Sep 8, 2016

Need to think 10 years ahead to achieve transformational change: Suresh Prabhu

My idea is that from anywhere to anywhere in the country, one should be able to reach within 12 hours; tells Suresh Prabhu in an Interview. Minister opines that while Indian Railways is eyeing new sources of revenue and looking to focus on transformational change instead of incremental improvements, we have to think 10 years ahead for achieving it. Edited excerpts:

Q: Why are you working towards merging the rail budget with the Union budget?
A: You need to understand that I have huge social obligation in the form of subsidies (at least Rs 30,000 crore).

I have proposed that subsidies for categories such as defence, senior citizens, students and others should be borne by their respective ministries. That is the most logical way of doing it. We should have a unified approach towards national priorities. Railways shouldn’t work in isolation.

Nowhere in the world does the railway have a separate budget. I had written to the finance minister to merge the budget. We are both on the same page now. We have already formed a committee that is looking into the modalities.

The committee will give its report soon which would then be implemented.

Q: What will be the impact of Seventh Pay Commission award on the already stressed railway finances?

A: The impact is unprecedented. The impact of the fifth and sixth pay commissions was not even half as that of the seventh one.

In one go, my wage bill will go up by at least Rs 35,000 crore. We had taken it into account during the presentation of the budget.

I think it will be uncomfortable for us but we’ll manage since I’m targeting non-fare revenue. We are also in talks with the finmin. Then we would save some money on energy and fuel bill.

I have also requested the finance ministry to waive the dividend we pay. Have you ever heard that a financially overburdened organisation such as railways is paying dividend to the government?

Q: Freight growth hasn’t been as expected & passenger traffic is slowing. How grim is the picture?

A: The challenge today is to convert vicious circle into virtuous circle.

Today, my freight revenue has come down because of slow growth globally. Indian Railways does not work in silo. Freight has shrunk across the world. If you see China, last year their freight loading fell 13 per cent.

This year they are happy because it is just down 7 per cent. The world over freight has been falling. In India, freight hasn’t grown as we expected, but at least it hasn’t shrunk. My idea is not to make money through freight or passenger as it’s already stagnated.

The idea is to make money through railway stations. The commercial exploitation of stations has long been talked about.Nothing has happened on that front. Stations and trains are the prime real estate.

I have set up a dedicated cell to rake in non-fare revenue. It’s taking station by station and train by train approach for commercial exploitation. These trains and stations could be our mass media products.

We need to sell them to advertisers. You would see the difference in coming years. Nowhere in the world is the fare model successful and no railway relies just on passenger and freight earnings for growth.

If we have to move towards having a railway system like the ones in developed world, we must take transformational steps now. There’s an urgent need to junk incremental thinking. We have to think ten years ahead.

Q: What are the models you are looking at for redevelopment of railway stations?

A: For station redevelopment, I have come up with five different models. I have hired BCG (Boston Consulting Group) as a consultant.

The first model is to get into partnership with states. Both state and railways join hands in redevelopment of stations and get our investment back through commercial exploitation.

Maharashtra has already proposed to redevelop 36 stations. So, this model looks feasible. The second mode is to get government to government funding. There have been talks with China, Japan and some other countries.

The third is to get cash-rich PSUs on board. If they have money they should invest it and get some return as well. Some investors are also coming forward for the complete PPP (public-private partnership) model. And we are also in talks with the World Bank to develop around 10 stations.

In sometime all of it will go to implementation stage from drawing board. I’ll redevelop around 100 stations.

Q: The operating ratio is very high. How do you spend on capacity expansion when your traffic isn’t growing as expected?

A: People ask me that when do we get to see the difference. Railways for the longest time has had legacy issues.

We are sorting them out one by one. There can be no overnight transformation. It would take some time to get results. I would say three-four years at least.

Media always focuses on short-term results but in a mammoth organisation like ours, deliverables would take some time but then what you’ll get will be world-class. I have already restructured the rail board.

You say that the railways was growing during Laluji’s time. People forget that economic growth across world at that time was really good. To get things on track I’m already in final stages of setting up an independent authority that will take financially prudent decisions.

There’s a holding company for all our PSUs that’s in the works. A draft cabinet note has already been circulated for comments and we are waiting for comments from the finance ministry and Niti Aayog. I have already doubled my capex in two years from Rs 58,000 crore to Rs 1, 21,000 crore.

It clearly indicates that we are spending money on constructing new lines. For the next five years, I have a capex plan of Rs 8 lakh crore. We are setting up a Rail India Development Fund with World Bank’s assistance.

We’ll be tapping low-cost long-term pension funds. In layman’s terms, my target is to construct 6-7 km of new rail lines every day.

Q: You’ve been talking about setting infrastructure for high-speed railways in India. What’s the progress?

A: We have always got technology from other countries. India has never been able to have a technology of its own.

Today, I have thought of developing technology along with global railway companies.

I’m not thinking about increasing the speed by 10-15 km. My idea is that from anywhere to anywhere in the country, one should be able to reach within 12 hours.

Why do we have 36-hour-long journeys? I’m putting in place Mission 350 plus so that we could get ultra-high speed technology to India. We have already floated tenders for maglev technology. Four-five global rail companies have already approached me.

I’m working out the financial structures for such projects. Investors are showing interest. Railways has been able to attract interest from global investors. This is no less achievement.

Q: What steps are you are taking to ensure that your revenue doesn’t fall since the loading of coal and other core commodities has been low?

A: Railways has never been market focused and reliance on freight has been limited to coal and a few other commodities. Now, I have asked my officials to be market focused and expand the freight basket.

There’s a need for segmentation of freight traffic. For example, Maruti Suzuki chairman was here for a meeting a few days ago. He told me he wants to use the railways for transportation of his cars across the country.

We are working on a special auto freight scheme. I am not competing with roads but complementing it.There’s a synergy that I am trying to develop among all forms of transportation since none of it could work in silos.

We have people who want to invest in private freight sidings here. They are investing in the infrastructure. Though the money is not coming to us, our infrastructure is expanding. Earlier, coal and fertiliser ministry would blame me for shortage of wagons.

Today, I have the capacity to load 1,200 mt.