“The Railways have done something exceptional in the last two and a half years. Of the Rs 3.5 lakh crore of capital expenditure undertaken, a substantial part of it has been raised outside the Budget,” said Suresh Prabhu.
The Railway Ministry has stepped up capital expenditure under the NDA government, said Railway Minister Suresh Prabhu. In the last two and a half years, the ministry has spent almost all the money allotted to it in the Budget, something that never happened under earlier administrations, he said.
Of the total outlay of Rs 1.31 lakh crore allotted for Railways in the Budget, only Rs 55,000 crore will be provided for by the Finance Ministry. The remaining amount, will be raised by the Railway ministry, said Suresh Prabhu in an interview with news media.
“The Railways have done something exceptional. Of the Rs 3.5 lakh crore of capital expenditure undertaken, a substantial part of it has been raised outside the Budget,” said Prabhu.
This year, the ministry plans to spend on electrification, station redevelopment, doubling and tripling of railway lines and retrofitting of train coaches, said Prabhu.
Below is the verbatim transcript of Suresh Prabhu’s interview with news media.
Q: We saw the merger of the Union Budget and the Railway Budget and this is the first time that you are speaking to us post that. Give me a sense of the outlook at this point in time. It has been a difficult period for the Indian railways whether it is as far as passenger fares are concerned, passenger revenue is concerned or freight revenue is concerned, I don’t want to get into the details but you have pegged your revenue estimation at a growth of about 10 percent in the Budget this year, are you feeling confident of being able to achieve that number?
A: You only give in your own channel the microeconomic picture and many times you keep saying that the core sector growth rather the sector growth are not there. Freight is directly related to the amount of cargo available in the market place. So the growth will depend upon that. Therefore despite all this, in the first few months, we had a very difficult time because coal movement had gone down, steel movement had gone down, cement movement had gone down, iron ore movement had gone down, the major five commodities. So we have decided a strategy for a long-term change that is to go beyond coal. We have completely revamped our entire freight policy, we have completely reduced the rate, we have changed the rate and the result of that now you can see in the next few months.
January we recorded the highest ever loading in any January of any previous year. February is also good which is ending today but it is far better. March also is expected to be even better and the next year will be far better. This year, we have done far better than the market condition that was prevailing.
Q: You have missed your own estimates by quite a margin.
A: When you prepare estimate, what is the basis of estimate? The basis of estimate is what the industry gives you. We talk to each and every industry segment, if the steel industry says that they are going to transport so much of cement, coal industry says that we are going to transport coal, the estimates are based on that, it is not my estimate.
It is an estimate given by the industry. We are a transporter. I am not making revenues by doing something internally within the railways. Transport anywhere in the world, their revenue targets are dependent upon what your customers are going to handle. If the customers themselves don’t come forward and try to meet their own revenue projection, how are you expecting the railways to do it?
Q: Are they giving you a different picture, are they seeming more confident today?
A: Absolutely. That is what I am saying that you are seeing the results in last three months so please try to understand this is not my revenue target. The revenue targets are given by the people who are going to transport the cargo. So please try to put into perspective. You yourself are saying that cement industry is not doing well, you are doing the corporate result of steel industry so they are the ones who are giving the targets to us.
Q: In terms of one development that the markets are keenly awaiting and that is the decision to look at monetising and unlocking value through the disinvestment process, the finance minister has made that announcement in his Budget speech, where do things currently stand and how soon can we expect movement on the listing of the three railways entities that he articulated?
A: This is a continuous process. I had said in my last Budget speech that we are going to put it, we are going to unlock the value.
Q: Is the holding companies idea now over and done with because they are talking about now listing these entities independently?
A: Listing and holding companies are two different things. The holding companies has got nothing to do with listing. Listing of an entity and the holding companies are completely different things. The Tata’s have got several listed companies, doesn’t mean that they don’t have holding companies.
Q: So the holding companies idea is still on the table?
A: That is a different thing. I am not going into that today. I am just telling you that this is a continuous process of thinking in the government to unlock the value, therefore we already initiated the process last year itself.
We have talked to a lot of companies to do the valuation of some of the companies. This is not this year. This we had done last year. We are trying to find out the best possible way to get value to the country as a whole, to the exchequer. That is why we don’t want to just disinvest for the sake of just disinvesting. We want to do it to make sure that railways get money, government of India gets money, the shareholders get money and the country as a whole also benefits from this unlocking of the assets.
