The Trimurtis Are Firing Up India’s Infrastructure Sector Like Never Before

The Trimurtis Are Firing Up India’s Infrastructure Sector Like Never Before

by Seetha - Wednesday, June 8, 2016 11:47 AM IST
The Trimurtis Are Firing Up India’s Infrastructure Sector Like Never BeforeSuresh Prabhu, Piyush Goyal and Nitin Gadkari
  • Three ministers in the Modi Cabinet, in charge of crucial infrastructure sectors, have brought a rare energy to their jobs, cutting through red tape, setting ambitious targets, and keeping a hawk eye on implementation. If these visionary and impatient men succeed, they could change countless lives for the better and transform the economy.

They form the Trimurti of the Narendra Modi government. Not individually, perhaps, but each is a combination of creator, preserver and destroyer. So they are innovating new ways of doing things, nurturing their sectors assiduously and indulging in creative destruction—sweeping away outdated ideas and processes.

Meet Suresh Prabhu, 63, Railways Minister, Nitin Gadkari, 59, Minister for Road Transport, Highways and Shipping, and Piyush Goyal, 51, Minister for Power, Coal and Renewable Energy—the triumvirate that, helped by a supportive Finance Ministry, is firing up India’s infrastructure sector like never before. In the face of humungous challenges.

Fixing infrastructure had to be Narendra Modi’s top priority when his government took charge in 2014. Growth was flagging and the economy was hobbled by an acute infrastructure deficit. Given the criticality of these ministries, they needed to be headed by dynamic people. Modi, everyone agrees, has chosen well.
All three bring to the table a single-minded determination, sound knowledge of financial and business issues, an ability to see the big picture as well as grasp the problematic elements within it, and a willingness to tread the path less trodden. “I have never seen this combination of high energy levels, practical sense, and drive,” says Vinayak Chatterjee, chairman and managing director of consultancy firm Feedback Infra.

Modi was running a huge risk by putting an administrative rookie like Goyal in charge of the highly complicated sectors of power, coal and renewable energy. He had the toughest initiation among all his colleagues. His was baptism by outage, jokes Chatterjee. Within days of the Modi government assuming charge, a massive thunderstorm ripped power lines in Delhi, plunging the capital into an unprecedented power crisis.

And a few months into his job, the Supreme Court cancelled 204 coal block allocations.

This, when Goyal’s plate was already overflowing with problems. Several gas-based power plants, accounting for nearly 60 per cent of total capacity, were stuck for want of fuel linkages; two-thirds of the thermal power plants had critical coal stocks of less than seven days; transmission and distribution (T&D) was in a mess; there were no investors in the renewable energy space; and the coal sector was caught up in a gigantic scam.

There was also a handicap: the success of any Union Power Minister is crucially dependent on the actions of state governments. Power is a concurrent subject and the Centre has no control over state distribution companies (discoms), the weakest link in the power supply chain. Discoms have been run into the ground by populist policies and earlier attempts at putting them back on their feet were not successful because of the unwillingness of state governments to let them function on commercial lines. But if there is a crisis, the states are quick to transfer the blame to the Centre.

Political commentators insist that Modi was slighting Gadkari, a former BJP President, by giving him a relatively less important portfolio, but he is a natural fit for the ministry, given his stellar stint as PWD Minister in Maharashtra in the late 1990s. When he took charge at Transport Bhavan, he was saddled with 403 stalled roads projects worth Rs 3.85 lakh crore, a complete collapse of the public-private partnership (PPP) model and banks wary of lending to the sector.

He was just about getting a grip on the problems, he recalls, when premier engineering company Larsen & Toubro’s  (L&T) Executive Chairman A. M. Naik came and told him the company was not interested in the roads sector, paid a penalty and walked out of a project. On top of this, he had to breathe life back into a moribund shipping and ports sector.

Prabhu did not have an immediate crisis to tackle, but the Indian Railways had been crying out for change for ages. A victim of political meddling and bureaucratic rigidity, its finances were in bad shape, it was losing freight market share to roads and its service quality and safety record was pathetic. He also inherited 13.5 lakh employees and 14 lakh pensioners, and a shelf of pending projects worth Rs 6.5 lakh crore, half of which were unviable.

