His prime ministers like to give him difficult, complicated ministries to handle. Atal Behari Vajpayee put him in charge of environment, fertilisers and power; Narendra Modi gave him railways to run. Suresh Prabhu is wowing the middle class with cleaner trains, stations and a host of amenities. But he is not content with this adulation. In an interview with Seetha he speaks about the plans to transform the behemoth into a nimbler, efficient, customer-focussed organisation. Excerpts:
How do you assess your first two years as railway minister? What were the challenges and constraints you faced?
On my first day, I only knew about railways as a passenger. I started studying it and I realised that it was in deep trouble. So many things that needed to be done had not been done. It was both acts of commission as well as omission that was responsible for the problem.
I said it is inconceivable that such a large organisation, such a large part of the economy, can be overhauled without a long term regime plan. Therefore, I said let us prepare a five-year plan. But I also knew that the challenge when you deal with the overhaul of a sector is that people will keep asking you, that is alright but what about today? And if you solve only today’s problem, you will never solve the long term problem and railways will get into bigger trouble. So I said let us have a five-year plan (now we are extending it to 15 years, so a 2030 plan will also be ready) but also address immediate problems of the people.
I was once at Varanasi station. A train was delayed because of fog. One person told me not only is the train delayed but there is no charging point, so I cannot tell anyone. So I said, we will put up charging points, improve food quality, cleanliness in stations and coaches, retro-fit coaches internally, provide wi-fi. These are small things that can happen in the short term. They are the deliverables for the customer, but not something that will overhaul the railways. What is important is to keep eye on short term without losing sight of long term. That has to be our strategy.
How did you go about it?
My first budget was the first step in that direction. It was also a complete departure from earlier budgets. One budget had ten pages on stoppages, another had several pages on new trains, there were announcements that had not been provided for in the budget, like starting a new division, a new zone. I said we will not make a budget like this, we will give strategic direction to railways, we will talk about challenges and how to address those challenges and the core budget – the financial statement, expenditure-income – will be very precise and sans fanfare.
It was a very deglamourised budget but people accepted it as a good budget. But everyone was stunned that I have not started new trains. We have started new trains but it has nothing to do with the budget. The budget is a financial statement, a policy statement, showing the direction. All these [new trains, stoppages] are operational issues. In that case I should also announce transfer of one official in my budget speech.
And we did something exceptional. Normally, people would be focussed on getting money from the ministry of finance. If it didn’t give, then nothing would happen. And I would blame the finance minister – I want to do so much, he is not giving money.
I said we will not do this. We will very 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. So we raised the money – got Rs 1.50 lakh crores from LIC [Life Insurance Corporation]. We also went outside the budget.
This year’s budget is, in a way, a continuation but it is also a little higher level of change. We are trying to change the Railway Board management structure; we are also considering cross-functional entities. Compartmentalisation of railways is a problem - it is about specialisation but also creates hurdles to seamless functioning, so that has been addressed. Some task forces have been created. Two directorates have been created - one for mobility and one for revenues. Others are in the process of being created. The idea is that we should try to work as a team, in a focussed manner, knowing your objectives very clearly, and then to realise those objectives. Whatever structural changes need to be brought in should be brought in.
There has been scepticism about your revenue projections – you didn’t achieve what you promised to
But that is something beyond me. What is the revenue of railways? It is from freight. The projection of revenues was based on the projection for development of the core sector. If the core sector does not grow as much, obviously we can do nothing about it. It is an externality to the railways. I knew this, but I wanted to challenge the railways.
I will tell you the result of this. Last year, we were ready, for the first time, with capacity for handling 1.2 billion tonnes of cargo. That capacity is there today. Earlier the cargo handlers had to chase the railways, now the railways is chasing them. It is a very different type of approach. Like China does, we created capacity ahead of demand. So supply side constraints have been removed; whether demand will come or not depends on the market.
What are the areas where you feel you could have done more?
A lot of people compliment me for doing a great job. I am not content. But I don’t think making stations clean, making food quality better, reservation experience better is a great thing. Because this is not my objective. I will be happy when we will be able to transform the railways in the real sense of the term - the speed, the reliability, safety. And, in my opinion, the first stage is 2020; then you can actually judge it
Why I am saying 2020? We are adding, doubling, tripling lines, wherever there is congestion. And all of this cannot be done, unfortunately, in one year, but over three to four years. By 2020, we would have added capacity, modernised signalling to a great extent, completed hopefully the dedicated freight corridor so most of the. . .
When will that be completed?
We are planning for 2019, but 2020 in the worst situation. Land sometime becomes an issue.
Railways operating ratio needs to improve, can you do it without increasing freight charges and passenger fares?