Q: Let me ask you about the capital expenditure outlay and this is the highest that we have seen at over Rs 1,30,000 crore and even the gross Budgetary support at Rs 55,000 crore. You have also been pretty innovative in trying to raise funds off Budget, what is the expectation now in being able to whether it is electrification, doubling of tracks so on and so forth, what can we expect on that front in terms of the infrastructure push by way of the railways?
A: Typical capital Budget of the railways used to be in the region of Rs 30,000 crore to Rs 40,000 crore for years together. It has never exceeded that number. We increased it to Rs 1 lakh crore and we have spent Rs 94,000 crore. Last year was Rs 1,11,000 crore. We are very close to it maybe few thousand less than that.
This year again Rs 1,31,000 crore — where is it coming from? The Finance Minister has provided Rs 55,000 crore from the gross budgetary support. So where is the balance Rs 66,000 crore coming from? It is coming from extra-budgetary sources which the FM is saying in his Budget speech but who is going to raise it? We are going to raise it. That means, the railways have done something exceptional for last two and a half years of Rs 3,50,000 crore of capex, most of it, substantial part of it is going to raised outside of the Budget. So this is a great achievement in itself that we have been able to do that whereas the railways have never done that before. So in just two and a half years, we could do that in a substantial manner.
Most of the money will go into doubling, tripling, electrification, partly station redevelopment, retrofitting of our coaches, that is the rolling stock, laying the tracks — of course that is a part of the safety fund, safety fund is different than this. So just imagine, the amount of capex that we have done.
Imagine, Rs 94,000 crore even though it was 100 percent more than the previous year, Rs 1,11,000 crore is another Rs 17,000 crore more than the previous year. This year it is Rs 1,31,000 crore. So all that put together, the cumulative effect of that on the capex.
Another thing about the capex, when you start a project which has a five year timeline. In five years, first year you spend 10 percent, next year you spend 20 percent, third year you spend 35 percent. So in that progression it happens. So just imagine the project which was started last year or an year before last, we have spent only 20 percent, this year we will spend 30 percent. The project which was started last year, this will again we will spend 20 percent. So cumulative effect of all this will be felt in the next year essentially but four years after substantially and then you can see the real consequence of all the capital expenditure that is happening on the ground.
Q: So one of the big ticket ideas that the Budget presented which pertains to your ministry is the Railway Security Fund that has been set with a target of Rs 1 lakh crore over the next five years. Are you looking at some of the innovations that you have brought in to raise money of Budget even as far as the railway security fund itself is concerned?
A: Let me give a little historical background, this idea was proposed one and half year ago. As soon as I became the minister, I had written to the finance minister and we have been negotiating since then. Finance minister has agreed to put 75 percent into this. The balance 25 percent — there are many ways by which you can raise this money and you are right and I appreciate it that we will try to use some innovative ideas to make it happen.
Q: By when can we expect you to give us some sense of what these ideas could be?
A: You have already seen the ideas getting implemented. I told you, two and a half years ago, when I said we are going to have Rs 1 lakh crore budget, you said where is the money. We have got the money, we have spent Rs 94,000 crore when the Budget was hardly only Rs 30,000-40,000 crore. Last year again we spent more than that, again the Finance Minister himself is saying that Rs 55,000 crore only is going to come from the Budget, balance is going to be raised by the railways, so he also has the confidence in our ability to raise money. So, what I believe in is not to just make announcement but to do something on ground. So when we do it, you will be the first one to know.
Q: As far as railway development or the railway tariff authority is concerned we didn’t see the Budget make any specific reference to that. Is that an idea that is still being considered, will be taken forward?
A: There are a lot of inter-ministerial consultations which are going on, in fact it is at a very advance stage. I hope it should go through. We are working on several different dimensions of that but this is already on track.
Q: What would be the immediate priority? There have been some concerns on slow execution of some projects and so on. At this point in time as you try and meet the target that you had set for yourself in this year whether its electrification, tracks and so on. What you foresee as big challenges because you have got pretty ambitious targets that you have led out for yourself in 2017 as well?
A: As far as we are concerned we have already raised the speed of implementation by more than double in the course of last two years. So that is something which is acknowledged. We keep setting higher and higher standard for ourselves, the bars will be higher only because there is so much of backlog of so many decades, so therefore we set it high. It is always challenging, it is no easy to set such high target. I could have also waited and said, I will spend only Rs 30000-40000 crore but I stick my neck out.
Q: I remember our headline from two-and-a-half years ago when you said that you want to break the cycle of under investment that the railways have been stuck in?
