March 6, 2018

Speaking at Deloitte: Annual India Partners Meet, in New Delhi

The results of Uttar Pradesh, we got 325 out of 403 seats, a feat which was unparalleled in the history of India, despite demonetization having happened, despite some very tough decisions having been taken just before the UP elections.

Of late, you see a lot of news about concerns in the country, about things going wrong, particularly, on the banking front. Again, something which we inherited, something we are trying to clean up, something we are biting the bullet where many governments, many leaders in the past had failed to do so. And one would think looking at the messages floating around today, one would actually suspect whether we are doing the right thing, particularly, with the elections in Karnataka round the corner, the three other states, and then the national election in April and May next year, barely a year from now.

But Prime Minister Modi focuses on the long term and is very clear in his mind that this country is ready for facing these short-term difficulties, but is looking for a long-term solution for the despair that we have had for so many years, and no better endorsement, no better certificate than the recently concluded elections where in three states, where BJP was near non-existent, we have never had an existence in these three states.

In Tripura, there was a government which was in power for 25 years, considered unassailable. The last election in 2013, the BJP had got 1.5% of the votes, I am sure your best of your management consultants with any graph that you make or any projection that you do would not have imagined us getting 50% or 50.5% vote in 2018 – from 1.5 to 50.5% – and a government with two-third of the seats in its bank. Nagaland, another state where BJP had I think probably one MLA and very small percentage of the vote, you have a resounding victory. In fact, everybody who has won there, including the opposition wants to tie-up with the BJP, that’s the kind of situation.

And, of course, in Meghalaya the congress lost its vote bank, the seat tally went down. Our voting percentages improved significantly and we have government in all the three states. It only goes to show that if you have sincerity of purpose, your focus is right, if the people trust your leadership, they believe that this leadership means good for the country, it’s an honest leadership, it’s a leadership that will protect the best interests of the people of India, the need of the national interest, will protect it, is paramount to us. And, therefore, I think this has been an opportunity for us where we have kept on the path of true governance. We have tried to do a serious effort in changing the way business was done in the past. We are trying to clean up the system. We are trying to bring in new ways of work culture in the country which we had never seen before.

A case in point is the auction of natural resources, something which used to never happen in the past. You could get away by giving the nation’s natural resources to friends and family, and Members of Parliament of your group. Very often, compulsions of coalition politics was cited as a reason to justify irregularities. This government has steered away from all of that. This government has made an effort to introduce long-term sustainable change in the way government is run in the country. And I am quite sure that the work that is being done now, and all of this is supported with large amount of improvement in the macro economy, every parameter of the economy, every indicator of what’s happening in India has shown significant improvement – it could be GDP growth, it could be fiscal deficit, it could be current account deficit, inflation, interest rates – on every count, the country is getting better and better, emerging stronger.

We have once again pipped China on GDP growth. Hopefully, we will continue to retain our slot as the world’s fastest growing large economy while maintaining low inflation, a strong rupee, continuing to keep our deficits low. Interest rates have taken a little bit of a turn for the worse in the last few weeks, but I hope that’s a temporary phenomena. But creating India a base of a sustainable long-term future is what this government has focused itself on.

That’s the kind of work we are also doing in the railways, which is under my charge. Again, in the railways, every programme is being looked at very holistically; every programme is looked at for its multifarious benefits, prioritizing what is the need of the hour. Before I conclude, I will mention a small decision I have taken on signalling.

India still has a signalling system which is nearly 100 years old. We are still dependent on red, green, amber, all those lights to tell us whether we can take the train ahead or no. I am looking at introducing the world’s most modern signalling system in India, the European signalling system called ETCS. And when I got the main players, the international companies which provide ETCS, they were unsure whether they can meet the needs of India. They said but in the whole wide world, in the last 10 years, we have only had about 25 or 30,000 kilometres of ETCS being installed, in the whole world. China is 10,000, Europe is probably another 10,000, all the railways put together, America hasn’t even started putting ETCS, possibly because it’s European.

