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Expect H2 to be good for freight growth: Suresh Prabhu

If freight movement demand doesn’t increase, meeting revenue targets will be challenging, says Railway Minister Suresh Prabhu. He, however, expects the second half of the year to be good for freight growth.

He is also confident of meeting capital expenditure targets for railway this year.

Below is the verbatim transcript of Suresh Prabhu’s interview with CNBC-TV18’s Ronojoy Banerjee

Q: One big focus area of your tenure so far has been on making investments. You have said that for long – the Railway Ministry was gripped in this cycle of under investments that affected quality of services, that affected your ability to raise fares and so on and so forth. You have earmarked about Rs 8.5 lakh crore to be invested over the next five years. Can you give us a sense of how much of this Rs 8.5 lakh crore debt would have to be serviced by you because we understand a significant chunk of that will come through budgetary allocation. So, how much of this Rs 8.5 lakh crore would you have to service?

A: Firstly, the station development fund in that Rs 8.5 lakh crore already – we are talking about station development which will take about Rs 1,50,000 crore – all the 400 stations come through, so that is one.

Secondly, the Budgetary support which is already about Rs 40,000-50,000 crore, so in five years it will become Rs 2.5 lakh crore. Then there is a India infrastructure development fund which the government of India is creating and already – 50 percent of that at least railway will draw because the most of investment that is going to happen in the next five years will be from that bond, then tax free bonds.

So, if you really look into internal accruals, so the amount of loan will not be very significant. Already LIC has given Rs 1.5 lakh crore, we will take from multilateral agencies which will be again something little more than that but over a period of time and that too we will have to repay in the next 30-40 years and that too at a very concessional rate of interest and that is what is the advantage.

Now, coming to your point about investments. People talk about new stations, how do you get it without investment? You want safety, what is safety? It is track renewal, rail overhead bridges, signaling, coaches… needs investment. Then you talk about capacity addition because all the tracks are suffering from overuse, we are using at 150 percent in some places. How do you decongest it without investment? You need investment for that. You need good rolling stock? You need investment. You need customer service, you want better services to be given, escalators, etc, which we are doing anyway, all that needs money. So, finally people don’t realise that money without money – if the focus is not investment, nothing will happen and if you want investment, without money you cannot make investment, so then only you talk about money, investment and you don’t have project implementation, it will not work.

So, these are complex issues which we have tried to combine all together and I am trying to tell you… the first four months, 79 Budget announcements have been fully implemented. All the project reports that are going to be 1 lakh crore projects which we are going to implement, we have to prepare, begin from the scratch. We have to prepare, begin from the scratch.

We have to prepare detailed project report, technical, commercial, financial, administrative issues rolled into one, very complex exercise. We did that in the last few months, we are already gearing up for that, all the general managers have been implored, given powers for estimation. Given powers for deciding tenders, it is a mammoth task and you can just imagine even a corporate body, we think private sector, you think in such a short time you could do such a mammoth thing? Is it something which is feasible and also following the governance system that we need to follow? So this we have done.

Q: You are a Chartered Accountant by profession and soon after you have taken over now you have come up with a system of a quarterly set of sharing of the financial data and we understand that in the first quarter so far in 2015-2016 your total earnings have gone up by 14.5 percent vis-à-vis the previous year’s fiscal. What do you attribute this shoot up in earnings? Has the dip in oil prices got something to do with it?

A: The earnings will have nothing to do with oil price dipping, that is the expenditure side. But what we are really saying is that this is something what has happened in the first quarter need not happen in the second quarter, second quarter may not be as good because ultimately where do you get your earnings from, two thirds of your earnings come from freight.

So, freight, unless we have a movement of commodities of a scale – this is completely external to the railways. We are ready to handle, we have geared up the entire system, so in the second quarter I don’t know how much earnings we will get because that is something which is really a risk factor for us but that does not affect us because over a period of time, over a year’s period of time because second quarter is a lean quarter, the third quarter will be the better quarter, fourth quarter will be still better quarter because normally freight growth comes in September to March.

So, we will wait for that six months to happen. But we are very sure that over a period of time, we have a challenge of getting cargo. We are getting because unless the others move the cargo railways cannot do anything about it. We are only a service provider, so unless somebody comes and gives us the cargo, we are doing marketing, first time unprecedented action has happened to get cargo.

Q: We understand that you have taken up some innovative ways to address that problem but before we get there, so far in this first quarter your targets were new lines, gauge conversion, electrification, track renewals you have exceeded that. Are we now given to understand that the targets you had set in your railway budget speech many of those targets you are well on track to achieving before you present your budget year?

A: Capital expenditure (capex) we should be able to do that. On the revenue side, as I said, these are external to railways, unless there is a demand for coal, cement, steel, movement of raw material like iron ore or something, if that doesn’t increase we cannot handle that. So, that increase has to happen in those sectors. Therefore, it is completely external to railways. I have no control over that externality.

Q: Yesterday, the Finance Minister Arun Jaitley said that railways now need to start making more investments. You have lined up an investment plan for this year of about Rs 1.1 lakh crore. How much of that investment has already been put to use?

A: But that is unfortunately what people don’t understand. How can you put money into – that is what I am talking about project report. If the project report is not passed by the Cabinet, how can we spend the money, that is one part. Still I will tell you, this is very simple. That is why I have been telling you the quarterly 130-140 percent of the quarter we have already spent. So, that is the amount. But additionally Rs 82,000 crore worth of dedicated freight corridor is – almost Rs 16,000-17,000 crore worth of tenders have been sanctioned in the last six months and more are coming in the next six months, so that is something additionality. Plus we have sanctioned projects for doubling, for tripling plus the state government PSUs, PSU joint ventures, all of that will add to another – then port connectivity, all of that will be at least Rs 15,000-20,000 crore worth of projects will come into play.

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