August 28, 2018

Speaking at FICCI: Inauguration of Smart Railway Conclave, in New Delhi

Mr. Paul Jansen, I am sorry Mr. Jansen you did not get enough time, may be during the course of the day you can catch up with your ideas and we will certainly look forward to receiving the outcome of today’s proceedings that FICCI will put together. Mr. Nalin Jain, Mr. S.K. Mishra, distinguished ladies, and gentlemen who have assembled to discuss Smart Railways today.

At the outset, I am really looking forward to one conference or one program that CII, FICCI or ASSOCHAM invite me where there is not a wish list before we start the program, and today’s wish list was actually quite amazing and quite surprising to me.

Sandeep, you spoke about two things, one is you spoke about purchasing in a certain manner that you mentioned. When we are discussing Smart Railways, I think procurement should also be smart and the method that you proposed will ensure that everything I purchase will continue to be more and more expensive, think about it. What are we trying to do? We are trying to ensure transparency in the system and we are making all of you guys bid against each other so that I can get the best price, ensuring that the quality standard is the same for everybody.

The moment we go in for very complicated systems, you will land up with corruption allegations, you land up with favouritism, you land up with people giving markings for different companies in different fashion and I think that’s not very smart. I think the smarter way is you set a benchmark, make sure that everybody who bids conforms with that benchmark and then make sure everybody bids aggressively to give you the best value, and along the way you aggregate quantities, you look at long-term procurement, you give assured business to companies so that they can plan for the future better.

You give the best bidder the highest volume so that they can aggressively quote and save some money for the railways. It’s your and my money, we pay the taxes that runs the railways. And why I said this is because I think very often when we are… I am sorry, nobody please take offense to what I am saying, but very often when we are discussing on such platforms, we tend to look in the narrow prism of our business interest.

I think it may be much better if we started looking in the perspective of what is good for the country, what is good for the railways and when there is a fair and equal competition, everybody will make money. I saw that happening in the LED programme where prices fell 87%, thanks to honest, transparent and competitive bidding ensuring that it’s a one point single price at which you bid, everything else being equal. Prices fell 87% but every one of those companies is making more money than they made earlier. And, in fact, India led the world’s efforts to promote LED and save energy, save the carbon footprint of the world.

Similarly, there was this other issue, the two issues that I could pick up from, again Mr. Jansen also raised the issue, was about the GST and the inverted taxes. I am trying to put this aside so that there should not be that I didn’t respond to the two issues that have been flagged off so far, so I thought I will put this aside before I focus on Smart Railways.

While I appreciate you want taxes to be low and everybody wants taxes to be low. Think smart again. First of all, how does it matter, the ground rules are the same for everybody that’s what GST is all about. So, if there is an inverted duty and if there are six bidders or five bidders or three bidders or twenty bidders, the rules are the same for everybody. So, if at all somebody should be worrying about it, it should be me, because if there is an inverted duty some of you cannot use that duty for your final product.

The rules are the same for everybody, so it’s not as if it is causing any unfair competition, but the approach that you have that we should because of inverted duty we should reduce the input taxes, I’ll tell you where that goes, where that falters. Now if I am procuring a locomotive and certain ball bearings go into that locomotive, I am sure you will all appreciate the ball bearings don’t go only into locomotives, they go into a hundred other products or a thousand other products. Now I cannot determine when the sale of ball bearings is happening that hey, this ball bearing is now ultimately going to go into a railway locomotive, so I charge 5% on that and then look at the other ball bearing, which is probably going to, then pushing the argument further, maybe going to food processing plant’s machinery and they say there should be zero and a third, which goes into a maybe into a Mercedes Benz car should be at 100% and then we can equalize the revenue that is required to run the government and the country and the social welfare programs of the government.

So, one must I think before you put forward a wish list also analyse it smartly that truly does that make sense in terms of what’s good for industry and then can you imagine, suppose your products, the Hindustan Sanitary ware products, will have to start figuring out how many of those are going into the railway toilets and giving you a concession on that, how many are going into a home of a millionaire or a billionaire and the whole system will go haywire.

