In a first, Prabhu’s rail ministry creates competition for road transportation sector!
Railways Minister Suresh Prabhu says the Railways will spend USD 142 billion towards boosting the country’s railways infrastructure. Will he be the man to turn around the transporter?
The Railways Ministry is considered by many as one of the best-performing in the Narendra Modi government.
Just a few days before the auspicious day of Gudi Padwa, India’s rail passengers have got two gifts from the railway ministry and both are going to benefit lakhs of passengers in the coming years. First is India’s fastest train ‘Gatimaan Express’ that will run between Delhi and Agra and the other is the first ever air-conditioned Mumbai local train which will roll out on the tracks in the coming days!
Suffering from chronic under-investment, a lot of flab and an over-dependence on freight revenues, Railway Minister Suresh Prabhu has looked to turn things around.
“We are looking to invest about USD 142 billion in the next four years for rail infrastructure modernization,” Prabhu told in an interview. This, he said, would partly be funded by a sharp increase in capital expenditure supported by the government Budget – it rose from Rs 57,000 crore in FY15 to Rs 97,000 crore in FY16 and is pegged at Rs 1.21 lakh crore in FY17 – but a lot of it would be outside the Budget, such as PPP spending on the Dedicated Freight Corridor and High Speed Railway.
“The government is putting in place a National Plan for Rail Infra Development. Funding for all projects for the next two-three years has been tied in,” he said.
Indian Railways have taken a leap as they deliver India’s fastest train Gatimaan Express in service from this week. The train touches a speed of 160 km as it covers the distance between Delhi and Agra in about 100 minutes. Apart from speed, this train also delivers certain services such as onboard stewardess providing luxury hospitality to passengers, onboard WiFi services and entertainment. It’s the first of its kind which was available while availing air travel. This could be a new era in India as passengers would be able to enjoy a higher class of services and would perhaps attract higher middle-class passengers back to railways.
As we are aware, the Indian Railways are currently struggling badly on the financial front and this is mainly because successive railway ministers have treated the railway department as a tool only to leverage their personal brand equity in politics in their respective constituencies or states. Thinking only about the constituency, only about party’s political interest or another personal vested interest was the method followed by most of the railway ministers in the last 15 to 20 years. However, Suresh Prabhu for the first time seems to have been attempting to bring in some level of professionalism to the ministry and most of his policy decisions are aimed towards not just winning votes for himself or his party but to improve the condition of the railways.
In his budget too the Railways Minister insisted that he will not be making tall claims and announcements about launching new trains etc but will instead work on improving the present structure and especially the financial condition. That is surely a welcome approach and the right way forward.
Gatimaan Express will surely become very popular because it now connects India’s most sought after national monument Taj Mahal with India’s national capital and lakhs of tourist domestic, as well as international, arrive in Delhi and want to go to Agra to see the Taj Mahal. These tourists will benefit because of the train.
The Railways Ministry must also think of having this kind of high-speed connectivity now between other cities such as Bengaluru and Mysore, Pune and Nashik or Nagpur and Amravati. Such high-speed trains would take the pressure off the highways and provide efficient and quick transport to the passengers.
A little over 2.5 crore rail passengers use railway services every day in this country. Out of those, just about 1 crore use it on Mumbai’s suburban network alone. The Mumbai suburban rail network has been totally neglected in the last two or three decades, now for the first time, an air-conditioned local train is being brought in on city tracks. If this train works well, thousands of people would prefer to keep their cars at home and use air-conditioned trains to commute in the city. It would not only reduce the traffic pressure but also reduce pollution levels. What should have been done many years ago has now finally been done and hopefully, will be taken forward. Railways Minister Suresh Prabhu is attempting many things. If Prabhu can turn around the Railways in the coming years, it will be a big contribution towards not just to transport sector but to the economy and the environment too.
The Mumbai suburban rail network has been totally neglected by the rail ministry in the last two or three decades, now for the first time, Suresh Prabhu took initiatives to introduce an air-conditioned local train on city tracks. If this train works well, thousands of people would prefer to keep their cars at home and use air-conditioned trains to commute in the city, it would not only reduce the traffic pressure but also reduce pollution levels.
In the interview, he discussed how the speed of projects sanction has increased in the Railways, thanks to decentralization, how it is redefining its approach to customer service and explained the economic opportunities that will come with its modernization.
Q: It was a question about trying to get an increase in market share for rail freights. We have seen an increase in rail freight charges at the same time as diesel prices have been falling and so you have had a relative move in competitive advantage towards using road over rail. Would it be considered reduction in rail freight cost in order for it to remain competitive with trucking?
A: Of course, in a way all markets are integrated and in a way if you have intrinsic strengths like the Indian market has of many institutions, many important players, domestic demand, I think we in a way are also insulated. So, we get affected adversely but because of intrinsic strength we could also ride this difficult phase in a much better manner than many other countries.
What we are doing currently is to ensure that we are increasing our domestic capabilities to face such challenges that come from global headwinds and at the same time we make sure that we also respond to some of these global challenges – what happens in the currency market, capital market anywhere in the world gets – India will get affected because also we are integrated. So, that strategy has to be two-fold, to work on domestic strengths to be enhanced as much as possible in shortest possible time. We have certain legacy issues which we try to keep them behind and try to address them.
The honorable Prime Minister personally monitors untangling of some of the stuck assets that happened as a result of past policies. However, again our Finance Minister, if you saw in the Budget has laid down a very clear signal. Yesterday, the central bank has also responded positively putting faith in Indian economy in a very significant way. As you know our central bank, Reserve Bank of India (RBI), is completely independent, autonomous, they function in their own wisdom and they also have faith in growth trajectory that India is expecting and therefore we feel that we will be able to ride the wave in a much positive way than many other countries.
