‘We are in a strong financial position today’

The Rakesh Mohan Committee found Indian Railways standing on a slippery slope to financial disaster. Mr. Lalu Prasad dismayed the pessimists. The Railways under his leadership has turned the tide and earned $ 5 billion cash profit. “By earning a profit of Rs 20,000 crore, we are in a strong financial position today,” the Railway Minister said in an interview with Amitabha Sen. While attributing the success to 1.45 million officers and workers, he said: “…this is not my Railway, it is the Railway of the entire country and the entire country has to make it move forward and take rest only after making it No. 1 in the world.”
AS: Sir, first we convey our hearty congratulations for turning around the Indian Railways and the international award given to IR recently. When others had virtually written it off, you not only put a brake on IR’s journey on a slippery slope to disaster, you have brought it back on rails. What is the key to your success as chief of Asia’s largest rail network?
Honesty, firm determination and sensitivity towards the last person of the society.
AS: What are three main reasons that you identified for such a collapsing state before you stepped into the Rail Bhavan? Was it a leadership problem or management problem or due to poor utilization of assets?
All the three.
• On the leadership level one has to enhance the spirit of the workers. Instead of facing the market, privatisation and retrenchment were encouraged.
• On the management level passenger fare and freight were steeply enhanced without understanding the problems of the market.
• Value of own properties was not understood, neither attention was paid on their maintenance nor the assets fully exploited.
AS: Some say, more than anything else, increase in axle load and resultant growth in revenue is the main contributory factor to Railways turnaround? Is that true or there are something more, which were lacking in earlier regime? While talking about increased axle load, to what extent tracks are safe and secured to bear the additional load burden?
It is not so. A big turnaround cannot occur just by increasing the axle load. Besides this policy, we adopted several policies as per the requirements of the market, viz:

• We brought down the wagon turnaround time from 7 days to 5 days. As a result 30 percent more wagons are now available. Due to increased availability of wagons, availability of goods trains has increased, no more queues are there and our participation in the carriage of goods enhanced.
• Price policy was adopted as per market requirements.
• Offered discount on trains returning empty.
• I made surprise inspections and got overloading stopped.
• Introduced 'Tatkal' and 'Upgradation' schemes which were popular and profitable.
• Controlled the loss on catering and parcel and halved it.
• Increased the number of coaches in popular passenger trains. Newly designed compartments providing more sitting space have been introduced. As a result more number of passengers could travel. Thus our per unit cost has gone down and income increased.
• So far as safety is concerned; we have increased the expenditure on maintenance of our properties. Now as soon as any of our properties ages out, we change it.
AS: One of most redeeming features of railways operation today under your leadership is the significant reduction in Operating Ratio. From over 98 at one point of time, it has come down markedly to around 77. Is it due to changes in investment priorities?

In the railway, generally more fixed cost means whether you run a train of four compartments or 24, there is not much difference in the cost. Whether you run the carriage or not, depreciation is bound to occur. That is why we have been paying attention to reduce the per-unit cost and to maximize utilization of properties and
• Made investments in schemes yielding higher profits in lesser time,
• Introduced trains such as the Garib Rath,
• Curtailed the compartments from empty-running trains and added those to overcrowded trains. As a result the Operating Ratio (OR) now stands at 78 percent.
AS: Your predecessors had given more emphasis on gauge conversion so far as investment is concerned and it is said to be one of the main reasons of abnormally high OR. In terms of investment, what is your top three priority segments? What percentage of total planned investment you would be earmarking for those priority segments?
In order to maintain the face-lift of the railways, fine admixture of short-term and long-term policies is the unique feature of our investment policy. On the one hand we are investing in such a manner so as to earn more profit in lesser time. For example, we converted siding and terminal point into full rake, provided the 24-hour loading and unloading facility. On the other hand under long-term policy, we are also making investments in projects like Dedicated Freight Corridor, new wheel, wagon and coach factory so that better opportunities remain available to us for facing the market in future.
AS: As you are aware, at one time, Railways used to be one of the major revenue contributors to Indian federal budget. After major setbacks, net revenue of Railways in last two years has significantly increased. When we will see Indian Railways again emerging as a major, if not the largest, single revenue contributor to India’s general budget?