Unlike Gadkari and Goyal, who head expenditure ministries, Prabhu has to raise money to fund capital expenditure and running expenses as well as pay salaries and pensions. The support from the general budget—less than 40 per cent of its total budget—has to be used only for infrastructure and the Railways has to pay interest (dubbed dividend) in perpetuity on this. And he also has to deal with retail customers. “He may successfully address the basic problems of railways, but one accident can set the perception back 10 steps,” says Soma Banerjee, Principal (energy and infrastructure), Confederation of Indian Industry. “What is important is to keep an eye on the short term without losing sight of the long term,” Prabhu told Swarajya.

But the triumvirate is delivering. The tantalising numbers the ministries’ information officers dish out may perhaps not stand up to very close scrutiny, but fundamental issues dogging individual sectors are being addressed. “Each, in his own way, has grappled with the enormity of the problem he was faced with. The net result has been a sector that is far more invigorated than what I have seen in 15 years,” notes Chatterjee.

All three men have a structured, systematic approach to problems, quickly homing in on root causes.

The Delhi outage made Goyal realise that he would have to fix the transmission and distribution part of the power chain urgently. And so he set about working on what would, a year later, become the Ujjwal Discom Assurance Yojana (UDAY), which is a mix of restructuring of loans of discoms along with tough conditions on improving operational efficiencies.

Prabhu has put his finger on the one reason for all of railways’ problems—colossal under-investment over the years. He has identified the solution—massive increase in capital expenditure and focused implementation of projects. But since this will not yield results immediately (definitely not before 2020, he admits), he is focusing on the low-hanging fruit—clean stations and train coaches, improved reservation experience, better food, charging points, wi-fi. This, sneer critics, is just to keep the urban, social-media-savvy middle class happy. Prabhu’s reponse to such criticism is a rhetorical question: “Look, what are we? We are a transporter. What is my core job? It is to transport people and goods. So if you don’t take care of your customers, why will they come to us?”

Having identified the basic issues, these ministers go about addressing them methodically. “(Goyal’s) whole focus is on de-risking the power sector from the impediments inherent in it,” says Banerjee. Prabhu believes that no overhaul of a sector is possible without a long-term regime plan and so he first got a white paper on the condition of railways prepared and simultaneously initiated work on a five-year plan, which is being extended to 15 years, up to 2030.

Realising that the bureaucratic functioning of the railways is a big impediment, he is ushering in process improvements—e-procurement, and e-tendering, and delegating powers to functional heads, to name just two. “These are all small changes but have tremendous impact,” says Banerjee.  Time for project approvals has been scythed from 24 to six months and processing time for tenders from 500 to 88 days.

Gadkari got the stalled roads projects categorised according to the reasons they were stuck, first worked out generic solutions and then addressed individual concerns. For cases where promoters were facing stress, he created packages where the National Highways Authority of India (NHAI) would come in with equity and got banks to restructure loans. He did have to let over 40 projects be terminated, but it was not for lack of trying. “If he encounters a problem, he will not rest till he finds a solution; he brings along a lot of positivity,” says Chatterjee.

Gadkari is not a great fan of having files initiated and notes put up; his biggest beef is with the long-winded processes in government. “How to reduce time is my biggest challenge,” he told Swarajya. Instead, he prefers to sit everyone involved in an issue down at a table and get them to talk things over. “I have done thousands of meetings with contractors and bankers and sorted things out,” he says.

Take the case of the Delhi-Jaipur highway project. Problems relating to land acquisition and contractual issues saw the project languishing well past the completion year of 2011. Gadkari held several rounds of meetings with the developer, the NHAI, banks and sub-contractors. He ensured that the NHAI paid up the dues it legitimately owed to the developer and got after banks to lend more to the project. He insisted that the banks directly paid to the small sub-contractors what the developer owed them, so that there were no delays in resuming work.