But what we are looking at doing is that the entire 118,000 line kilometres over the next 6 years we want to do ETCS. And the reason behind it is not only will it make our train travel significantly safe, but it will almost double by line capacity, it will be the lowest cost to double a line capacity in the country, because the headway between two trains can significantly come down, punctuality can improve because trains will talk to each other electronically, won’t be dependent on the fog or any of that. It’s like the Instrument Landing System on aircraft, which has made it easier to fly in and fly out even with barely 20 or 50 metre visibility.

And most importantly, my own sense is when we do it in a compressed 6-year timeframe and I am not looking to give it to 6 companies like we used to do it in the past that you have a 68,000 route kilometre business, you have 5 companies, give each one 12,000 each, it’s the worst way to do business. What I am looking at doing is I am telling I will give only one party the entire business, now you compete amongst yourselves. Whoever will bring that business will be the leader of signalling for the rest of his company’s existence. Having implemented this huge contract, he would have fine-tuned his processes, he would have to make in India to be competitive – I am sure European costs cannot work in India, and with this assured pipeline of business, anybody will happily manufacture in India providing jobs to India, providing economic activity in India, providing me with ready maintenance and support facilities. They will become cost effective for the rest of the world.

So, any other business of signalling comes anywhere in the world, they will be the leader or they will have a price advantage, logically. And by the time in 6 years they finish this, Indian railways would have expanded another 50%, the speed with which we are adding new lines, doubling new lines. So, 6th to 10th year, again I will have an order, and I am sure they would be the best place to give me the best prices at that. So, I am going to do an auction process. I am going to have them fight with each other. And I am confident that if they are sensible and if any of you are consulting with Siemens, Bombardier, Alstom….. please advise them to take this business even at a loss.

Q: Thank you so much Mr Goyal for those remarks. I think very-very helpful, very useful. I think you started with talking about elections, still about a year and a half away, just on a lighter note, you have given that this is an India partner’s meet. There are several partners here from Karnataka, so I am sure they are all inspired by what they have heard from you. 

A: You, your family, your neighbours, your relatives, every vote for ……

Q: One of the things, and you have heard almost all of us in this room, railways has this connect with your childhood. You know, you have these memories when you would think about holidays and the entire ritual of travelling in the railways going to your hometown, so we have all got these positive memories and we have got these rituals associated with rail – how we would pack, you know the wedding, taking into the rails, all of that.

A: Sri Sri Ravi Shankar solemnized the wedding in the railways.

Q: Correct, he solemnized a wedding in the train. I think one of the things that I have always thought about is, if you think about railways, you have got about 1.3-1.4 million employees, that’s about 0.1% of this country’s population. How do you keep them motivated? How do you keep them coming to work every day, in difficult conditions, you know we have got railway tracks in some of the coldest locations, some of the rainiest locations, hot locations. How do you as a leader of that organisation keep them motivated?

A: I will tell you it’s a remarkable organisation. Many of us, particularly, those from India would know about this phrase that we often use about – well, this, God makes this country run. In that sense, sometimes one wonders, come hail or storm or whatever, every day we have 20,000 trains run across such a wide spectrum with all these difficult conditions. The organisation is a very committed organisation, despite what our impression may be from the outside, and like that in India we love to criticize everybody but ourselves.

But the reality is that the railways per se is not a bad organisation. It’s just that they were never empowered; they never felt that they can outperform what they have been doing. What we only needed was to give them that encouragement, and we only needed to tell them they can do it. After all, why did I start with that statistic of track renewal? When I came into the Ministry, I saw that everything that I discussed when I took my reviews of different zones, PSUs and divisions, whatever we discussed was this is pending at the railway board. The first decision was we downsized the railway board and delegate powers extensively. So, within the first month, we started delegating and every week now a board meeting is held and one of the item agendas is delegating power.

And I will tell you, some small things will tell you how delegation of power has an impact. I was a little unwell and hospitalized in December, so the doctor who came from the railway hospital mentioned to me there – and it was about a week before that we had delegated powers to the medical officers of the railways for emergency operations to take a decision. Earlier, it used to come to the railway board. He gave me two instances of lives of railway men that were saved. One needed a bone marrow transplant, another needed a liver transplant. Both cases in the past would have gone from the hospital to the division, to the zone, maybe come back somewhere along the way for some queries, then starting the journey again, gone to the board, again may have come back for some queries and by that time the guy was gone.