So I think, let’s focus on simple things which can help us make smart. I agree with Mr. Jansen when he says India has the unique opportunity to leapfrog, undoubtedly, we have a unique opportunity, but before we can leapfrog, some of the basic elements will have to be sorted out and that’s what this government has focus its energies to do over the last four years.

I give you a simple example. Mr. Mishra talked about investments, capex cycle being reignited under the current government, just to give you the perspective from 2009 to ‘14, there was a total investment in the railways of 2,30,000 crores, that’s about $33 billion for the foreign delegates. This government has ramped that up to 5.3 lakh crores that would be about $75 billion. That’s the kind of ramp up you saw in the last five years in terms of investment. But it’s not only about the values, it’s not only about 33 becoming 75 billion dollars, it’s how you invest that money, and why I say this is many of you will recall we used to have a separate railway budget.

Now the Railway Minister always under pressure to present a budget and the huge amount of political pressure that we face would keep announcing new projects indiscriminately, bare you, just announcing the project, there was never have been any intention of ever completing any project. And you have a situation where you have a thousand projects going on in the country and given the little amount of capital that you could spend on the railways, you landed up allocating small amounts of money, a million dollars here, two million dollars here, five million dollars there and over 500 projects you spread out all the money that you had and in the next year’s budget you added some more project.

So, whatever little extra money you are willing to invest in the railways also went into some projects, which were never going to see the light of day, and therefore, over 64 years of independence till 2014 you barely saw the infrastructure in the railways grow by about 12%. The railway network, the railway lines in the nation grew by only about 12% in 64 years and because you are parcelling out small amounts of money over different projects, project cost kept escalating. I won’t even discuss the time overruns. We still have some projects which were started in the emergency, 1975.

Forty years later, I don’t think half that project is over. Of course, it is in West Bengal, so I don’t know whether it will ever get over. But you never planned smartly that let’s focus on the projects which can give you outcomes, which can give highest value for every dollar that you spend, every rupee that you spend, let’s complete projects and move forward.

I remember the Dedicated Freight Corridor which was initiated in 2007, when we came in government in 2014; land of about 24% had only been acquired in seven years, 24% of the land was acquired. Now you will all appreciate if the land is not acquired at one go, land prices keep ramping up and increasing and it becomes very difficult to get the land in bits and pieces. Of course, with the new laws the value of that land also escalated significantly. The contracts which were given out for implementing that project were also about 25% of the…. 1/4th of the projects were contracted out. Now a project which was earlier to cost some 40,000 crores, it’s about $6 billion, is today going to cost in a best case scenario about $13 billion. Who will be responsible for that?

And if the same pace of work as was being done for so many years and in the same style with new projects being added were to continue, you would have a situation where I think we would have disaster in the making. You wouldn’t get the coal to the power plants in time, no passenger could reach his destination on time, no improvements or services could be made better for lack of investments. And, therefore, when you look at a Smart Railway I think the basic ingredient is that we will have to start thinking smartly. We will have to start planning smartly. We will have to start working smartly, and I think that’s the change that hopefully some of you may have seen in the last four years and I will try to highlight why I say that.

In fact, as Steve Jobs had said, “Everyone here has the sense that right now is one of those moments when we are influencing the future.” While I do believe every generation must have thought that what we are doing what they are doing is influencing the future. I have the courage of conviction to say that we are influencing the future in a positive direction, in a progressive direction, in a smart direction for the changes that the Prime Minister Modi and under his leadership Mr. Gowda, Mr. Suresh Prabhu and I have now got that opportunity are able to do in the short span of four years.

In fact, Mr. Jansen also spoke about digital technology and how we could leverage on that, but to leverage on the digital technology, on the one hand the government of India is working to take Internet, to take fiber optic to the remotest corners of the world. On the other hand, the railway is working to get technology across the entire rail network. You will be happy to know Mr. Jansen and other delegates that we had about 358 kilometers of optic fiber cable in the country in May of 2014 – 358 kilometers of optic fiber cable. Today, its upwards of 2.3 lakh kilometres – 2,30,000 km in four years.

We have about 60% of the villages of India already connected with optic fiber and in the next 15 to 18 months you will have the entire country wired up, because we believe that if we have to leverage on digital technology the basic ingredient starts from ensuring access to technology in the remotest parts of the country.