Now only 14-15 projects worth Rs 30,000 crore are still stuck, and L&T is doing nine projects worth Rs 15,000 crore. “The situation has changed; those who ran away are coming back. Go to any banker or contractor, they will say I have saved them,” he grins. Because of his seniority in the BJP, he is able to pick up the phone and speak directly to the Prime Minister or call other ministers to get issues sorted out.

Goyal, too, holds large and long meetings (one went on till 2 AM) where he encourages everyone to speak. When dealing with problems relating to the coal sector, most meetings are held, not in Delhi, but in the states. For UDAY, too, there were extensive consultations with state governments, discoms, banks, power companies and industry chambers. The final shape of UDAY, says a power sector expert, is a combination of the best suggestions from each state.

UDAY is entirely Goyal’s brainchild and this is another trait the three share: they are ideas men. Goyal, however, is criticised for getting carried away at times. A bureaucrat who has seen all three closely says Goyal tends to make grand statements of intent without understanding the ground reality and then starts worrying about implementation. Prabhu and Gadkari, he feels, are more measured, perhaps the result of their previous administrative experience. Chatterjee does not agree with this reading. Goyal, he says, may be expansive in his vision, but has delivered action on the ground.  “In two years, he has impacted every link in the power chain. What was a bold stroke by the Prime Minister turned out to be a masterstroke.”

The hybrid annuity and toll-operate-transfer models in the roads sector, which is bringing private interest back, are both credited to Gadkari. He is constantly thinking of innovative financing methods. “First, you understand my economic model,” he starts, in response to a question about how he plans to fund his grand Rs 25 lakh crore plans and then reels off multiple ways he can leverage whatever money he has in order to get more. “So I am not dependent on the Finance Ministry resources,” he ends, finally stopping to take a breath.

Any scepticism has him reminding people that as Maharashtra’s PWD Minister, he took Rs 5 crore from the state government, raised Rs 4,000 crore, completed projects worth Rs 8,000 crore in two and a half years and returned the money. “Main hawa mein baat nahin karta (I don’t make tall claims),” is a favourite refrain.

Prabhu, too, is trying to reduce the railways’ dependence on the general budget. “We will strongly lobby with the Finance Ministry to get as much resources as possible, but we will not be constrained by the fact that they are not giving due to their own compulsions,” he says. So, he has inked a deal with the Life Insurance Corporation which will get the railways Rs 1.5 lakh crore over five years, talking to the World Bank for a Railway Infrastructure Development Fund, setting up joint ventures with state governments and has got the Japanese financing for the Mumbai-Ahmedabad bullet train to cover research and development as well. He has also set up a separate directorate to increase non-rail revenue.

This last move has attracted criticism. Freight and passenger fares account for 95 per cent of revenues and this is what he should try to increase for maximum impact, the conventional view goes. Prabhu rejects this, pointing out that in most major countries, the contribution of non-rail revenue is 30 per cent.

A similar impatience with conservative thinking and a readiness to experiment with new ways of doing things is what helped Goyal not only come up with UDAY but also bring private investors into the renewable energy sector, which seemed like a pipe dream at one time. Gadkari’s innovative hybrid annuity model in roads, says the bureaucrat quoted earlier, would never have got off the ground if it had been left to his officials.

Prabhu often questions what is seen as taken for granted in the railways. Safety-related projects, for example, get a lower internal rate of return (IRR) and, hence, lower priority or less allocations in capital expenditure plans. Prabhu has pointed out that safety is far too basic an issue to cut back spending on, just because it has a low IRR. “If our operations are unsafe, we can forget about profitability,” he is reported to have said.
Consider also a move by the rail bureaucracy to nix a proposal by the Coal Ministry seeking re-negotiation of fuel supply agreements because it could have led to the railways losing revenue. “But the country will benefit,” Prabhu reportedly said as he overruled his officers.