Now we had the power to sanction it, the moment he could detect this is what needs to be done. And he says two lives were saved. And it’s not a question of those two lives; it’s the impact that those two lives had on 1.3 billion people that we care for.

On a similar note, every proposal that would come up, the response of the Minister, the replies used to be that we are short of ….. you will appreciate that we have a funds crunch, the shortage of funds, we have to prioritize. The first thing I did was tell everybody in the railways there’s absolutely no shortage. Whatever funds are required, it’s my responsibility, I will get it for from anywhere.

And you won’t believe, it’s the same amount of money we were spending earlier, it’s just the mindset change. Earlier, the mindset was we have a shortage of funds, delay everything. Now the mindset is, advance everything, let’s do it faster, because have sufficient funds. And the impact you can see, I will give you a small thing. In Mumbai, some of you may be aware, I brought in the army to construct three foot-over bridges soon after a very unfortunate stampede. On the face of it, I had nothing to do with that incident, the bridge did fall. The accident cannot be attributed to railways, certainly, not to me. I had taken charge on 4th September, this happened on 29th September.

But certainly there was anger amongst the people that a new foot-over bridge which would have been wider and helped people move easier was sanctioned 18 months before that. And on that same fateful day on 29th September, the tender was uploaded on the computer – tender – and then it had to be tendered and then the contractor would come in, procure equipment and maybe three years more to build that bridge, in the typical mindset of the working.

Of course, I took up a lot of root cause analysis after that to see what more needs to be done. We did an audit of every station in Mumbai, 125 suburban stations. I come from Mumbai; I have travelled in trains all my young days, to college and then to work. And for the first time, in the history of Indian railways, we have decided to invest nearly $8 billion for Mumbai Suburban alone – $8 billion only in Mumbai Suburban, recognizing that one-third of my passengers are in Mumbai, out of the nearly 22 million passengers that travel on railways every day, nearly 8 million are in Mumbai alone.

So this $8 billion is not some favour I am doing to Mumbai, it’s not because I come from Mumbai. Like Prime Minister jokingly in some meeting said, ‘Piyush is from Mumbai,’ not that he didn’t know it, but it’s not because of that, it’s pure economics and pure human concern. Second decision I took was to get the army to make these three bridges, I also understand that three bridges is not something which is going to change the entire Mumbai scenario or decongest all the Mumbai problems. But you won’t believe what happened and that was the entire idea.

When we gave the army these three bridges to make, and I had actually ordered that all the 17 zones from India will send teams to Mumbai to see how the army does the work, right? I thought it would be a nice learning exercise. I also had at the back of my mind that unless we do some visible change quickly, people are, anger is going to get some subsided or subdued. And there is no other organisation in India that I can give a contract without a tendering process, organisation which has equipment in their own factories. Army has their unit in Kolkata or somewhere which manufactures all these… the Bombay Sappers are experts in building bridges in adverse circumstances, this bridge has to be built with a two hour traffic block every night, 22 hours trains are going to run, we get two working hours. And I gave them only 90 days to perform.

But you know the impact of that – now the railways got active. Before the army could complete these 3 bridges, the western and central railway in Mumbai completed 17 more foot-over bridges, by June they are going to complete 22 more bridges. And I have recently sanctioned 56 foot-over bridges with the …. from start to finish, as soon as the budget gets approved, another 15 days from now – they say within 365 days those 56 bridges would be completed. That’s the change in mindset these simple things brought in.

Q: That’s truly inspiring. I think the other thing that we have seen a lot is how railways is in the forefront of deploying technology, like some of the … cases like use of UAVs to see whether there are any defects in tracks, whether there are any breakages, and again, we talk about adverse situations and circumstances. So, how have you over the last 6 months thought about using technology and what’s your experience?