Railways similarly is working on a programme to do the last mile connectivity wherever we don’t have fiber optic on our network, putting up towers wherever we need to leverage on the existing infrastructure. And we are hopeful that within the next 6-8 months all the stations of the railways, other than the halt stations we don’t have any staff and not much trains stopping there, about 6000 odd stations would all be Wi-Fi enabled – 6000 stations. We already have about 700 stations which are Wi-Fi enabled and I promise you the Wi-Fi at the railway station is faster than anywhere else in the country. It’s at what, 40? Whatever it is, I am not a technical guy, 40 mbps. I am a chartered accountant, so you will have to pardon me for my ignorance on technology or technical terms.

There were small things that I thought could make a lot of difference. I will give you a simple example why I say it’s the small things that will make us smarter. One day honourable Member of Parliament came and met me and he requested that we extend a particular train from one destination going further a little bit further. This was very early on when I was just made a Minister in the Railways and when we assessed it we found, and you will be amazed it’s the fastest train in the country, it is the number one best friend in the country called “Gatimaan Express”, it can take you to Agra if you would like to visit it. The Gatimaan Express would travel under 2 hours in the morning from Delhi to Agra and under two hours in the evening back from Agra to Delhi, less than four hours of utilization of that asset, a premier asset in the country. And lo and behold, it opens up a huge opportunity of being smart. We extended that to Gwalior so added another couple of hours or hour and a half of travel time, but we still found there is still scope for more, and lo and behold, we were able to take it to Jhansi, which is probably the country’s most backward region in the Bundelkhand area – once upon a time famous for all the tales of dacoity and what not have you.

So, we have the country’s premier train today connecting the national capital to the most backward part of the country at zero, literally zero incremental cost, just using the layover time which was idling in Agra station all through the day. Of course, my ideal best case scenario is to take it up to Khajuraho, but I am still not able to manage the timing in such a way that passengers can be back by the evening, but we will do that we will get there.

It’s the small things that make a difference and can help you really achieve hugely incremental results, because after all, we have seen passenger traffic become almost 15 times in the last 60-70 years, freight has gone up to almost 17 times or it’s the other way around I think, freight is gone up to 15 times and passengers 17 times in the last 70 years. And as I said to you earlier, the routes growing by about 23 kilometers, I am including what happened in the last four years.

But the potential is huge within this network, despite the fact that over 60% of our routes are over hundred percent utilized. Once we change over to a smarter signalling system, once we focus on removing the permanent speed restrictions, once I get the 150,000 bridges audited and those which need improvements in better shape so that trains don’t have to slow down over every bridge and some of these bridges are 80-100-120 years old. The potential is immense, within the network also. And, that’s the focus that we are trying to do. You know, not to castigate anybody, but I do wish in the course of the day all of you would focus on how we can make things actually happen in a practical fashion.

We had an international very-very reputed company from a world-renowned Railway, come and study one of our important routes and give us a report how we could increase the speed on that route. And to implement their plan, it was a $2 billion plan that they gave to increase the speed of trains on that route, they gave us three alternate scenarios. One is that we close down that entire stretch of 250 kilometers I think for two years, just close it down for two years to implement their plan. Another was we close it down every Saturday-Sunday for five years and in that period implement their plan, and the third was some you close it down for six or eight hours every day and implement it in seven or eight years. Now, can you imagine me being able to implement any of these three scenarios? All the power plants in that region would have shut down and the three states would have been without electricity. Passengers would have been at my home not even the office.

So, when we are looking at solutions, one must not forget it’s a network that works 22,000 trains a day chugging day-in and day-out from remotest corners of the country and solutions have to be found within that to make it a smarter railway. For example, punctuality was a big issue and I used to always wonder that the railway statistics seem to show that punctuality is damn good, relatively. But everybody was complaining about punctuality and then what do you find, you find that when you tell them to improve the punctuality it’s very simple, the station master logs the time little before the actual time that it actually came in and the train becomes punctual. But a small solution kind of sorted it out.

