"Organisational restructuring will be the key to transformation"
Railways Minister Suresh Prabhu talks to Anilesh S Mahajan on delegation of power and how he plans to raise money for ambitious capex plans
- Aug 6, 2016,
- Updated Aug 10, 2016 11:37 AM IST
You have targeted a capital expenditure of Rs 8.56 lakh crore between 2015 and 2019. Of this, gross budgetary support will be just Rs 2.5 lakh crore. The railway ministry is creating space for private investments. It is also trying to leverage the books of railway PSUs and enter into tie-ups with state government agencies and other PSUs for joint execution of projects. How do you plan to go about it?Before I lay out the strategy for spending, let me put things in perspective. The root cause of most financial woes of Indian Railways is neglect of infrastructure creation for years. That is why we came up with the plan to spend almost Rs 8.56 lakh crore in five years. In the five years after that, we should spend double this amount if we want Indian Railways to reach anywhere close to world standards.
There are two aspects to this - funding and capability. For funding, we have tapped innovative sources. We have been able to negotiate a loan of almost Rs 1.5 lakh crore from LIC. We are also partnering with state governments for not only sourcing of funds but also enhancement of management bandwidth. The second element is capability to execute projects. The first thing I did on joining was to delegate powers to functional levels. I also took measures to ensure transparency by implementing e-contracting and e-tendering. We have started moving to EPC-type contracting to ensure participation of big infrastructure players. Lastly, we are creating opportunities for private investment, too.
How have economic headwinds hit plans to revive the railways? We have already seen that freight and passenger receipts in 2015/16 were not as per expectations. How do you plan to deal with this?
We have taken steps to liberalise freight policies. We are looking to reduce dependence on a few commodities and expand volumes by rationalising tariffs. In the passenger segment, we have a strategy to launch distinct products for different passenger needs.
In the Budget, you announced reforms in the Railway Board, merging of cadres and giving of more powers to the board chairman. You have already delegated several powers to general manager-level officers. How do you see things moving from here?
Organisational restructuring will be the key to transformation. The overriding thought is to ensure cross-functional collaboration and business-oriented mindset. A unified cadre will enable us to restructure the board on functional lines. The other important aspect of restructuring is about processes, authority and accountability. One has to lead from the front. Hence, I was the first one to delegate powers. I have not seen a single tender file in my tenure. Once we delegate, we have to ensure that accountability is fixed. Hence, we have developed key result areas for each general manager so that expectations are clear.
Indian Railways is facing competition for passenger and freight customers. Flights are becoming more and more affordable. Nitin Gadkari's ministry wants a large chunk of freight to shift to waterways.
Your assessment is right. Railways share of freight has been decreasing. But in this government we don't see things in silos. There is an integrated approach. We are working with Gadkariji's ministry to enhance connectivity of ports, waterways. Ultimately, consumers want stuff to move efficiently.We were told that 17 states have agreed to join hands with the railways for different projects. How are you convincing the states to pitch in?
The partnership is a win-win for both. What we are looking at is managerial and project execution bandwidth along with partnership in cost and ownership. The states decide the priorities for development, including land use.One game changer you are aiming for is setting up a holding company for Indian Railways. You want to leverage the books of railway PSUs to raise debt. But there is a question mark over the capability of Indian Railways to execute projects. There is fear that it could land in a debt trap if these projects are executed with the old mindset.
The holding company will ensure better utilisation of resources of all our PSUs. It will also help us leverage their balance sheets. On debt, I do not think there is a problem. Moreover, unless we build infrastructure, all future earnings will be at risk. Isn't that a trap, too?
Anyway, we have a rigorous process for managing debt and improving project execution. For instance, we are looking at using drones to monitor projects. I personally look at big projects like the Dedicated Freight Corridor (DFC) on a weekly basis. More delegation has reduced the time taken to implement projects. To quote an example, a procurement tender at one of our factories, which used to take 500 days, was completed in 88 days recently.
When can we expect the regulator to be set up? This can make investors more confident about the railways.
We put up a concept note on the Rail Development Authority (RDA) in public domain for comments. The next step is to prepare a draft Bill. We are deliberating on the feasibility of setting up the RDA through a Cabinet decision.
The Budget announced three more DFCs. What lessons have you learnt from delays in the first two DFCs?
We have managed to remove the bottlenecks. The project has gained momentum. Last year, we gave contracts worth Rs 23,000 crore, more than the total in the previous six years. We are targeting completion of DFCs by December 2018. The key to fast execution is hard, rigorous monitoring. I am calling for weekly reports. I am talking to people executing things. Most of these projects will come up quickly.
The critics of the station redevelopment plan say the 'plug and play' model would have been better.