Our job is of course, we want to make sure that the global economy also gets benefit of this because if any economy of size of India expands little more than rest, obviously the benefit will accrue to other economies also. Like we see that the Chinese the second largest, Japan is the third largest two large economies in Asia, we are the third so we have a great responsibility also to make sure that we also contribute in our own way to some recovery in rest of the world economy. We are not as big as the largest economy like US, China, Japan but still we feel we will also contribute. So, we have time to weather the storm globally in terms of making sure that we work in a proper manner.
We are seeing lot of interest within the country. Now investments are picking up. We are also seeing lot of global interest in India thanks to realisation of the intrinsic strength of the Indian economy but also because of the leadership of our Prime Minister who inspires the global community of investors to ensure that they will come here, they see a regime which is very positively responding, which is business friendly but also does not necessarily favour a particular entity. So, it is no crony capitalism, it is true working of market forces institutionalised by government policies by making sure that each of the ministry also contributes.
Q: Can you specifically talk about what railway projects will be announced over the next 12 months, as we understand the ministry has been doing a huge amount of home work in developing credible projects in the railway sector particularly in urban transportation where we think people are probably underestimating how important that is going to be in terms of its multiplier effects on growth. Could you may be run us through some of the metro schemes that the railway ministry will be promoting?
A: There are huge opportunities in transportation sector of India and because the urbanisation is rising, as you correctly mentioned, even the urban transportation itself, so, there is a great opportunity because people will move. What is urbanisation, when they come to urban areas, you need to provide urban transport solutions. However, where do they come into urban areas? They come from hinterland so you also need connectivity from hinterland to the cities.
So, actually speaking, we need a holistic management of integrated transport solution which we are working on. I already announced in my Budget which is presented six weeks ago to the Parliament, that we will actually be putting into place a national plan for railway network expansion, which will encompass all the concerns of all the stakeholders in the country including private sector, state government and others so that it will be a holistic plan available for implementation.
Now, in terms of projects, in fact in city of Mumbai, we already talk about elevated corridor. There are about 8 million people travel by Mumbai every day, so just imagine the potential of that business. Mumbai is a commercial capital of the country; we are doing the same thing for a technical capital of India, Bengaluru. We are trying to do many things. There is a huge potential, we have a large number of projects now available to us including urban station development.
There are 7 billion passengers who travel by railway every year. Now, just imagine 7 billion is close to the global population. That many footfalls, that many eyeballs and therefore those urban stations where redevelopment could take place on the top of the station using the land and air rights, just imagine the potential for that project. So, there are huge opportunities for investment into the railways.
We are using all resources available within the country, we are already borrowing USD 25 billion from the largest insurance company in India but we obviously are open to finding out how other countries can contribute. There are 13 countries with whom we have got agreements for development. We are already working with Japan on a USD 16 billion project for linking Mumbai and Ahmedabad, two urban centers with hi-speed train. Yesterday, we launched another semi hi-speed train going from Delhi to Agra which is the home to one of the world’s best known site Taj Mahal.
Q: We wanted to ask you exactly how much of contracts you gave out in FY16 and how much you will give out in FY 17. We are asking because if you looked at the Budget numbers, there was an 80 percent jump in the amount of money that the railways spent. The expenditure budget – from Rs 56,000 crore in FY5, you have risen to Rs 97,000 crore in FY16. FY17, the budget is Rs 1,21,000 crore, 25 percent rise. So, how many contracts do you actually give out in FY16? How many do you expect to give out in FY17?
A: You will be surprised and shocked that government’s railways capital expenditure is more than double of previous five years average. It is more than double. There is more than 30-40 percent more than previous year’s capital expenditure. So, you can imagine how much we are spending in the railways. But this is only from the capital expenditure of the railway which are mentioned in the Budget.
In addition to this, we have already spent about, there is a dedicated freight corridor. We gave away the contract this year, which will be at least about Rs 30,000-40,000 crore. We are already working on the projects like port connectivity project which is another high amount. Then we gave contracts for USD 6-7 billion to General Electric (GE) and Alstom to manufacture diesel and electric locomotives this year.
So, if you go outside of the Budget, without the number which I gave you which is double than the previous five years, this is an addition to what these numbers are. So, if you add these numbers, they are phenomenal numbers which already happened. Next year will be far better, because this year, we have to start from scratch. There was no available projects, so we had to prepare detailed projects report. We had to get sanctioned for these projects.
Now, the sanctioned projects available with the railways. As a result of the good work that we had done last year, actually will be sufficient to even cater to the next 3-4 years of capital expenditure. And funding is more or less tied for the next 2-3 years, so therefore, there is no real issue in terms of that.
In addition to this, we are making joint ventures with the state government. There are 16 state governments who will work with us. The contract that will be given to the joint venture will be far excess of what has ever happened. So, you can imagine the amount of money that is going to be spent by the railways directly for the Budget which I just mentioned. Next year we are talking about Rs 1,20,000 crore. But this is only one part. The part that is going to be spent outside of that will be even far more. And just imagine, this was the year when we actually had no projects.
So, the railways used to take more than two years from the projects is announced till the tender is given. We brought down this gap to less than six months this year. So, just imagine, it is not easy, if you feel that spending is something so easy, you just take the money out and give it to people. It is not as simple as that. It is not giving away alms. This had to be followed a procedure, but despite this we have done it. So, I am very sure we will do better this year.