The latest railway budget by Lalu Yadav is the most reformist ever and should pave the way to build the railway we deserve, says Vivek Sharma
Lalu Yadav is possibly the most controversial, though a highly entertaining, politician in the country. When he landed in Delhi after a decade of disastrous rule as the chief minister of Bihar, most commentators feared that the railway ministry he was assigned would go the Bihar way. But, that was not to be. Yadav has surprised all by turning in major reform initiatives in his ministry and has been rated as probably the best performing minister in the present cabinet.
Yes, he had the benefit of substantially higher revenue growth in the railway from the rapid economic growth. But to his credit, he has seized the moment and used the opportunity to introduce initiatives to transform the vast Indian Railway network. His masterstroke has been to allow the railway management to run the railway as it should be run, and not as politicians are wont to run it.
Until recently, the worst nightmare of a railway minister was an accident involving a passenger train. Whenever such unfortunate incidents happened, ministers would come under enormous pressure to 'own moral responsibility' and resign. Some ministers did resign after major rail accidents, but that did not help improve the safety record as accidents have continued to occur.
Accidents, except those caused by human error, happen because of inadequate safety systems or poor quality of equipment. To prevent them, there should be sufficient investment in safety systems and equipment. The railway never had enough money to invest because operational inefficiencies and passenger subsidies were huge burdens. Railway was always the perfect vehicle to burnish populist credentials, by lowering fares and starting passenger services on unviable routes, whenever a ruling party wished to do so.
This system of misplaced priorities saw the railway actually neglecting its bread and butter - freight operations. The way railway fares are structured now, freight operations have to generate a huge surplus to cross-subsidise passenger services and meet investment needs. But, the focus on stretching passenger services at subsidised rates to satisfy political compulsions led to severe neglect of freight operations. Inefficient and unreliable freight services combined by unrelenting rate hikes saw the railway steadily losing market share to road transport.
The most significant change in recent years over the last decade has been the realisation that, if run efficiently, freight services can actually generate sufficient surpluses to meet most of the requirements of the entire system - and even satisfy populist compulsions.
Accordingly, the private sector was slowly allowed some leeway with schemes like 'own your wagon', which has now expanded to privately-owned and operated freight trains. Unprecedented economic growth over the last few years has led to a substantial rise in demand for freight services. Though the railway has not yet been able to win back market share from road transport in a big way, the overall growth in demand has benefited it immensely.
The dedicated freight corridor (DFC) initiative of the railway is as significant as the National Highway Project, which has transformed our road networks. When operational, these tracks will lead to substantial cost and efficiency gains. More significantly, these corridors will see industrial developments coming up along the route - like the ambitious Delhi-Mumbai industrial corridor proposed along one of the DFC routes.
A major element missing in the recent freight network initiatives was the lack of adequate linkages to ports. It is also true that transport planners never bothered to build large ports, to act as international gateways, and the need for inland rail linkages was never felt. With the recent flurry in port building activity, like the large container terminal being built at Kochi by Dubai Ports and the Mundra Port in Gujarat, such linkages have been given great importance in the railway budget.
The minister and railway management deserve to be congratulated for this.
Private sector partnerships
"This is a budget for privatisation, and we totally oppose it" was the response of CPI leader Gurudas Dasgupta. And that should rank as the best compliment Lalu Yadav can claim for his latest performance. Not only has he expanded the scope of earlier initiatives for private participation, but has also opened up new areas for private sector involvement.
To give a fillip to public-private-partnership initiatives, the BOT model has been adopted for new projects and potential private investors should be happy about it. As many as 40 container terminals will be developed by private developers along major rail routes, apart from bulk handling terminals. Some of these terminals can be developed into integrated logistics facilities, especially along the DFCs.
Capitalising on land holdings
An even more significant initiative is the proposal to develop the unused land owned by the railway in major cities, with private developers. The railway plans to generate Rs4,000 crore by offering the land on long-term lease for commercial development. Bids have already been received for 10 land parcels, including one in New Delhi, and another 46 parcels are expected to come up for bidding this year.
These new developments are coming up in areas with severe shortage of quality commercial space. Property rentals in most cities have gone up dramatically and are a potential drag on growth. Most of the railway land is in prime locations that are highly attractive for commercial development. Any addition to commercial space availability in our major cities is always welcome and if the railway is generating a neat pile of cash from it, all the more better.
The most far-reaching aspect of this initiative is the change in mindset. It is true that some of the public sector companies have generated large amounts by selling surplus land. But, so far, government departmental undertakings have been slow to take this road - obviously because of fears of political opposition. This initiative by the railway, when successful, will act as a model and benchmark for other departments as well. As the benefits become more obvious to the public, opposition to such initiatives will die down.
Someone in the government had to take this bold step and Lalu Yadav has shown the political courage to do so, when some of his colleagues with more popular reformist credentials continue to shy away from aggressive reforms.
The railway we deserve
Though the efficiency, passenger comfort and convenience, reliability and safety record of the railway have improved substantially over the last decade, there is no doubt that we have a long way to go before we can match global standards. Our railway stations are among the filthiest, trains are still dirty, booking tickets in major stations is a long and tedious process and the railway continues to spray the length and breadth of this country with human excreta. We should do better, we absolutely do.
There are some major initiatives on these lines as well. Major stations like New Delhi are being completely rebuilt, the Mumbai suburban system, which is undoubtedly the most inadequate and probably potentially the most dangerous in the world, will be transformed once the both phases of the MUTP project are implemented and the minister has promised better passenger comfort and to eliminate queues at booking counters. Thankfully, the railway is also planning to spend big money to install modern toilets.
With all these initiatives, the railway will transform itself into a modern, efficient transportation network. If the reform momentum is sustained and focus on efficiency is maintained, it will continue to best Fortune 500 corporations in investment returns - as Lalu Yadav mentioned in its speech. Wish he had shown some of these managerial capabilities when he was ruling Bihar.