New Delhi: For a man who started his life as a socialist politician, Lalu Prasad’s stint as India’s railway minister—winding to a close as this government gets ready to finish its term by May—has been marked by the decidedly free-market trait of pursuing profit.
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On Friday, Prasad cut fares for air-conditioned and cheaper passenger trains by 2%, and promised to start 43 new trains in the fiscal year beginning 1 April. However, he did not announce any incentives for cargo handling. A reduction in freight rates could have added to the fiscal and monetary stimulus packages announced by the government, said Satish Bagrodia, president of PHD Chamber of Commerce and Industry.
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And the budget didn’t list any big-ticket partnerships with private firms to build infrastructure—the kind of projects that result in more jobs. “He didn’t come up with any PPP (public-private partnership) initiatives,” said Umesh Chowdhury, managing director of Titagarh Wagons Ltd.
Prasad said the growth in freight traffic was adversely impacted by the nation’s economic slowdown, outlining the constraints in reducing tariffs for cement, steel and other commodities. Still, the ingenious Prasad has found ways to address similar constraints in the past.
Not all worked.
One involved fitting a third berth on the side bays of long-distance trains. A protest by passengers resulted in the withdrawal of coaches fitted with these extra berths that would have allowed Indian Railways to carry 11 passengers more in every coach—resulting in higher revenue.
The pursuit of profit
The focus on revenue and profit was new for India’s largest employer, which subsidizes travel for soldiers, freedom fighters, the disabled, journalists, elected leaders and students.
Losing steam: Union railway minister Lalu Prasad entering Parliament to present the interim rail budget in New Delhi on Friday. Kamal Singh / PTI
Despite this, however, Prasad didn’t increase ticket prices even once, although fares for special services such as Tatkal—which lets people buy tickets with reserved seats or berths at short notice for an extra charge—have been raised periodically, as reported by Hindustan Times on 11 February. In an effort to earn more, the Indian Railways added coaches to trains and lengthened platforms. It increased the capacity of wagons. And it decided to lease railway land for commercial purposes.
“Instead of increasing passenger fares, we concentrated on increasing the length of passenger trains. Between 2004-05 and 2007-08, we added 3,000 additional coaches, thereby earning an additional Rs2,000 crore,” the minister had said while presenting last year’s budget.
In 2008, the Indian Railways carried 790 million tonnes (mt) of cargo, compared with 602.5mt in 2004-05. Revenue from freight almost doubled from Rs30,778 crore in Prasad’s first budget to Rs59,059 crore thus far in 2008-09.
That the economy was on a roll helped. India’s economy expanded at an average of 8.9% in the first four years of the current government. The cash surplus of the railways almost trebled from around Rs9,410 crore in 2003-04 to Rs25,065 crore in 2007-08. The ministry had previously said it expects to have a Rs30,000 crore cash surplus before dividend this fiscal year.
“We used to keep asking the railways officials to earn more so that they could support their capital expenditure with internal generation,” said Anwarul Hoda, member, Planning Commission. “It was only after Lalu took charge that the railways actually started earning huge cash surpluses.”
Decreasing the turnaround time of freight trains and expanding the carrying capacity of wagons did the trick, Hoda added.
Building on the budget
J.P. Batra, who was chairman of the Railway Board when it posted a record Rs20,000 crore cash surplus for the first nine months of 2006-07, said that such an exceptional performance would not have been possible if the railways had remained rooted in tradition. “Traffic was available for the asking. It was an opportunity that needed to be encashed.”
While doing so, however, Prasad also had the vision to think beyond his tenure, say analysts. In the 2007-08 budget, he proposed Rs1 trillion spending over the following five years. More importantly, he proposed that this would be achieved by attracting private capital. Prasad’s plan included proposals for bullet trains, at least 100 budget hotels, station facilities, ambitious modernization plans for 22 railway stations, and several factories to manufacture wagons and locomotives.
Even as he worked to ensure a legacy, Prasad’s railways did not miss out on small details, add analysts, marrying big ticket changes—such as auctioning surplus railway land and inviting private sector investments—with minor conveniences such as providing facilities to charge laptop and mobile phones in trains and promising Internet cafes at some stations.
Investment in locomotives, wagons and coaches increased from around Rs1,000 crore in 2004 to Rs11,545 crore in 2008.
Planning Commission officials were also enthused by the fact that the railway minister had decided to follow the so-called PPP path.
But the Railway Board opposed taking this route for some infrastructure projects.
That Prasad managed to open the doors of Rail Bhavan (the seat of the ministry) for private players without fraying ties with his friends in the Left (Communist) parties was another achievement. “It is not correct to say that we have not opposed the privatization initiatives in the railways,” said Prasenjit Bose, member of the economic cell of the Communist Party of India (Marxist). “But at the same time, the railways has also improved its efficiency in transportation.”
Similar praise comes from the opposite end of economic thinking in the country. Says a top Planning Commission official, who is a key proponent of infrastructure privatization: “The minister has been steady in his commitment to seeing the PPP projects through. He has a clear mind and wants to see these projects implemented. The delays are on account of red tape.” The official did not wish to be identified.
Those are the delays that could haunt the next railway minister.
Not all straight As
Many of Prasad’s ambitious plans are still blueprints. The projects that are close to being awarded are the two locomotive factories proposed in Bihar and contracts for the 3,300km freight corridor, an exclusive route for goods that will connect the six metropolitan cities.
And the emphasis on profits without compromising on populism has created problems of a different nature. Prasad’s critics say that the axle-load, the maximum load that a pair of wheels of a wagon can absorb, was raised on an average by nearly 40% to 32.5 tonnes in Prasad’s push for profit. Such overloading is a concern, they say.
“The railways is overloading the freight carriers, which will result in huge maintenance and operations cost. And as far as passenger safety is concerned, there is no clarity. There have been more derailments and accidents during Lalu’s rule,” said Prakash Javdekar, spokesperson for the Bharatiya Janata Party, the main opposition party.
Also, despite the strides the railways has made in several areas, trains continue to be plagued by its trademark problems of poor hygiene, with rats and cockroaches having a free run, as an HT reporter found on a 38-hour, 2,800km train trip ahead of the rail budget. (HT is published by HT Media Ltd, which also publishes Mint.)
The biggest problem facing the next railway minister, however, is the abrupt reversal in the economy. “When you have a healthy growth rate, it is easy. Let’s see whether the railways can maintain such impressive figures as the effect of the slowdown starts kicking in,” said a former railways officer, who didn’t want to be identified.
Political critics, too, argue similarly.
“Lalu is a good marketing man. The foundation for the railway turnaround was laid by Nitish Kumar during the NDA (National Democratic Alliance) government, when an outlay of Rs70,000 crore was earmarked for the railway modernization,” added Javdekar. The economic boom that followed did the rest.
Utpal Bhaskar, Reuters and Bloomberg contributed to this story.
Graphics by Sandeep Bhatnagar / Mint