Railway is a very big empire. By earning a profit of Rs 20,000 crore, we are in a strong financial position today. We are paying dividend on time. Due to better working results the Railway is no more a burden like the old one. Today we are not a burden but self-dependent. Since we are a part of the government hence in some form or other we are adding strength to the nation financially. Today the image of the Railways has brightened so much that we are getting loans from abroad at low rates. We are executing our projects in the country with our own resources and all this is being done while carrying out social commitments simultaneously. The financial stability we have established in the public sector is an example in itself.
AS: At what stage is ‘Dedicated freight corridor’ project ? What would be funding pattern?
The foundation stone of the Eastern and Western corridors have been laid by the Prime Minister. The Indian Railways will construct these corridors with the assistance of the Government of India and the private sector. Dedicated freight corridor will come before the nation as a miracle. Talks are afoot with various financial organizations along with Japan's Jaica to acquire loan on attractive rates. Shortly some useful decision will be taken taking into account the greater interest of the country.
AS: What is the scope of FDI in railways? Are you getting any feeler from potential foreign investors to participate in railways mega projects? If so, what type of projects they are interested in?
We are chalking out an ambitious plan for the development and modernization of the Railways at a total cost of Rs 250,000 crore in a phased manner over a period of coming five years. Out of this massive investment, a substantial part is expected to be raised through PPP. We are encouraging the PPP in the construction of Dedicated Freight Corridor, coaches, wheels and loco factory, budget hotel, construction of world class stations, agricultural outlets etc.
AS: Information Technology is going to be a major plank of Indian Railways’ future growth plan. What is your investment plan for IT? What are the major focus areas in IT? To what extent you expect IT would strengthen the bottom line of IR?
See, today is the age of IT. Railway has always been in favour of maximum use of the IT. In the Indian Railways. we had already introduced the Passenger Reservation System for enhancing convenience of the travellers. Today, people from any corner of the world can get their reservation done to travel from any part of the country to the other. With mobile and Internet facility people sitting at home can get their tickets themselves. Not only this, we have installed touch screens and display boards that are providing people all kinds of information regarding status of reservation, arrival and departure of trains and other information concerning the journey. In the current fiscal year’s Budget we have decided to provide palm top computers to the TTEs for the convenience of the travellers. With its help they would be able to convey information of vacant berths to the next station so that wait list travellers will be able to get seats.

In respect of passenger transport besides the PRS, we are introducing Coaching Operation Information Systems as well as "Know the status of the trains" system with which the status of any train can be seen through the computer. Very recently Magic Number 139 has been introduced which is an Integrated Train Enquiry System. This will make getting information of the railways convenient. This will be made still more efficient. We want to make the investment substantially multiplied for the IT in the forthcoming Five Year Plan.
AS: On-line service is getting increasing importance in IR. E-procurement is one such major initiative of IR. What is your plan about the e tendering? Indian Railways through various divisions of its zonal administration are floating tenders running into billions of rupees every year. By which time you expect to launch e-tendering system in the entire rail network which will help bidders to participate in tenders on-line instead of going through rigors of huge paperwork? Will you be outsourcing this massive job to competent IT firms in the country?
We are giving serious thought to E-Tendering and this arrangement will be introduced shortly in Indian Railways. Not only in respect of tender of the railways but also in making recruitment, we are encouraging online facility. This is helping in busting the nexus of the tender mafia as well as according transparency in this entire work. There is immense possibility to use IT in the railways and we are trying to use the IT on every level including the E-Tender
AS: What would be your response to those who say turnaround is a very difficult job but once it is achieved, to sustain it and to take it to a greater height is far more difficult one?
So far as turn-round of the Railways is concerned we have achieved this, as stated earlier, with the diligence of our 14.5 lakh officers and workers and it has persistently improved. Thus, it is wrong to think that the turn-round will not be sustained. I.I.M. Ahmedabad had carried out a research on this and the students of Harvard, Wharton, Sloan etc. foreign universities had also put the same question to me and I had told them also just this that if work is done with honesty, commitment, vision keeping national interest in mind then it is not an impossible thing and now our third line is to be constructed. Wheel and Loco factory in Chhapra, Coach factory in Rae Bareily are being set up. I have stated time and again that if development is not politicized, the country can move forward and we have proved this with our performance. I say to all the people that this is not my Railway, it is the Railway of the entire country and the entire country has to make it move forward and take rest only after making it No. 1 in the world.

August 15, 2007