At all the interchange points across the network, we put in data loggers which ensured that the time at the interchange point would be a computer generated automated time logged into the system, and you have roughly an interchange point at what, about 200 km at best, maximum about 150-200 km you have an interchange point. Small step, didn’t cost I mean anything, I think data loggers who were already there, they just needed to be connected. And when we switch that system on on 1st April this year, our punctuality fell 20% from some 80 odd percent to 62% I think. But it at least reflected the truth.

You don’t go to a doctor for treatment without knowing what the ailment is and now that we know what the problem is I am happy to report to you that between April 1st when it drastically fell to 62%, we have been able to up it to about, for the whole period, April to now to about 73-74%. If you look at the last week, it would be nearly 80% and we are looking to take it up to 90% but this will be accurate 90%, completely controlled. And now we are working on the next step putting a GPS what one of the panelists suggested, putting a GPS device on every locomotive so we could actually have the train being marked out just like we have our car on the Google map. We will have every train available on your mobile phone knowing exactly when and where it is and we can all plan our day better, we can plan our journeys better.

But this is just about the small interventions. There are other ways there are smarter interventions for example we are looking at electrification in a big way now that’s going to save us nearly $2 billion every year, which otherwise I would have had to charge to the passengers of the country. So, effectively, we are trying to make the railway more efficient so we don’t burden the poor of the country with increased charges, with increased passenger rate cards.

But what do we do with the diesel engines that we already have, and lo and behold, our engineers know what can be done. They have worked day and night and they engineer a solution that as and when we have a periodic overhaul of the diesel engine coming up, at the cost we would do we would spend for overhauling that old diesel engine for that same amount or less we are able to convert it to an electric locomotive. So without losing a single dollar we will have converted our diesel locomotives to electrical locomotives smartly within the cost of a periodic overhaul, and actually instead of overhauling a diesel engine and making it or refurbishing it, we will have a new electric engine actually, other than the outer shell most of it would be new.

And then we can use the engines that Nalin gives us as the back up across the country, in the border areas for the maintenance purposes whenever electrification needs to be repaired or set up or there is any reason why. So we will have engines which are superefficient as a back up and look at the huge impact this will have on the carbon footprint of the country. The savings in terms of energy as well as the impact on the environment and each of these things builds upon itself. Then you have one type of system, your cost of maintenance, spares, training of employees all of that comes down with one common, and with that in mind we are also commonalising and making the entire railway network a broad gauge network, simple things.

You didn’t have ports connected adequately with the railways. Is that a smart way to work if your port and railway system are not connected, so from the port you get onto a truck, from the truck you get back to the rail, proceed some distance and then go back to the truck, doesn’t make sense to me at all. We are getting the railways to get into everyone of the ports in the country. Standardisation – few days back my colleagues were telling me that there are so many different types of train configurations that having back up rates or scratch rates, as they call them in your railway language or our railway language, is difficult to maintain because they are 20 different types of trains. We are looking at standardising as many as we can, so it brings down the pressure of spares or spare rakes.

There used to be a big problem on punctuality because of sudden traffic blocks being taken up. We are looking at smarter time tables, if any of you is a good OR person or you know a good OR team, we are really looking for the best of OR to integrate into our time tabling system and see how we can make our time table smarter. I have yet to come across somebody who can really help me get the timetabling right in the railways.

And so many other process simplifications. Just now Mr. Mishra was talking about procurement, right? How was the procurement of wagons done earlier, some of the wagon guys may not like it, but I think the efficient people will like what I am going to say. We would first procure very few wagons and there was perpetually a shortage, I am suffering from a shortage of wagons today, but we would procure let’s say 20,000 wagons, give 3000 to the best bidder and give 2500 to the second-best and 2200 to all the others.

Where was the incentive to bid aggressively? If I was a bidder, I would bid high, I knew I was going to get 2200 wagons in any case. Mind you, you are the guys who are paying for all these extra costs when you transport your material or you travel by train. But if I am able to procure the wagons in such a fashion that I say that look if Majumdar’s company is efficient and he is willing to give me a lower price I will take his whole capacity at that price and then go to the second best. I am more concerned to protect my railways’ interest. Now that will bring more efficiency in the whole system maybe one or two will be out of business but if you are inefficient it’s not railways’ job to keep you running and float.

