June 12, 2018

Speaking with ET Now on 4 years achievements of Ministries of Railways & Coal

He wears many hats in the Modi Cabinet but, of course, Railways, Coal and the Minister of Finance, Mr. Piyush Goyal is today here to talk about Railways and Coal with us. Let’s put the spotlight on the operating ratio, the punctuality and what’s all that’s green in his report card as far as Railways and Coal is concerned. Thank you very, very much for joining us.

Q: I know you want to keep the focus to Railways and Coal, but I will still ask you one question on a very scathing criticism that has come against your government and before I talk to you about the achievements and the misses in Railways. And as a member of the Union cabinet, I think it’s a responsibility to respond to this. Former Finance Minister Palaniappan Chidambaram says that a government can be judged by its outcomes and not by intent after four years in Office. GDP growth, he says, has contracted from 8.2 to 6.7, credit growth has slipped from 13.8 to 5.7 and the gross fixed capital formation has fallen from 31.3 to 28 and a half. You also hold the portfolio of Finance right now, what is it that you would like to tell your Opposition?  Let me get one finance question out of the way before I move to Railways.

A: Well, I think Mr. Chidambaram has completely forgotten the kind of economy that they inherited in 2004 from Mr. Vajpayee in NDA-I and the shambles in which he left the government in 2014 when Prime Minister Modi and Mr. Arun Jaitley took over as Finance Minister. He is trying to play on averages but he is forgetting that growth was down to about 4% when he left the government. He is forgetting that fiscal deficit was above 4%, 4 and a half nearly. He is forgetting that current account deficits were high, inflation was at near double-digit levels, he is forgetting the kind of high interest rates India was paying.

So, the economy that he left behind for Mr. Modi, Mr Jaitley and this government was in a complete shambles. He left behind huge unpaid subsidies which we are paying to this day. Both – we are paying back principal amounts on oil bonds, we are paying back interests on those huge oil bonds that he left behind, we have paid off all the subsidies, the unpaid…..

Q: So, are you gonna negate all these numbers?

A: Well, there are so many numbers that he left behind for us to repay. That I think he was a failed Finance Minister. If he had done half as much as this government has done, the country would not have been in the shape that we received it in 2014.

Q: Let’s talk about Railways and many people obviously draw comparisons between Roads and Railways, because they are both infrastructure sort of related parties. While Roads has been able to draw a lot of investment and both are obviously revenue and job generators, the same amount of investment hasn’t flown in Railways and the quantum of investment and its impact can be a lot higher in Railways than it can ever be in Roads. Are you personally disappointed? I mean, a lot has happened in Railways – you have got a lot of green also on your report card. But are you personally disappointed with the levels of investment that haven’t?

A: First of all, I am delighted that the Roads sector, particularly the National Highways has done some wonderful work. We are very, very proud of the work that’s happening in the Road and Highways sector. But one stark difference is that when you are working on a road or a highway project, it’s an independent project. It does not disrupt your existing traffic, so you can actually work round the clock and complete projects much faster.

In the Railways, and we are already grappling with the huge punctuality problem when we are trying to expand the railway network, electrify the railway network, sort out the huge backlog of safety related issues – track renewal, track replacement, the huge amount of problems that we inherited across the railway sector. Now, in that, we have to take traffic blocks, stop the trains, delay trains yet do all of these works – the expansion, the repairs, the electrification. So, these are very challenging circumstances in which the railway investment takes place.

Even then, I am delighted to share with you that we have almost increased the investment on the Capital Investment Cycle – CAPEX cycle – to almost two and a half times what was happening before this government came in. I am delighted to share with you that this year we have one and a half lakh crore rupee investment plan. I am delighted to share with you that Dedicated Freight Corridor which – even the land acquisition was barely 20-24% up to 2014 – seven years after it was conceptualized. We have been able to take it up to 98%. Work contracts have been given across the Dedicated Freight Corridor so that all work starts. The first leg of it will be operational by the end of this year. So, we are really moving the needle on essential projects, both from the safety and maintenance side and from the expansion and growth side.

Q: You know, when your government came to office, there was a lot of hope that private participation will be driven in. You very categorically denied today that there is no plan to privatize the Railways. I get that, I appreciate the point of view that you are putting across but getting private players to do track lays, getting private players to do wagons. Why has some of that not taken off as planned by you? I mean what are the big hurdles there?

A: Well, I think over the years, one of the hurdles in the wagon procurement, for example, was the low rate of return that was permitted to parties who invested in wagons for their goods freight trains and all. We have recently come out with a revised policy by which we have now allowed a very fair rate of return on wagons that any private party may procure for its own use and we have also dovetailed it with national infrastructure in such a sense that they will have a right or a priority whoever owns the wagons to get their wagons.

Similarly, for new private investment in new lines, we are soon coming out with a policy which is going to be a very easy to operate framework, very few questions asked, very easy to get access to the national network given the technical constraints, if any, being sorted out and complete freedom on pricing on their network with a small haulage charge that the Railways takes and when the trains come from the private to the government network, a charge that we charge them for running it on our network. So, very akin to the transmission systems across the country where if anybody takes power across transmission lines owned by the government, they pay a willing charge. We are working on that pattern in the Railways.