If you increase freight rate, you will lose more share. This year, railways, for the first time probably, reduced the freight. Because then we get more business. My colleagues are talking to various industries. We asked the Cement Manufacturers’ Association, we will reduce [freight] by 5 per cent, how much more [business] will you give? They said we will give you 15-20 per cent more. So this is one strategy.
Globally, you cannot run railways based on these two streams of revenue – freight and fare. In most major countries, the contribution of non-rail revenue is 30 per cent. In India, it is not even 1 per cent. So we have created another directorate – to increase non rail revenue. One [source] is advertisement, then station redevelopment.
But it doesn’t seem to have got too much interest; also there are issues about civic infrastructure in the vicinity
Work on 10-20 will definitely start this year. It is a completely transparent process. We will put all the technical information on the website, then we will invite bids. This is done at the level of general manager because station redevelopment is a very local issue. People bid for it. Then they will try to normalise the proposal, it is a technical issue. So once it is normalised, to say that operational issues are handled, then it will be handed over to a two-member expert group, one technical and one financial. The short-listed companies will again be put on the website.
At that time of I have given a bid for Rs 100 crore, you have a right to improve on it, say Rs 120 crore. But you may do it just to kill competition or spoil the bid. To make sure it does not happen, the first bidder will have right of first refusal by taking the Rs 120 crore. So this is a very unique bid formula. It is not Swiss challenge; it is Indian challenge. Swiss challenge starts with unsolicited bid, but we start with solicited bid.
I am talking to the states. We are forming joint venture companies with them, I am suggesting that we put station development in that. The advantage for them is that the land is ours, they don’t put any money. What are our advantages – they give us more floor space index. Why? Because they also feel the city will get developed properly.
The second strategy is working with foreign governments. Korea, Japan, China, France, Germany are all interested. They will work with the state government entity. I asked the Delhi chief minister, he is interested.
But in many cities, the approach to stations is so congested. What’s the point in having a snazzy station when getting there is a harrowing?
That will be taken care of by the state government, civic bodies. Plus I have already talked to [urban development minister] Venkaiah Naidu. I don’t think a city can be smart without a smart station, so why not include smart station development as part of Smart City?
How much interest has been expressed?
Pre-bid conferences have been held in most of the zones, and there is a lot of interest. We did one for Surat - 17 bids have come.
You are criticised for overly focussing on middle class segment
Look, what are we. We are a transporter. What is my core job? It is to transport people and goods. So if I don’t take care of my customer, why will they come to us?
What is the progress on Rail Development Authority? Why are you shying away from calling it a regulator, which was the original idea?
Functions are completely regulatory. If regulators are going to accept cost as a starting point, then fix fares, that is a very simple thing to do. I want regulators to add one more function, which is very important, which is to find out how to improve efficiency. If you don’t do that, what is the point? I will keep increasing my cost, and the regulator decides the fare. So my customer is going to be overloaded with this.
A regulator should do development work, try to reduce the cost, increase the efficiency. If you don’t do that, what is the purpose? This is my own contribution to the whole process. The Debroy committee had spoken about the need for a regulator. I said it is a good idea, but if you don’t improve the efficiency, if you make it cost plus, how can the economy develop?
You are also not tackling the rigid rail bureaucracy
If you want to have disruption as the sole purpose of doing change then why does change make sense? I personally believe the whole purpose of change is outcome based. If the idea is to come and demolish everything, then it is a great victory because nothing is remaining. But nothing is functional either. Is that a purpose? That is why we have created these cross-functional directorates.
So it is not true that we are not touching. We are changing the bureaucracy. We are talking to the officers’ association. It is a 150 years old organisation, it has not changed much; you cannot just tell them that from tomorrow, what you did for 150 years was wrong. It is counter-productive. Rather, you tell them this is the outcome you want, this is the best way to achieve the outcome. They will also realise it. So the changes we are making are very significant but we are not making a big announcement about it because it will become counter-productive.
The railway unions are very strong. They can trip you up.
We have excellent relations with them. Is having good relations a problem? What is important to realise is that the same union is cooperating with us on safety, on customer service.
What is the progress on shift to accrual based accounting?
That project is on. See, we use generic terms and create a problem. All expert committees have spoken about accounting reform - single entry-double entry, cash to accrual. What is the reform? This is a basic thing. Have I done something more?
What we are doing is an outcome-based accounting. If you have outcomes to be derived, it cannot be done post creation of expenditure. You measure it that time, but the process has to start with budgeting. So it is a way of tracking budgeted expenditure, output and outcome. It is a very complex thing. World Bank people have said nobody has done it, this is how it should be done. They are also collaborating with us.
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