Let the critics say whatever they want. As we are talking, the tender for the first station has been awarded. In the next few months, six-seven more will happen. We are looking at various models, not just PPP. We are revamping the entire process, including strengthening the organisation for station redevelopment.
You have targeted a capital expenditure of Rs 8.56 lakh crore between 2015 and 2019. Of this, gross budgetary support will be just Rs 2.5 lakh crore. The railway ministry is creating space for private investments. It is also trying to leverage the books of railway PSUs and enter into tie-ups with state government agencies and other PSUs for joint execution of projects. How do you plan to go about it?Before I lay out the strategy for spending, let me put things in perspective. The root cause of most financial woes of Indian Railways is neglect of infrastructure creation for years. That is why we came up with the plan to spend almost Rs 8.56 lakh crore in five years. In the five years after that, we should spend double this amount if we want Indian Railways to reach anywhere close to world standards.
There are two aspects to this - funding and capability. For funding, we have tapped innovative sources. We have been able to negotiate a loan of almost Rs 1.5 lakh crore from LIC. We are also partnering with state governments for not only sourcing of funds but also enhancement of management bandwidth. The second element is capability to execute projects. The first thing I did on joining was to delegate powers to functional levels. I also took measures to ensure transparency by implementing e-contracting and e-tendering. We have started moving to EPC-type contracting to ensure participation of big infrastructure players. Lastly, we are creating opportunities for private investment, too.
How have economic headwinds hit plans to revive the railways? We have already seen that freight and passenger receipts in 2015/16 were not as per expectations. How do you plan to deal with this?
We have taken steps to liberalise freight policies. We are looking to reduce dependence on a few commodities and expand volumes by rationalising tariffs. In the passenger segment, we have a strategy to launch distinct products for different passenger needs.
In the Budget, you announced reforms in the Railway Board, merging of cadres and giving of more powers to the board chairman. You have already delegated several powers to general manager-level officers. How do you see things moving from here?
Organisational restructuring will be the key to transformation. The overriding thought is to ensure cross-functional collaboration and business-oriented mindset. A unified cadre will enable us to restructure the board on functional lines. The other important aspect of restructuring is about processes, authority and accountability. One has to lead from the front. Hence, I was the first one to delegate powers. I have not seen a single tender file in my tenure. Once we delegate, we have to ensure that accountability is fixed. Hence, we have developed key result areas for each general manager so that expectations are clear.
Indian Railways is facing competition for passenger and freight customers. Flights are becoming more and more affordable. Nitin Gadkari's ministry wants a large chunk of freight to shift to waterways.
Your assessment is right. Railways share of freight has been decreasing. But in this government we don't see things in silos. There is an integrated approach. We are working with Gadkariji's ministry to enhance connectivity of ports, waterways. Ultimately, consumers want stuff to move efficiently.We were told that 17 states have agreed to join hands with the railways for different projects. How are you convincing the states to pitch in?
The partnership is a win-win for both. What we are looking at is managerial and project execution bandwidth along with partnership in cost and ownership. The states decide the priorities for development, including land use.One game changer you are aiming for is setting up a holding company for Indian Railways. You want to leverage the books of railway PSUs to raise debt. But there is a question mark over the capability of Indian Railways to execute projects. There is fear that it could land in a debt trap if these projects are executed with the old mindset.
The holding company will ensure better utilisation of resources of all our PSUs. It will also help us leverage their balance sheets. On debt, I do not think there is a problem. Moreover, unless we build infrastructure, all future earnings will be at risk. Isn't that a trap, too?
Anyway, we have a rigorous process for managing debt and improving project execution. For instance, we are looking at using drones to monitor projects. I personally look at big projects like the Dedicated Freight Corridor (DFC) on a weekly basis. More delegation has reduced the time taken to implement projects. To quote an example, a procurement tender at one of our factories, which used to take 500 days, was completed in 88 days recently.
When can we expect the regulator to be set up? This can make investors more confident about the railways.
We put up a concept note on the Rail Development Authority (RDA) in public domain for comments. The next step is to prepare a draft Bill. We are deliberating on the feasibility of setting up the RDA through a Cabinet decision.
The Budget announced three more DFCs. What lessons have you learnt from delays in the first two DFCs?
We have managed to remove the bottlenecks. The project has gained momentum. Last year, we gave contracts worth Rs 23,000 crore, more than the total in the previous six years. We are targeting completion of DFCs by December 2018. The key to fast execution is hard, rigorous monitoring. I am calling for weekly reports. I am talking to people executing things. Most of these projects will come up quickly.
The critics of the station redevelopment plan say the 'plug and play' model would have been better.
Let the critics say whatever they want. As we are talking, the tender for the first station has been awarded. In the next few months, six-seven more will happen. We are looking at various models, not just PPP. We are revamping the entire process, including strengthening the organisation for station redevelopment.