise faster than income growth to reduce affordability and consumption.
In India, stagnation in effective excise duties meant that real prices of cigarettes did not rise sufficiently, weakening tobacco control efforts.

Revenue Considerations

Historically, tobacco has been a major contributor to indirect tax revenues.
The GST Compensation Cess, introduced in 2017, was meant to compensate States for revenue losses due to GST implementation.
While it ended for most goods, tobacco remained one of the last items subjected to this cess, reflecting both its revenue potential and public policy priority.

Shift Towards Purpose-Specific Cess

The recent reform reflects a shift from a general compensation-oriented cess to a dedicated, non-lapsable cess, designed to ensure predictable funding without raising broad-based taxes.
This approach aligns fiscal objectives with sector-specific policy needs, particularly national security and long-term preparedness.

News Summary

The Union Finance Ministry has notified a comprehensive restructuring of tobacco taxation, effective February 1, following the passage of the Central Excise (Amendment) Act, 2025.
This marks one of the most significant overhauls of tobacco taxation since the introduction of GST.

End of GST Compensation Cess

The GST compensation cess on tobacco products will cease from February 1, as the original objective of compensating States for GST-related losses has largely been met.
The cess had already been extended beyond its original timeline due to pandemic-induced revenue shortfalls.

Introduction of New Excise and Cess Framework

To replace the compensation cess, the government has introduced:
- Revised central excise duties on tobacco products
- A new cess under the Health Security-cum-National Security Act, 2025, applicable to pan masala and related units
This new cess is designed to create a non-lapsable and predictable revenue stream, particularly for long-term security preparedness and capacity building, without increasing the tax burden on the general population.

Revised GST Slabs

Significant changes in GST rates include:
- Beedis shifted to the 18% GST slab from the earlier 28% category
- All other tobacco products, including cigarettes and chewing tobacco, moved to a 40% GST slab
These changes are aimed at simplifying the tax structure while ensuring higher effective taxation on products with greater health risks.

New Valuation Mechanism

For smokeless tobacco products such as gutkha, khaini, jarda, and chewing tobacco, GST valuation will now be based on the retail sale price (RSP) declared on packaging.
This is expected to curb under-reporting and tax evasion, a persistent issue in the tobacco sector.

Significance

The reform aligns India’s tobacco taxation closer to global public health guidance by:
- Increasing the real prices of tobacco products
- Reducing affordability over time
- Strengthening enforcement through clearer valuation rules
At the same time, it ensures fiscal stability by replacing a temporary cess with a purpose-specific, long-term revenue instrument.

Source: TH | TOI

Tobacco Taxation FAQs

Q1: Why are tobacco products taxed heavily in India?

Ans: Tobacco is a demerit good, and high taxation is used to discourage consumption and address public health costs.

Q2: What changes have been made to GST on tobacco products?

Ans: Beedis are now taxed at 18% GST, while all other tobacco products attract 40% GST.

Q3: Why was the GST compensation cess on tobacco removed?

Ans: Its original purpose of compensating States for GST losses has largely been fulfilled.

Q4: What is the new cess introduced on tobacco products?

Ans: A dedicated cess under the Health Security-cum-National Security Act, 2025, applicable mainly to pan masala units.

Q5: How does the new valuation mechanism affect smokeless tobacco?

Ans: GST will now be calculated based on the declared retail sale price, reducing scope for tax evasion.