BackWe’ve created a new atmosphere of accountability: Suresh Prabhu
Focus is on increasing revenue in different ways, and we have put in place structural changes to do the same, says railway minister
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Railway minister Suresh Prabhu on Thursday presented his second budget, introducing a plan for structural reforms and introduction of new revenue models.
Excerpts from his interview to DD News:
The budget you presented today would have made the common man happy as passenger fares have not been increased. Industry would be happy as freight rates have not increased. But a lot of negative reactions are coming in from the markets.
What could the reasons be?
The economic situation of this country will receive a huge push from this budget. You must know that every rupee invested in the railways gives five times more profit to the entire economy.
In the last budget, I had said that ₹ 41,000-45,000 crore used to be our budget, if you take an average before our government came in. Last year, we got ₹ 1 lakh crore and this time we increased it to ₹ 121,000 crore.
So, you can gauge how big a impact this will have on our economy and this should definitely reflect in the markets.
Secondly, in this budget, we have worked on various challenges faced by the railways. On the one hand, the common man will be happy because we have primarily kept him in mind for this budget. On the other, two-thirds of the profit that we get is from industry. So, we have done a lot for them.
In this rail budget, for the first time, we have talked about structural reform.
We have thought about how the rail board will be restructured, how appointment reforms will be brought in, and we have focused on transparency.
We have thought about how, in the coming years, increasing expenditure should not be the work of railways, we also have to think about how to reduce expenditure. This year, we have saved more than ₹ 8,000 crore. We have focused on the short-term, medium-term and long-term and then made the budget.
You must have seen that for years, the state of railways has been deteriorating. Revenue has been decreasing and expenditure rising. We have focused on how to increase this revenue using different ways and have put in place structural changes to do the same. We have also attempted to look at how the five-year plan is being implemented and, for the first time, we have given an action report to the nation. We have created a new atmosphere of accountability for the people.
Let’s come to some of the finances. You have said that you have saved more than 8,000 crore in the current year. The operating ratio that you are projecting is at 92% in spite of the Seventh Pay Commission. What are the components that you will be looking at going ahead in terms of savings?
See, first obviously what we did was we started a zero budgeting exercise. So, we told general managers of all divisions to go through each and every cost.
Normally, budgeting happens like this: we spent ₹ 100 this year, so next year 10% more. So, we keep adding a percentage to historical costs for the following year’s budget.
We said no.
Why not go through all the components of that cost? As a result of that we started from the grassroots because zero budgeting cannot happen at the board level. We started it from the grassroots and that has resulted into one big component of saving.
Secondly, the cost of energy.
Diesel prices are falling but I’m not accounting for that. I’m looking at an absolute reduction in the price of diesel by reducing consumption of diesel and electricity, using energy conservation measures, and doing market-based purchases of electricity. So all of that put together will result in a huge saving.
You have also talked about capex of 1.21 lakh crore and joint ventures with states. How is this going to be worked about in terms of cooperative federalism?
States are important because most the action happens there. We said why should we not take states as partners and try to work with them? Typically, states are giving 50%, we are giving 50%. This is also not a good model because states do not have that much resources, neither do we. So we said we’ll create some bankable projects, which are necessary for the development of the state.
Socio-economic development is necessary as is a project’s commercial application. We will leverage such a project and try to borrow from the market and do it. These are the additional projects going beyond the plan size that we have talked about. So, just imagine, next year there will be one, the plan (projects), the second will be the joint venture projects and third will be the partnership projects.
So, imagine the volume that will come to the market and I’m sure the market will take note of this and realize that a huge benefit is going to come to all the stakeholders.
When we look at the railways, we look at it from the perspective of the common man. For him ‘achhe din’ is when trains run on time, the cleanliness is maintained and there is safety for women.
You have a vision, but do we have to wait till 2020 for the vision to be realized? Isn’t that too long a wait?
First, you have to think about the reasons behind this. What are the root causes for this? The main reason why trains run late is because routes are congested. Take Ghaziabad to Mughalsarai, for example. If we don’t decongest this stage, then trains will run late. We can monitor, manage, but that’s only to a certain extent.
To achieve 95% of our target, we have to decongest and for that our doubling, tripling projects have to take off. Complete the dedicated freight corridor in 3-4 years and automatically the capacity will increase and this is not something we can finish in six months.
With regard to freight, there has been all this cross-subsidization that has been going on for years. Economists have talked about how you should do something to bring down freight rates and raise passenger fares. Could that have been done?
This is what we have talked about, rationalising of freight.
This is the first budget probably where we are not talking about increasing freight (rates).
We have talked to major customers of the railways like the big steel players, iron ore and aluminum producers, others.
They said we’ll give you big volumes, let us work out a solution. So just imagine, we were getting ₹ 10 from one person, now we will get ₹ 8 from 100 people. Revenue will increase substantially.
In terms of passengers, a majority are travelling in sleeper and lower classes. What is in the budget for them?
In fact, the entire budget is for them. We’ve talked about starting new bogies for them, the Deen Dayalu bogies. We have talked about bringing in all kinds of new facilities, which will be largely benefiting them. We are of course also looking at middle-class travellers, upper-class travellers, upmarket travellers, for whom there will be separate facilities, but they will of course pay for them.
You also spoke about restructuring and the seven missions that you have created and each of them will have a director. What are you hoping to achieve through this?
We cannot operate railways like this. If something has to be delivered, it has to be delivered on the ground, and the ground is where many agencies have to work on issues. So, we decided will have a mission director who will be responsible for executing the mission, roping in all departments; and he will directly report to the chairman, Railway Board. I feel this will be a very big change in the management style of the railways, which has been following a very departmentalized approach towards railway issues for decades.
So, we have brought about this change and each mission will have an important role to play.
Transcribed by Mint’s Nikita Mehta, Priyanka Mittal and Apurva Vishwanathan.
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