A: I have done a very simple thing. I don’t know anything about the railways, other than as a passenger, I didn’t know anything. I am not even an engineer. So on every subject, actually it’s very good to be ignorant, because on condition … sometimes, and frankly, we as auditors face it. If we do the audit, if the same person does the audit with the same company again and again, very often, I think we tend to lose the essence or pick up something which may be extraordinary, which may be … I think the mind misses that.

So, I think me as somebody who doesn’t understand the railways was a great bonus for me. And what I have done is, on every subject I immediately pick up the phone and try to get together a group of people from that field. So, when I decided on signalling, how did I decide? I was reviewing the signalling in telecom division, and I told them I want to know what’s the latest technology, when they made that presentation, I promise you, I took that decision to change the entire signalling system in 30 seconds flat. The presentation was not ever over, we were somewhere halfway down the presentation when I said we are changing the entire signalling system of Indian railways. We had estimated it to cost about $12 billion. My own sense is it will be cheaper than that with my plans for giving it to one company and bringing in more competition and make in India.

But a $12 billion decision as a fellow chartered accountant you will all appreciate that it’s not rocket science, $12 billion to almost double India’s carrying capacity and doing huge amount of safety, it’s a no-brainer. Why didn’t do it 20 years ago is my question. So, I think wherever there are new technologies, I am taking the help of industry. What do I do, I called all the five signalling guys, I sat with them to make them talk to me. So one outsmarts the other, talks ill about the other, the other counters that and within about 3 or 4 hours I knew enough about signalling.

Q: That’s what most of our clients do, call three vendors and then talk to three concerned with this, so now what it’s going to be.

A: Well, I think the way things are going, that’s what they are going to do with the auditors also.

Q: So, as part of the …. the audit firm we have already done. So, just looking at the numbers, if you look at the Indian railways today, in terms of revenues it could be close to say $30 billion, about $900 million in profit. So, if you do the math on a billion dollar in profit, in net income?

A: No, the Indian railways doesn’t make a profit, let me confess to all of you. We are still dependent on freight being over-charged, over-priced to subsidize our passenger traffic and we are creating this profit through literally killing our industry or killing…. I hope you don’t quote me outside, I will be in serious trouble on this one. But on a serious note, we keep increasing our freight rate, because of the lack of political will to make consumers pay for the true value of a journey. And in some sense, we are actually losing our freight competitiveness. And India as a country is losing its competitiveness on logistics cost, because of railways keeping on increasing the same.

But it’s a harsh reality that again exists for long, and I also recognize that India still has large number of poor people. I will have to be sensitive to their ability to pay. I can’t take a very-very philosophical or a very cut and dried economic approach and say increase all the passenger traffic rates to reflect its true cost on the use of …….. So the solution to my mind is not to roll the freight with higher costs but also not try and recover all of it from the passengers. It will have to be efficiency. I will have to sweat my assets better. I will have to see what we can do that we have faster turnaround time, faster maintenance of tracks, faster maintenance of locos, coaches, rakes, the entire system will have to bring in efficiency and let efficiency do the role of our inability to increase rates.

My own sense is in the next 5 years, we can make Indian railways the best railway in the world. In the next 5 years, we can bring down our freight cost by about 25% at the very least, in the next 5 years, we will have double the capacity of what Indian railways can carry today, and that’s the target I have set for my team. And I am very-very confident that in the next 5 years we can genuinely start making a profit in railways without overburdening one section to the debt of railways.

Q: I think I would like to open the questions to the audience if they have any questions to the honourable Minister.

Q: Piyushji, good afternoon. Himant Joshi here. What are the plans for railways in terms of electrification, total electrification. I think the Energy Ministry ………. and secondly what are the plans for totally solar powered trains? Thank you.

Q: Good afternoon, Mr Goyal. You are always convincing and enterprising when you talk. One of the questions when you started your speech, you talked about the PNB, similar to one which you had foot-over bridge that you did in Mumbai, what is the root cause analysis that you did for PNB. Because the reaction mode is always, a failure is always attributed to an auditor. When you had a similar situation with the United Bank in 2016, did anything change and your reflection on that?