Q: How soon do you see the first of such operations take off?

A: I think that’s for the private sector to determine which are the projects that excite them, but I am happy to say that many states have now done joint ventures with us. We already have the ports, Mr. Nitin Gadkari’s Ministry looking at a JV with the Railways and investing to improve the connectivity between the Ports and the National Railways System. I believe one or two power plants are wanting to setup their private infrastructure for moving coal to the port and then, taking it by barge and then again to their power plants or to their steel plants. So, there is a little buzz of excitement around it but I have not put any deadline to it.

Q: But Mr. Goyal, you know, the obvious question to ask in all of this that while you are creating the elbow room, the framework, you are laying the ground for investments. Is there a little bit of a double speak on the part of Indian industry to not invest either, because I mean, it’s my job to ask you why not the commensurate investments. It’s your job to answer – I have created the elbow room but they are still not happening. Where is the missing link?

A: Not at all. I don’t blame the Indian Railways at all. Indian private sector also, I don’t blame the Indian private sector at all. If you will observe during the period 2007-08 to 2014, you saw this indiscriminate investment on capacities across the country when money was, credit was flowing very easily, capacities were being created without a proper assessment of demand. And a lot of those assets have become stressed assets, bad assets over the years and finally now recognized as such by showing a true and fair view under the guidance of Reserve Bank of India after the Asset Quality Review of August, 2015. Now, in this situation until investment starts fructifying into results, into capacities being utilized, the appetite for fresh investments of Indian Industry obviously has been constrained.

Q: When do you see that turnaround happen?

A: I can already see the signs of that turnaround. You see the gross capital formation has increased significantly in the last quarter. I can see that private investment is now coming in into the cements sector, into the steel sector, the airline sector has seen huge amount of investments coming in. So different sectors based on the demand-supply gap are putting in money – into industry, into businesses. To my mind, as this expansion of demand takes place, obviously, logistics, freight all of these will also, then have to take place.

Q: Fair point! Let’s just talk about operational ratio, because the performance of Railways is always judged by this one metric and sometimes, by this one metric alone, but that’s not perhaps the most scientific way to do this. The operational ratio of the Railways could at about a 98 and half percent for fiscal year 2018. I am presuming this is not a figure you are comfortable with. So, what is the way out then because this could be the last ever…?

A: Not at all. I think I have set a goal that in next 5 years, we should bring it down to the 80s and, very clearly, one of the major reasons this happened is a 22,000 crore rupee hit straight on the PNL because of the 7th Pay Commission. So, that’s about 13 or 14% shaved off at one shot. So, obviously it will take time to recoup that. I am focusing more on efficiency gains. My own thinking is that we should not look at burdening the people of India with fare increases. We should not look at burdening industry with freight fare hikes. Our focus is going to be on more efficient utilisation of our assets. Our focus is going to be on efficiency gains both in procurement and in managing the entire Railway show better.

We are looking at electrification giving us gains. We are looking at doubling or tripling of lines which will unlock a lot of potential because you know a single line becoming a double, you almost have 4 or 5 times the capacity. And, sadly, Supriya, it’s a matter of grave concern for the nation and I would like to tell the people of India till today, so many 70 years after independence, prior governments had not planned even to double the Mumbai-Chennai, Mumbai-Hyderabad or Mumbai-Bangalore lines in full. We are now completing the doubling of such critical lines as these and hopefully in the next few months, we will finally have the golden quadrilateral completely running on double lines but it’s a shame that prior governments instead of focusing on critical lines and circuits like this – did only politics in Railways.

Q: That infrastructure could have helped certainly, but you know, you recently met MK Singh of the 15th Finance Commission in your other capacity. Do you believe this huge devolution that’s happening to the states is affecting departments like yours, like the Railways?

A: Not at all. This government under Prime Minister Modi has not made any compromise when it came to providing funds for infrastructure development. Simultaneously, we are providing funds for social development – we have balance, we have done a fair balance. We have been able to increase our revenues. Thanks to the formalization of the economy, thanks to the growing size and scale of the economy and I think, funds has not been a constraint anymore.

In the last few years, as I said, we have done almost two and a half times the CAPEX that was done in earlier years in the Railways alone. We have huge ambitious plans on Bharat Mala, on Sagar Mala. So, connectivity has been a focus area, much like, you know, John F Kennedy had once said – “Whether America made the Highways or the Highways made America.” We appreciate that a robust infrastructure is very critical to the success of India.

Q: I want to ask you, you just said in your previous answer that we are not looking to burden the people with excess fares or freight and all of that. At one level, are you following a very socialistic approach to Railways all over again?

A: Not at all, I am following an approach I used to follow in the power sector. If you may recall, I used to often say we cannot burden the people of India because we are in inefficient. I mean, end of the day – if two companies are going to make water bottles and one is efficient and another uses twice the amount of plastic, wastes a lot of water, has a lot of rejection in the caps that they use, has an inefficient marketing model. Will you as a consumer pay him more money to offset his inefficiency or are you going to say that, no I will take whatever is most sufficient.

