How Railway Minister is trying to make IR more Efficient & Profitable

Railway Minister exerciseProfessor KK Goyal of Vadodara-based National Academy of Indian Railways (NAIR) shows this movie clip to a group of accounting probationers after bombarding them with numbers pertaining to the Indian Railways (IR) that run into 12 digits.

For the probationers, this train scene from the timeless 1972 film Pakeezah turns into a refresher before getting into the next round of numbers and accounting processes.

In another class, professor Deepa Chawla quizzes her students, all from the Indian Railway Accounts Service, to analyse numbers that she writes on the blackboard. She is teaching what traffic accounting is all about, and how the cash collected from a platform ticket makes a long journey from the ticket counter to the Nagpur branch of the Reserve Bank of India.

A thousand kilometres away from Goyal and Chawla’s classrooms, railway minister Suresh Prabhu wants all his officers to brush up their numerical skills and use existing data more meaningfully. Prabhu, a chartered accountant with a penchant for numbers, has also decided to covert the IR’s data collection cell into a data analysis department. After all, the IR in 2014-15 received a mindboggling 100.3 terabytes, or 100.3 trillion bytes of data. If you’re wondering how much of data that would be consider this: If all that data was stored physically on two-sided sheets of paper, its storage would call for three towers of New York’s World Trade Centre, the largest private office building in the world till it was destroyed in 2001 by a terror attack.

Volume, however, is one thing, and its value quite another. “Raw data has no value unless analysed properly… We should not just collect data, we should be able to analyse those data for our decision-making processes. We must use the data for outcomes,” Prabhu told ET Magazine in an interview (see “I have Begun with a Number: 8.5 Lakh Crore”). Prabhu places numbers ahead of policies. “The railways is a story of numbers. Falling operating ratio is a number; falling electrification is a number; falling track renewal is a number…” He points out that the `8.5 lakh crore, or close to $150 billion, that he started out with as the investment outlay for the Railways for five years — as was announced in his first Rail Budget in February this year — can be doubled to $300 billion in five years. “This number is required for the railways to be up and going,” Prabhu adds.

The Number Journey has Begun

If railway officers engaged in data mining are to be believed, the process of analysing data has already begun. And the first key outcome is likely to be seen next month when the IR comes out with “Berth Confirmation Probability” for every waiting list ticket, initially for two Rajdhani trains on a pilot basis.

To put it simply, this exercise will ensure that a wait-listed ticket buyer will get a fair idea of whether the ticket will be confirmed or not, though IR is going to make it amply clear that the number is only indicatory and will in no way give a guarantee of ticket confirmation to its customers. While zeroing in on the number, the data on seasonal rush, classes and trains will be factored.

Further, there is a move in the IR to collect data using Google maps. “We are planning to geo-tag all rail properties including track, trains and land by March 2016. Once it’s done, we will have quality data from across the country. For example, sitting in Rail Bhawan, we will be able to spot encroachments in stations and take a decision on monetising some underused assets,” says a railway officer on the condition of anonymity.

Former railway minister Dinesh Trivedi is, however, not convinced with Prabhu’s big-bang idea of overhauling accounts and using numbers more meaningfully. “The easiest thing in the Railways is to fudge numbers. And the Railways has an accounting system that does not tell how efficient it is. We brought out many of those issues in the parliamentary committee that I headed (in a April 2015 report),” says Trivedi, who couldn’t resist the quip: “Also, chartered accountants are known for fudging numbers.”

For his part, Prabhu does not shy away from stating in clear terms that profit is a clear motive of the railways. “Unless IR is commercially driven, it can’t serve social interests,” the minister says. In fact, IR in its bid to woo debt from the market has already tied up with the government-run Life Insurance Corporation for `1.5 lakh crore, to be disbursed over the next five years, with a clause of a repayment moratorium for five years. The IR, which usually banks on internal accruals and grants from the finance ministry to keep it running, may soon clinch another debt deal — a $30 billion loan from the World Bank.

Yet, the multi-billion dollar question is how easy it will be for IR to raise funds against a backdrop of sub-normal indicators: its financial health is abysmal (an operating ratio of over 90% is perhaps the biggest indicator), decisions are often driven by political considerations, project delivery is below average and, above all, the accounting system it uses is alien to global investors. Like all other departments, IR too uses the cash-based accounting system (as against accrual accounting), which does not reflect receivables, one parameter that investors always want to figure out before putting their money on the table.

“Potential investors in the Railways want us to speak the same accounting language. So, IR has been undertaking pilots on commercial accounting,” says Hemant Godbole, an IRAS officer and professor in Vadodara’s NAIR. Already, eight chartered accountants from Institute of Chartered Accountants of India are engaged in two accounting pilot projects; one group in Ajmer in Rajasthan is working on accrual accounting and another in Delhi is driving a project that will eventually link budget to expenditure to output and finally outcome, something Prabhu had announced in his Rail Budget speech.

Prabhu and his key bureaucrats in Rail Bhawan may recognise the importance of numbers and right accounting processes to make the railways relevant for the market, nationally and internationally, but no one can discount that IR is also an organisation of a whopping 14 lakh employees; and that many of its managers are allergic to mathematics and accounting. In fact, when the Union Public Service Commission (UPSC) recruits officers for services such as Indian Railway Traffic Service or Indian Railway Accounts Service, it does not differentiate one with an IIT background from another who has a degree in history or sociology.

The question then is whether officers from the humanities or medical backgrounds can pick up numbers when they get training at NAIR. “To understand numbers, what’s key is logical thinking, and not the background of the probationers,” insists Shailendra Jaiswal, deputy director general of NAIR. If one goes by the Railways’ financial underperformance and, therefore, under-investments and poor quality of service, you would be tempted to believe that logical thinking has so far deserted the state-owned behemoth.


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