Q: With passing time, there is going to be a lot more organisation and a lot of need for mass transit transportation in the urban areas to scale up and improve. Could you share with us what you see as the plans to upgrade the mass rapid system in cities, major and smaller cities?

Q: China introduced the ….. carry the freight from China to Germany covering ….. Though India has a sort of a proposition with us, one of the major challenges you talked about the freight in the long term….. Is there any possibility India could be like that?

A: Actually, at the end of you talk I was going to suggest that I would personally like to see the day that we can do away with this men’s cricket team and women’s cricket team and actually have a team where men and women are competing with each other.

Okay, on electrification, you would imagine that I have come in here, so, obviously, this railway is going to be the world’s first large railway at the size of India which will be 100% electric in the next 6 years. That’s a commitment that I am making, we are already working towards that. We have already sanctioned electrification projects to ensure that the entire railways is electrified, new railway lines are all straightaway set up with electrified systems. And it’s a no-brainer absolutely. We have done the calculations of every sort. It makes imminent economic sense for a country like India which is dependent on import of diesel otherwise, you can imagine the amount of pilferage of diesel that may be happening in remote areas.

The impact on climate change, just for your information, for those of you from Delhi, and concerned about pollution here, 50% of the trains that come into Delhi – now go and file a case in NGT and stop my trains please. But 50% of the trains are diesel-drive, not because many routes are not electrified, because a train passing through a thousand kilometres, even it passes through a hundred kilometres which is not electrified, small stretch, I have to use diesel for a thousand kilometres and impacting the environment, losing precious foreign exchange, et all.

So, we are going in for 100% electrification. Some naysayers, also some vested interests if I may say, have tried to raise questions, but we have done all the verification, validation and I am convinced that this has to be done, will be done. Now, of course, we are changing the rules of the game. Earlier, electrification used to be 30-40 km contracts. I don’t know if you have followed me over the last 3-4 years, I am a guy who looks at scale. So, now projects are all a thousand kilometres plus. So, at a one time when a contractor comes, he gets a thousand kilometres. He knows, he’s got a good, big size package to work on.

If you don’t mind a little Hindi, carpenter की जो चाल होती है ना, अगर तुम चाल दो carpenter को तो अच्छा काम करता है, यह छुटकर-मुटकर काम दो तो उसको काम में मज़ा नहीं आता| So, a good artisan, a good craftsman needs a long, assured work to be able to do his work efficiently, that’s what we are trying to do – larger contracts on electrification. And that is bringing down the cost. I had kept a target of 15-20%, my own sense is we will save more than that.

Solar power trains is an idea that Suresh Prabhu and I discussed. It was implemented in Sureshji’s time, sadly, it failed. So, I take that blame entirely on myself, but it only shows that we are not ostrich in our thinking. We are open to failure also. We have tried that idea. We realised that every train is not necessarily on the track during the sunny hours. And, therefore, the Plant Load Factor, which is already low on solar equipment on train rooftops was even worse, and maintenance was a challenge. So, we finally dropped that idea, I think it’s an aborted plan.

Sir, on the PNB, clearly a root cause analysis is going on. So, I would be jumping the gun if I say anything more at this stage. But you can’t totally say that the auditors are not responsible. I have been an auditor on both sides of the fence, as a borrower when I ran my small industry as an entrepreneur, now nearly 38 years ago – I have become old I think. At that point of time also, when I was being audited by any auditor who came, they used to see every paper in the loan file and with a green pen tick mark at one area, could be the top right hand side one auditor would tick mark. Another auditor would come tick mark at the bottom left hand side. And like that there were 5 or 6 audits, there was a statutory audit of the bank, there was an internal audit, there was a concurrent audit, there was a management audit, there was a Reserve Bank audit – I don’t know if I missed out one or two more.

All through the year, we were answering auditor’s queries, as way back as 38 years ago. Now you can’t tell me that these two gentlemen and their companies from 2011 have been merrily taking LoUs and no auditor even thought it fit to raise the point that the SWIFT data should also be audited, the SWIFT data should also be within the core banking system.