So, I think in this competing era where the Modi government has been successful in making air travel available for the poorest of the poor through the Udaan scheme where with very good road network, we have been able to provide an alternating mode of transport by the road sector also. I think it’s incumbent that, we in the Railways also come up to speed, improve efficiency of working, improve the levels of service that we provide to our customers. When we achieve that, I am sure customers will be willing to participate in the Railways with much more enthusiasm and will be able to enjoy the Railways far more.

Q: A quick last question on Railways. You mentioned Udaan and this is something that I am asking you as a private citizen as well. I use a lot of Indian Railways, for instance. Your punctuality levels have slipped from 80 to 65%. It is a cause of concern on one hand but you have got increasing competition coming in from a scheme like Udaan on the other. It’s not just the cost of flight that’s going to go down but even to private and very remote parts of the country. How are you going to compete with a person who has the choice to fly instead of taking a train?

A: First of all, this 82 to 65 is not a slippage. It’s only a recognition of the reality. We were earlier using data from manual sources. We have in the last few years gradually moved to automated sources and in the last few months, we have ensured that all the data gets 100% accuracy into the system. So this is not some kind of a slippage, it’s the accurate data.

Like you go to a doctor, unless you know the problem the doctor is not going to be able to solve it. So, we have recognized the problem, brought it to fore. We are working as a team but given the importance of safety, given the importance of all of these infrastructure projects which we have embarked on to ensure that Railways is future-ready. I think this compromise on punctuality to some extent was unavoidable.

We have to give traffic block, stop the trains when all these works are going on. Can’t have accidents happening so that while the work is going on, a train comes in and you have a huge accident on our head. So, we have to have traffic blocks but how to do that more efficiently, how to ensure that it doesn’t result in punctuality delays. Maybe at some point, we may even have to rewrite the time table to provide traffic blocks even though expanding the travel time of trains so there is certainty amongst the passengers until we are able to make the Railways really robust and ready to meet the needs of faster travel.

Q: As somebody who was involved with the Air India sale decision. Are you personally disappointed that it did not envisage any interest from a private bidder? And how confident are you that this is going to go through?

A: I think the timing wise, with the oil prices going up…. We are quite confident we will go through it but we will have to have a… We will be meeting amongst ourselves. We will also try and see if we can engage with the stakeholders and see what are the constraints because of which they were not able to express interest in this bid, but we have an open mind and we should take it in its stride that if in this present form, it did not find a good…

Q: You will be open to tweak it?

A: I don’t know. The Committee will decide. So I think, once Mr Jaitley is a little better and back into his meetings, we will all meet and take a decision in that.

Q: A last question to you because you also wear a political hat, you are an extremely important political faction of the BJP, a very, very boisterous voice there. There is this whole anti-Modi block that seems to be in the making. I know, you can’t and I know what you going to say next that this is a Khichdi coalition, but let’s not undermine the index of Opposition unity. As a member and as a very important member of the ruling party, is there a reason to be concerned with this index of Opposition unity at all?

A: Well, as a responsible political party, we take every election and every challenge very seriously. So whether they are divided or they are together, we’ll strategize accordingly.

Q: So, I am sure you must not be very happy with the by-poll verdicts that have come – a string of them?

A: Well, by-poll verdicts reflect the local issues more often than not and certainly, nobody can be happy about any defeat except the Congress who sees victory even in defeat. That’s a different matter that they get 6 or 7 MLAs in Uttar Pradesh and they still find some victory in that. They lose the election in Karnataka and they still convert that into an unethical alliance and are winning to play second fiddle to the party which was third in the …… So, one really doesn’t understand, as Mr Jaitley rightly put it – I think Mr Rahul Gandhi has managed to reduce the Congress to the fringe of Indian politics.

Q: Are you making the mistake of undermining the index of Opposition Unity?

A: We never undermine anything that happens in Indian politics. Prime Minister Modi, my party President Mr. Amit Shah – very, very veteran politicians also. They run their government well. They ensure that they manage their politics well. So we are ready for any election with or without Opposition unity. It’s for the people of India to decide whether they want to see the kind of things we are seeing in Karnataka happening today on a daily basis, whether they want governments like the one – the Congress pull down Deve Gowda, the Congress pull down Inder Gujral, Congress pull down Chandra Shekhar.

Q: Mr. Goyal, people of India may also turn around and say there was a Manipur and there was a Goa that happened but on that note… You were not a single largest party there.

A: Wait a minute! Let me clarify, let us see that – we were not the single largest party, but if the single largest party does not even make a, stake a claim, what should we do as a responsible political party. We want to provide the electorate, the people of the state – a government that works and we have provided them a government that works. So I think it’s very unfortunate that people like you or veteran journalists are not able to see that unless the single largest party stakes a claim, what could the Governor of that State do?

Q: We can choose to disagree on this, but thank you very much for being with us. Such a pleasure!

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