So what the three are doing is changing institutional cultures. They are focused on getting results and their message is simple—perform. Under Goyal, Coal India has achieved the highest ever growth in production in two years; while under Gadkari, the ports and shipping public sector units have logged a combined Rs 6,000-crore profit. Goyal says he is happiest about the change in mindset. “Today, my team is willing to accept challenging targets which are unparalleled and used to be considered impossible at one point of time,” he told Swarajya.

“There is no alternative here but progress,” asserts Gadkari when asked about the status of projects. The rate of road construction, he points out, is 25 km a day, “the biggest record to date.” But was his initial goal not 30 km a day? It was, but he could not achieve it, he readily concedes. “But because I said 30 km, 25 km has been achieved. If I had said 10, we would have done just 8 km. One should be overambitious.”

This insistence on performance means keeping the bureaucracy on its toes. All three are relentless in following up, with their ministerial offices playing a key role in this. Goyal, who would demand weekly updates on Coal India production, has people working round the clock in eight-hour shifts. He has websites and mobile apps with dashboards that keep him—and the public—updated in real time on progress in rural electrification and distribution of LED bulbs, among other things. Prabhu has dashboards on his smartphone that helps him track progress on targets by individual Railway Board members. The knowledge that they can be checking this any time—whether or not they do—keeps people on the ball. Gadkari is not as tech-savvy, but he remembers decisions taken and keeps enquiring about progress; woe betide anyone reporting slackness.

He and Goyal have a reputation for being abrasive with bureaucrats. Gadkari has complained at public meetings about the negative mindset of the bureaucracy and in his early meetings with heads of ports authorities, his message was short and sharp—perform or quit.

Goyal is not known to hesitate in pulling up public sector executives publicly but bureaucrats say he has mellowed since his early days. “I have an absolutely wonderful bureaucracy working with me…It is an outstanding team,” he now says and is handing out letters of appreciation. Gadkari too has started making conciliatory noises. “If the system is not working, it is a problem with the leadership. No point blaming the system or bureaucracy. It means I am not capable of getting work done,” he says.

But that does not mean relaxation in pressure. Goyal still does not hesitate to name and shame slackers or quietly sideline them. Gadkari has been unhappy that his ministry has been implementing more roads projects than NHAI, when the latter is supposed to be the implementing arm. it was doing only 2,500 km against 4,000 by the ministry. He did some tough talking recently and told NHAI to pull up its socks, and also upped its target to 10,000 km.

Prabhu has the toughest job with the bureaucracy; the inertia in railways is higher, since it is a larger, fossilised organisation. Shiv Gopal Mishra, general secretary of the All India Railwaymen’s Federation, says he lacks toughness and the rail bureaucracy will slow him down. Indeed, Prabhu going slow on a wholesale bureaucratic restructuring of the railways has disappointed many. He counters that he cannot overnight junk a system that has been followed for 150 years. He may be ushering in changes gradually, but they are significant, he insists.

The boldness of the triumvirate, however, disappears when it comes to setting up independent regulators (for roads and railways) and corporatisation of Coal India and the ports. Gadkari and Prabhu are talking about development authorities in place of regulators and this has disappointed Chatterjee and many others. A regulator is needed in the roads sector to provide a level playing field for private players and in the railways to depoliticise tariff setting.

Goyal responds to a question on corporatising Coal India with a sarcastic laugh, pointing out that it is performing extremely well. Gadkari frankly admits he does not want a confrontation with port unions and says he has brought in elements of corporatisation into the Ports Trusts Act without using the term.

He may have a point, though there is a certain value in doing things upfront than through sleight of hand. Could this tactfulness become timidity at a later stage and extend to other areas, affecting the trinity’s can-do spirit?

That will be a pity, since they still have—their early successes notwithstanding—a lot of issues to address. What they need is the continued support of the Finance Ministry and strong political and administrative backing from the Prime Minister. Over now, to the Boss.

More from Swarajya:

1. Gadkari Moots Infrastructure Development Corporation to Fire Up Roads, Shipping

2. Speed, Reliability, Safety: 3 Pillars Of Prabhu’s Vision For Railways

3. Swarajya Exclusive Interview With Piyush Goyal

Seetha is a senior journalist and author
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