I remember when I was on the board of Bank of Baroda, and today I met the Chairman of Bank of Baroda, he had come to meet me. And he recalled also that I had said almost 15 years ago that Reserve Bank should have a common protocol of core banking for all the banks, so that they talk to each other. Today, we have a situation that every bank’s core banking is working in a silo, none of the auditors even in this room have ever flagged off this point. So, let’s shy away from our responsibility. We are all equally responsible.

And, certainly, our government from the day we took office, we have given full autonomy to the banks, full autonomy to Reserve Bank, full autonomy to the auditors to do their processes. I would dare say not a single call would have gone from this government, from our Secretaries, from our Minister to any bank to ever get somebody a loan or not get somebody a loan or to help somebody or not help somebody, there is a price to both actually. But we have never indulged in all of this.

And I think that’s the strength that we have brought to the table. We are willing to open up this mess, so that we can once and for all get rid of this. And the root cause analysis would, of course, have system failures, would have a failure of the management. And in Brady House, if any of you is from Mumbai or has done PNB, Brady House is their prime branch, credit branch. For that bank to have been able to get away with this kind of nothing less than murder for 7-8 years in criminal, nothing short of criminal.

But then we have had Barings Bank also fail, Barings having a trader who could get.. yeah, 2 or 3 million dollar loss. You had JP Morgan have a huge loss. You had Lehman Brothers… so many of them. So, I don’t think it’s something that’s uniquely Indian. It’s a failure where human intervention and human ingenuity probably worked at its worst, finest worst and it’s unfortunate. But then lessons in the making for all of us, I hope there are lessons for all of us also, while there are lessons for government.

For the mass rapid transport system. It’s damned if you do and damned if you don’t. We tried to bring in modern technology, bring in bullet trains and stuff like that. Many intelligent, well-to-do people who have travelled the world also started asking questions, but does India need a bullet train. And I am told that when Rajdhani was introduced, the last reasonably fast train introduced in 1969 Rajdhani was introduced and Shinkansen technology was introduced in ’64 in Japan. So, Rajdhani was criticized by also the Chairman of the railway in 1969, can you believe it?

So our country somehow, and well meaning people, educated people, like us at least, should be on the forefront of engaging India with the best in the world. Why should we be relegated to be second class and remain backward all our lives. That’s the effort we are trying to do, we are trying to bring metros to all the major cities. We are hoping that the highway, railway, airways, seaways, all of these networks which bring connectivity to India can connect and become the most modern in the world.

We are also having connections where ports are going to be connected with very good highways, with railways, airports coming up near different ports. It’s a large vision to make infrastructure truly robust in India. And maybe one day somebody will ask whether the highways or this infrastructure made India or India made this infrastructure, hopefully some day.

And about the China to Germany proposal, frankly, there is nothing on the cards right now. I still need to set my house in order, set the railways in India in order first. Who knows some day that may also happen if our neighboring countries become more dealable – what’s the right word, I am losing my vocabulary. But if our neighbors become more amenable to discussion and dialogue and working as partners in progress, rather than indulging in activities which are completely nefarious, encouraging terrorism, creating internal problems in our country, if our neighbors would stop doing that, I am sure there could be one fine day when something like that could also happen.

On the sea routes there is some movement through the Chabahar port and stuff  like that where we are trying to create new lines or open up new lines to transit and trans-ship, but on the road network and railway, I don’t think we have any such proposal right now on the table.

Q: Great, thank you. And I think with that quote whether India made infrastructure or infrastructure made India, I just want to take the opportunity to thank you sir for taking the time out, gratitude on account of all our partners here, taking the time out, speaking to us about what the government is doing, what you have been doing as part of the Railway Minister. And, you know, as I was hearing you one of the quotes that Steve Jobs used to say kept on coming in my mind. He talked about ideas without action, being not ideas, they are actually regrets. And a lot of time we don’t convert our ideas into action, because we are afraid what others will say. You talked about that initially, should I look at just laying out new rules or strengthening the existing ones or we just think about the fear of failure.

But I think what differentiates innovators from the rest, having that commitment, having that energy and having that conviction to take those ideas to action.

So thank you again sir. It’s been a pleasure for us.

Subscribe to Newsletter