Efficiency will have to be both ways, I will have to be more efficient but so will the industry have to be more efficient. The industry can’t ask for a protectionist approach, you protect us because we have set up an investment and pay us higher value for our inefficiency. I mean, I am sure when you go to buy a bottle of water; you are going to buy whatever is most efficient. You are not going to pay me 20 cents more for this bottle because I am an inefficient manufacturer, I use more plastic, I waste water during the processing of water, my marketing chain has some irregularities in it, I skim money out of my company. As a consumer, you are not going to pay me more for this water than what it costs or what it truly deserves or what my competitor can offer it at, all things the quality being equal. And I think these are the small things that to my mind were missing.

We are focusing on project implementation wherever we have hundred percent land. I am saying put in all the money there, get it going and let me move some more coal on that line and get some income out of it. Why should I divide my money to 500 projects and that has made such a big difference that you will be happy to know last year, we were able to electrify, to convert to electrified network, 4087 kilometers just in one year, which few years ago used to be 600-700 kilometers per year – 4087 kilometers just in one year.

Again what did we do smart? Instead of giving hundred kilometers to each bid, we are now giving 500, 1000, 1500 kilometers in each bid. Let’s leverage on economics of scale, it’s easier for the contractor, you know maybe somebody can later translate it in English but आप सब समझेंगे कारपेंटर को जब हम काम देते हैं तो कोई काम करने की जब चाल मिलती है, लंबी चाल मिलती है तो उसका समय भी कम लगता है, ख़र्चा भी कम लगता है और चीज़ भी अच्छी बनती है, you know when the contactor know he’s got a long-term contract he can keep working for two years and he can engage people, the best efficient staff, he can procure efficiently, plan for the future. But if you tell him you have got hundred kilometer and then he has to bid for another hundred somewhere else and another hundred somewhere else. It’s obviously going to make the whole system very inefficient.

So to my mind, simple things, the other day I saw an advertisement of the railways there were 12 helplines. For woman safety something else, for food quality something else, for punctuality I don’t know what were the 12 helplines all about. A simple thing like integrating them into one call center. So I think the bigger challenges before the railways are on two scores: one is what we can do which are these simple interventions which change the way the railways thinks and works, and of course, on the other hand, we will have to look at artificial intelligence.

We have a whole team working. In fact, barely three days back, I had a whole review of what the railways is doing to engage with artificial intelligence. We are looking at what we can do with the huge amounts of data that we generate. I suspect a lot of it has just not been put to use to see what we can do in terms of predictive maintenance, to see what we can do in terms of better monitoring of our assets, better utilization of our assets, ensuring better passenger services and maybe leveraging some of that data. Mr. Jansen, the day the debate on who owns that data get sorted out, you will find a lot of the tech companies or so-called data tech companies getting wiped out of the stock market and that would be a day probably similar to the burst of 2000 or 2001. But I personally think the data should be leveraged and should be put to good use whoever does it, the ownership can be sorted out by the regulators and using or leveraging on that data and making us a Smarter Railway is truly going to be the way forward.

At the same time, we will have to engage with technology. There is a debate in the country over whether we need bullet trains or not. I personally believe that it’s our duty to engage with the most modern technologies and bring them to India and let the people of India enjoy the benefits of the best in class internationally and I am only fulfilling a duty when I bring that bullet train to India. I feel sad that the Rajdhani was the last engagement with technology or high-speed trains that India had in 1969 and it took us 50 years to come to a stage where we are looking at bringing in Shinkansen technology to India, which was introduced in Japan in the year of my birth. And we still have a set of people outdated, probably wanting our citizens to suffer old technology and poor service, but politicising a simple thing like bringing modern technology to serve the people of India.

And to my mind this country is ready for change, this country is yearning for change, this country and the people of India want the best in the world for themselves for the usage of every citizen of India and we stand committed to ensure a Smart Railway and a Smart Nation so that every citizen of India gets a better future and the young people in this room can never feel ashamed of us foggies here, that we did not leave behind a good legacy when they took over.

Thank you.


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