Railways must grow to attain 10% GDP growth: Dinesh Trivedi

Chowdhary adds it is great to finally see a minister who has a clear mandate and an image that says he can turnaround things. For long now, railways has been a compromised ministry.

Trivedi says had his Budget gone through, operating ratio would have been 80 percent.

Below is the verbatim transcript of Dinesh Trivedi and Umesh Chowdhary's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.

Latha: For the longest time railways has been given to an inconvenient ally of the ruling coalition and it suffered because of that. Only in your case, we saw some responsibility but you became inconvenient for your own party. What do you think should be the first two-three things that the new minister should or can do considering now he doesn’t have to worry about majorities?

Trivedi: First of all, the political system in India has not understood the potentiality of Indian railways. It is very clear - you cannot grow India without Indian railways growing not double digit but at least 15 percent per annum. All of us, we say that railway is the engine of growth but the engine is stuck. Can you imagine? Four railway ministers in one year.

So first of all, even when I was a minister, I always used to say that please define what is railway. You want to add your gross domestic product (GDP) growth with the railways or you just want to have the railway as a poor man’s transportation from A to B. So first of all, you have to institutionalise Indian railways and you must have a national policy of Indian railways, which is not going to be for a year or two.

Like my Budget was not for one year, it was for five years. You should know where you are going to go from here after ten years or twenty years. But unfortunately, politics have always used railways as a carrot and that is not going to help. I have always felt keeping India’s growth below 10 percent per annum is a very difficult task. For another ten years India can grow at the rate of 10 percent provided you let the Indian railways grow. It is so directly connected. You look at any developed country. If the railway especially the freight system doesn’t grow, India cannot grow. It is the agriculture and the railways which can get India grow.

Latha: What should be the first two-three tasks? You have a minister who has a record being a good administrator and you don’t have to worry about political majorities for now. This government has been able to raise diesel prices, it has been able to raise power tariffs when the Bharatiya Janata Party (BJP) was in Gujarat, so they have shown the will to raise tariffs and now they have the majority. What should be the task of the first budget of the railway minister?

Trivedi: The ministry unfortunately is so much minister driven so you have got to give a big leadership but unfortunately, at this very point railway is bleeding. There are so many vacancies, the entire board is going to be new. In the next couple of months, the chairman is retiring, more than 60 percent of the board members are retiring, the budget is around the corner and there is no money. If a railway minister has to present his Budget, there is just no money. So it is the government of India who has to come forward and say that this is our investment.

Look at China, it was about 15 years behind Indian railways about 20 years back. Now they are a 100 years ahead. So you have to understand that there is no magic. One minister in one year is very little. Whatever you invest today, the result will come only after ten years. It is a huge infrastructure. So if I was a railway minister, which I have always said, I would rebuild the entire rail work all over again.

Let me tell you one very different thinking which I have always had that this freight corridor to my mind is not a very good idea. You must have a passenger corridor - it is a very new idea because if you are building a new freight corridor, you might as well build a corridor for passenger which will take 300 kilometre an hour speed and the present network, which you have give it to the freight because freight doesn’t go beyond 120-130-150 kilometres an hour, which the present system is very well built for. So you have got to have out-of-the-box thinking.

Again I would say safety is a huge consideration. We have been very fortunate during my time, I have taken some kind of measures so you see these days accidents are far lesser but that doesn’t mean that we are out of it. Safety is a prime concern. In a city like Mumbai, how can you expect 20 people or 12 people dying every single day on rail network? It is just not acceptable.

You have to build the large kilometre whether it is with port, with factories, with mines, so you have a huge task ahead of you but please understand one minister in one year’s time can give his vision but it is very difficult to implement things. We have 1.4 million people working in railways. So you have to understand the railway system. Our political system needs to understand what is the potential of Indian railways, this is one of the best organisations in the world and it is a very efficient organization.

Sonia: What is the sense you are getting? What could be or what should be step 1, 2 and 3 in order for Suresh Prabhu to turn around the Indian railways?

Chowdhary: I heard what Mr Trivedi said and I completely agree with him that if the Indian economy has to grow then the only option for it is to invest and bank upon the Indian railways to support that growth. Without that, Indian economy cannot grow.

I believe the Indian railway having dealt with the railways for far too long has a lot of low hanging fruits. It has been a compromised ministry for far too long. Now we have a minister who not only has a clear mandate but has a history and a reputation of being a reformist, a decisive person. So if only the pending decisions that have been there, the confidence building, the low hanging fruits are plucked, I think the turnaround will start showing immediately.

Indian investors, we were talking about investments coming in and fund shortages being there in Indian railways. Indian investors who have so far invested with the Indian railways are all crying, almost all of them have become corporate debt restructuring (CDR) cases wherein on one side, Warren Buffet is investing so heavily in the railways sector, why cannot the Indian railway attract similar kind of investment. So if he can streamline the decision making processes for the time being, that will be the first thing that I would bank upon.

Latha: Is just quicker decision-making one step just for executive efficiency but more importantly you spoke of this massive amount of money, probably a passenger corridor -- where is the money come from, this is a cash-trapped government which is trying to reduce its deficit, won’t that be a primary issue when the previous National Democratic Alliance (NDA) government built the golden quadrilateral at least they could bank on a PPP model which of course ultimately may have come out a cropper but in the railways even that doesn’t seem like an immediate possibility?

Trivedi: You will not have any private sector come in if you do not have a revenue model. I had bifurcated the stations. One of the big money spinner is real estate and even I was in touch with Warren Buffet's office and my entire job was to bring down the operating ratio and believe me if my budget would have gone through, our operating ratio in the railways would have come down to all time-record of 80. It is very difficult to bring it below that. It would have easily come across but having said that, you cannot have any fruits without investment. If I was the Prime Minister of India, I would invest lakhs and lakhs of crore of rupees into Indian railways. It is very unfair to think that Indian railways can generate its own profit and plough it back, it is just not acceptable, it is not doable. If you see the system all over the world, you look at the Japanese, you look at the Chinese, you look at everywhere it is a huge government investment that can give employment.

The only way to turnaround India which I absolutely agree with the previous speaker that you have to invest and that is what is going to give you employment. We are too much hooked about privatising the railways, corporatising the board - it is not required. These things are important but that is not going to stop the growth of the railway.

Sonia: The previous rail minister failed to put up a good plan to attract FDI into the sector blaming it on bureaucracy etc but what is your view on how much investments can be attracted into this sector via FDI or via any other route?

Chowdhary: I don’t think there is any cap that can be put to investment that this sector can attract. The kind of investment that the sector requires can be attracted from private investors or institutional investors. On your channel, on the Budget day, I had mentioned that this is a typical business wherein 70-80 percent of your cost is fixed cost and the revenue that you generate - 70-80 percent is operational profit and on one side that is the model and on the other side what we saw is that the IRFC’s borrowing was cut down. So I didn’t see the maths matching up together. On the one side you are having an operating ratio problem and on the other side you are reducing your borrowing and thereby reducing your capex, so both were not matching. I think on one side, the railways needs to keep on investing in long gestation infrastructure whether it is railway track or it is in signalling because that is not somewhere where I believe foreign investment will come in but the rolling stock, the passenger etc should be privatised and I don’t see that there would be any dearth of investments that will come in.

Latha: Deficit financing is about the only thing, isn’t it?

Trivedi: Yes, I think we require a huge time investment and we have to understand that whatever you do today, the results are going to come only after 10 years, there are no shortcuts. If I had to be at the helm of affair, I would rebuild the entire Indian railway system and please understand our people in the Indian railways are the best in the world, give them the opportunity, give them the know-how, they will do it.