R Sivadasan has been the financial commissioner of the Indian Railways for the last two years and has played a key role in the drafting of the original turnaround budget of 2006-07 as well as the recently tabled railway budget. The 2007-08 budget focuses on the railways making massive investments in dedicated freight corridors, manufacturing units and high-speed trains and expanding capacities.
The financial commissioner answered questions on the railway budget in an interview with Mint’s K P Narayana Kumar.
What are the constraints that the Railways face in sustaining the turnaround story?
The demand for carrying more freight is there but our own capacity to handle the additional load is riddled with bottlenecks. Capacity limitations have started coming in the way and we are finding it difficult to carry the kind of incremental load that we would like to. However, freight offerings have not tapered off.
In order to be in a position to continue loading extra every year, we have to complete a whole range of works in the short-term such as doubling, electrification and construction of alternate routes. Completion of these works will help us improve our turnaround time which we need to eventually drop by a day to around five. There is a shortage of locomotives which also have to be met.
In 2010-11, we want to carry around 1200 MT. (As of now the railways carry around 668 MT.) And in order to do so, we should be in a position wherein our locomotives will wait for the customer’s rakes and not the other way around. In the infrastructure business, one should always keep around 25% extra carrying capacity.
What are your plans for expanding capacities in the passenger and freight sectors?
In the passenger business, within the next couple of years, we plan to add 1,000 more coaches or one lakh berths. On the freight side, we plan to replace the brake van with an extra freight wagon. The addition of one wagon per freight train will help us earn around Rs 300 crore per year. However, as of now the plan is at a conceptual stage. We also plan to increase the payload of wagons from 68 tons to 90 tons by introducing six-axle bogies, in place of four-axle bogies.
All of these measures will help us carry more and earn more.
What was the rationale behind a Re 1 cut per passenger in the non-suburban ordinary second-class category?
As many as around 194 crore of the 660 crore passengers who travel by rail every year travel in this class. The average fare for this class is around Rs 20 and so for this class, the Re 1 cut will bring some benefit.
What impact will the next Pay Commission have on the railways and how prepared are you to absorb it’s effect on the coming railway budgets?
Between 2007 and 2012, our total internal generation for these five years is expected to be around Rs 1 lakh crore. Of this, we would want at least Rs 75,000 crore to be ploughed back into our network. We expect that the Pay Commission’s incremental impact on salaries to be around Rs 11,000 crore for the five-year-period and we should be able to cover this extra spending on salaries with our substantial surpluses.
The railways has declared Public Private Partnerships (PPPs) as a major source for expanding it’s infrastructure. How do you plan to go about bringing various services under the PPP umbrella?
The railways can attract PPP investments from a wide range of companies as we need participation in a wide array of activities. Companies involved in rolling stock manufacturing, civil constructions, agri-marketing and leasing companies can all have a role to play under PPP. However, each of these sectors will require a different set of terms and conditions.
The newly formed PPP cell in the railways will look at every business that we are involved in and come up with model concession agreements specific to that business. In some businesses, we may seek upfront payment whereas in others we may offer higher share in recurring revenues.
What are the new commodities that will boost the railways to higher loading and increased revenues from freight in the coming years?
Cars, electronic goods and other manufactured goods and agricultural commodities.
Why has the railways decided to run high-speed trains in India?
The railways has one concern regarding traffic. Once the dedicated freight corridor is constructed, our existing line will lose out on freight revenues. Our coaching losses are already to the tune of around Rs 6,566 crore as of 2005-06. So we need new revenue streams and high-speed corridors is one way of earning more.
The premium class passengers, whom we are losing out to the low-cost (airline) carriers, also demand better and speedier travel. Moreover, the youth are increasingly mobile and they also need speedy services. We will be able to recover a good part of our investment by leasing station premises and advertising. Our idea is that there should be such a high-speed train every hour to go to say Jaipur or Amritsar. In the high-speed train, the journey would take only about an hour or two at the most. Imagine how it can change the lives of people who need to travel long distances every day. Another plus of the high-speed system is that it will help reduce emissions as opposed to having more planes that increases emissions.
This is the second budget in which you have played a critical role as the financial commissioner. How was this budget different from the last one which was hailed as the original turnaround budget?
We had a surplus when we were preparing for the 2006-07 budget as well but were still heavily dependent on the government. However, now the commercial forces in the railway industry have become aggressive and they have the confidence to invest freely in railways. We have more resources to tap from.