Maverick engineers Indian Railways
turnaround By Raja M
Asia's largest railway network, India's
national lifeline and one of its perennial
financial headaches, has found an unlikely savior
in Lalu Prasad Yadav, a maverick politician often
dismissed as a rustic buffoon or a crook.
Yadav, fighting corruption cases ranging
from a US$225 million fodder scam to a $789
million subsidized-food-grain scam, has as railway
minister turned the world's second-largest rail
network around. Indian Railways now has $2.48
billion in fund balances, from $78 million in
2001, a stunning reversal after being long seen
as a
terminal debt trap.
With new budgetary
announcements of passenger-friendly and
growth-aimed projects, the once-doddering behemoth
is now dancing sprightly to attract big chunks of
the $150 billion in foreign investment that
financial experts expect India to attract in the
next five years.
Railway container
services will be privatized from April 1, a move
welcomed by industrial associations. Licenses to
operate container trains would have 20-year
validity with the option of a 10-year extension.
Dubai Ports, fresh from its US ports
controversy, was among 14 companies bidding for
the railway container business, which is expected
to attract more than $2.255 billion in the next
decade. The railways have already collected $121.8
million as registration fees.
These are
rosy times for Indian Railways, wide awake now to
the enormous investment potential of a business
carrying more than 16 million passengers every day
and running more than 2,500 daily trains.
A press release from the Prime Minister's
Office on February 16 said that the Committee on
Infrastructure, chaired by Prime Minister Manmohan
Singh, gave a pat on the back to the Railway
Ministry after its officials made a presentation
titled "Turnaround Story". The financial health of
Indian Railways had never been so good as in the
past two years, Yadav told a mesmerized parliament
during his railway-budget speech. The Financial
Express gushed: "Never before could it be
witnessed that the passengers, workers, traders,
rich as well as poor have said thumbs up in
unanimity to the railway budget."
The
turnaround came after Lalu Yadav flipped the
management rule book on its head. With petroleum
prices increasing, Yadav did not increase fares
but slashed them, reducing air-conditioned
upper-class categories from 18% to 10 %, a move
also forced by budget airlines eating into the
railways' higher-end customer base. Declaring
that resource constraints won't stop expansion of
the rail network, Yadav said in his budget speech
in February that he would encourage public
partnerships and public-private partnership
schemes. They include opening food plazas and bank
machines at the important stations across the
63,000-plus-kilometer rail route, and a new
timetable (replacing one based on a timetable
prepared in 1866 by a British company, Bradshaw)
to reduce running time of express trains by up to
four hours.
While the railways would
attract more foreign direct investment (FDI) this
year, senior railway officials told the media of
the need for clarity on how much foreign equity
should be allowed. On this hangs the fate of Dubai
Ports-P&O being allowed into the container
business. The railways have asked for
clarification from the Department of Industry
Policy and Promotion (DIPP, formed in 1995 to
formulate FDI and other policies in an opening
economy). While ambiguity exists whether foreign
companies can operate trains in India, the
railways-privatization policy currently allows
Indian subsidiaries of foreign companies to enter
the container business.
Other major
infrastructure projects await investors, such as
the Dedicated Rail Freight Corridor (including a
proposal to construct a $4.962 billion "dedicated
multi-modal high-axle-load freight corridor", with
computerized control), along the western and
eastern networks.
Yadav painted a rosy
picture for Indian Railways this year: passenger
and freight earnings (record loading of 668
million tonnes) expected to grow from 7% to 19%,
gross traffic revenues expected to touch $12.315
billion, and internal resources reaching a
historic $2.92 billion.
Leading trade
bodies such as the Confederation of Indian
Industry (CII) shared Yadav's optimism.
"Substantial increase in freight traffic to 668
[tonnes] from 600 [tonnes] is indicative of
growing industry confidence," CII said in its
official response to the 2006 railway budget.
More important for Yadav, the Indian
Railways turnaround has given him unprecedented
credibility in a country that often sees him more
as belonging to the "comics" section of political
news than as a serious contender for being a
future prime minister, his publicly declared
ambition.
Yadav's working trademark is
walking the offbeat track and making his own rules
(in a recent cricket match between the Railway
Ministry and the media, Lalu, captaining the
railway team, abruptly ended the match by
declaring it a "draw"), and his latest innovation
is to provide air-conditioned rail travel for
every one of India's 16 million-plus train
travelers. This includes offering train-ticket
reservations to farmers and milkmen at a 50%
discount.
The year 2006, Indian Railways
has declared, will be the year of "Passenger
Service with a Smile", a sentiment its money
managers might heartily endorse as they laugh
their way to the bank, instead of being laughed
at.
(Copyright 2006 Asia Times Online Ltd.
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