A: It is very easy for me to set low standards and low targets. I am deliberately doing it because I am challenging the organisation to do it. We are trying to do it but there are certain bottlenecks. However, I can tell you with certainty that March 31, 2016-17 target we will definitely meet, of course the overall number of it, maybe doubling may slowly come down but tripling may increase, so something like this but numerically whatever number of kilometres and everything we have said, we will definitely achieve.
Q: I want to ask you a question as far as operating ratio is concerned at about 94.5 percent and I understand that whether it was Seventh Pay Commission or it was on account of bonus act there has been a substantial burden as far as railways resources are concerned but in the coming year now with some of that perhaps easing, what do you see the picture looking like?
A: Operating ratio is something with which we get stuck with the past. The operating ratio, when it was calculated about 100 years ago since then we are talking about that. The world has changed. We need to look at finding out railway’s efficiency on different parameters. This year the social service obligation has been at all time high. It has never been in railways’ history, Rs 34,000-35,000 crore is public service obligation.
Second, the freight has never been as bad and this is not only India, China had a negative growth of freight; negative growth – China, which is the largest freight handler in the world, negative growth of freight rates for the railways.
Third, we had unprecedented burden of Pay Commission which has been the highest ever than any previous Pay Commission in one year. We had the highest burden of bonus because railway is the largest employer, so when you increase the ceiling of bonus, obviously the biggest sufferer was railway but despite all this, railway’s financial performance is far better than what it would have been otherwise, thanks to – we saved Rs 4,000 crore on account of energy bill.
We are rationalising the productivity of all the employees. First time in the history of railway we have done human resource audit by Deloitte. We are in the process of looking into it. We are trying to work out the complete transparent system by which a lot of money has been saved because we are doing e-tendering – almost 100 percent. So all of these measures have added to improving productivity, efficiencies, it is taking away the slippages.
Another target we have put for ourselves is Rs 41,000 crore of saving of energy bill in the next ten years and this has been vetted by global agencies. So you can imagine what transformation it will bring into the railways. On the other hand we have put Rs 17,500 crore targets for non-fare revenue at the end of the ten years. It will happen now but at the end of ten years it will be Rs 17,500. In addition to this we will raise from railway station redevelopment at least Rs 10,000 crore, so all of this is going to be added. So what you are asking me in terms of structural changes of railway’s finances, these are the issues which are going to impact productivity improvement, efficiency improvement, non-fare revenue, reducing cost, rationalising the entire operation. So this is like we are in the process of restructuring the entire railway organisation. We have setup a transformation cell in the railway by our own people to look at each and every function of the railway, so all these are transformative measures. You cannot see the result by asking every 15 days but I am sure when you will ask me, whatever details I have given you, all will be under implementation.
Q: In terms of big ticket project – freight corridor, metro projects that are around the country. Give us a sense of what we should realistically expect in 2017 and high speed rail as well.
A: The dedicated freight corridor is already at the advance stage of implementation. World Bank has recently sent me a letter saying that they have never seen a progress like this because they are the financing agency for the dedicated freight corridor – this is what the World Bank is saying.
Second, on high speed railway, we have done a lot of progress and that is also at a very advanced stage. When we agreed with the Japanese, the work was supposed to start in 2018, we are on track of that.
Third, we are in the process of thinking on new dedicated freight corridors.
Fourth, we have started a station redevelopment programme which is one of the biggest in the world. Already 23 stations are set on motion, 7-8 are getting constructed, another 40 will be offering for public. We cannot dump all stations at same time and you know the real estate market. We are always guided by the market condition which is not in my hand and so we have to also keep in mind the real estate market.
Also the entire process of state government involvement – 10 states have made a joint venture agreement, everybody was laughing at me when I said we are going to do this, including Kerala – a state which does not belong to my party. So entirely put together you can imagine the implementation.
This is the only ministry in which you can ask me question about operating ratio. This is the only ministry in which you can ask me question about raising finances on my own, no other ministry does that. This is the only ministry in which you can ask me the question about infrastructure project. This is the only ministry in which you will ask me about a customer satisfaction. This is the only ministry in which you can ask me question about hired number of people through human resources. So this is an unparallel amount of work that is happening. I can assure you one thing that on all fronts we are working, the results are also visible on many counts but I am not satisfied with the type of end product I envisage with a Prime Minister’s vision – that will happen while we complete out first cycle of five years investment because it takes that much time. In China it happened. Anywhere in the world the railway infrastructure up gradation has always taken, at least the few cycles, the first cycle has taken five years anywhere. So we are working on that.