A giant emerging out of deep slumber’: how Suresh Prabhu views Indian Railways and its services © Reuters

When Suresh Prabhu became the Indian railways minister just over a year ago, he inherited an empire with 1.3m staff and even more pensioners; tracks that stretch for the equivalent of one and a half times the circumference of the globe; and 21,000 trains.

Sadly for both Mr Prabhu and his country, such remarkable reach — China’s People’s Liberation Army is one of the few bodies that has more workers — comes with a notorious bureaucracy attached. It took 18 months, for instance, to decide whether the mugs in the washrooms of second class sleepers should be attached to the wall by chains, while a decision on charging points for mobile phones needs to be made at the very top of the hierarchy.

Immersed in what amounts to an organisational case study of elephantine proportions, Mr Prabhu admits the need for greater speed. “These are the soft issues where we have to accelerate decision making,” he says. Many others depend on his progress. “Only the minister can eliminate such red tape,” says Anant Swarup, the wonderfully titled Executive Director, Public Grievances to Minister of Railways.

If India is to get its economic act in order, and Prime Minister Narendra Modi’s Make in India campaign is to become reality rather than just rhetoric, India will need to improve its infrastructure. But no area is in more need of improvement than the railways.

One of the principal reasons Indian manufacturing lacks competitiveness is because of the shortcomings of its transport network. A World Bank study notes that logistics expenses in India are two to three times higher than its assessment of what they should be. The country’s 8,000 freight trains travel at an average speed of only 25km an hour and customers have to pay some of the highest fees in the world, partly because they are meant to subsidise passenger lines.

“Make in India can accelerate the growth rate and can change the profile of growth,” Mr Prabhu says.“We have to increase efficiency and reduce costs.”

The railway’s financesare in bad shape because 55 per cent of the revenues go to its staff in the form of wages and benefits (up from 36 per cent five years earlier) and 62 per cent of recent projects had a negative rate of return.

“There has been a trend of over-promise and under-delivery,” Akshay Soni, a Morgan Stanley analyst, noted recently, arguing that change could now be on the way following Mr Prabhu’s arrival. “He has brought fresh thinking to a relatively moribund railway ministry which in history has primarily been used to dispense political largesse.”

Indeed, in contrast with previous ministers whose first action was usually to build resplendent stations in their home constituencies, Mr Prabhu notes that “nobody can tell where I am from”.

Suresh Prabhu © FT

One of Mr Prabhu’s priorities is to cede power by decentralising decision making and granting more authority to those below him, something rare in the subcontinent. “Less government and more governance” is one of his favourite mantras, a refrain that can also be heard from the lips of his boss, the prime
minister.

Nevertheless, he faces a daunting task. In a recent white paper, the minister noted: “In an earlier era, the Indian Railways have been described as ‘imperium in imperio’, an empire within an empire.” Since that time, the empire has been in decline, almost terminally.

For today’s visitors, there are few visual signs that time has moved on much, other than the flatscreen television and computer screens on Mr Prabhu’s desk. A wooden signboard with a list of ministers going back to the Raj hangs behind it. A steady stream of sycophants, well-wishers and others wait patiently for their turn with the minister.

Like most government officials, Mr Prabhu and his staff wear Indian garb rather than western-style suits. Although not very impressive when addressing large audiences, with a small group he conveys a passion and urgency that is rare in a country where most officials emanate a sense of complacency.

But then there is little room for complacency when it comes to his domain. The system has been starved of investment for decades. In 1951, Indian Railways was 2.3 times larger than China’s. Since then, though, the situation has reversed. China’s railway is now 1.6 times the size of India’s, which has expanded a mere 21 per cent.

Mr Prabhu plans an ambitious programme to reverse these decades of neglect. The Indian railway is “a giant emerging out of deep slumber”, he wrote in the white paper. Between this year and 2019, he plans to spend more than $130bn, significantly greater than the $34bn that the railways ministry spent in the preceding five years. Much of that money will be divided evenly between expansion of the network and “decongesting” existing lines.

To fund his programme, Mr Prabhu is not content to simply rely on the largesse of the Ministry of Finance. He has embarked on unusual debt initiatives, raising $25bn from Life Insurance Corporation of India, a state-owned insurer, for a 30-year financing, with a five-year moratorium on interest payments, a period that is far longer than any bank would offer. He has a commitment from the World Bank for another $30bn loan. He has signed agreements with power providers to cut the railways’ utility bills. He plans to sell railway stations and the development rights around them to the private sector.

“If anyone is interested, let them approach me directly,” he says.

For years, a dedicated freight corridor from Delhi both to the west and to the east “has existed on paper but not on the ground”, the minister says, noting that making it a reality will require the largest railway infrastructure project. Orders placed for new locomotives and equipment, and a planned improvement in passenger service, could create many manufacturing and service jobs at a time when the private sector is not investing. Both Alstom and GE have received contracts to build locomotives in the depressed state of Bihar.

Mr Prabhu has also worked out an agreement with Japan International Cooperation Agency, the Japanese aid body, to finance the dedicated freight corridor between Delhi and Mumbai along the west of the country, and has enlisted the Japanese to build a high-speed rail line between Ahmedabad in prosperous Gujarat and Mumbai.

It is ironic that even as he devolves power, he himself has become the key risk factor to outsiders. “It is imperative that Suresh Prabhu stays in office long enough for his thought process to be institutionalised,” Mr Soni of Morgan Stanley notes.

On a recent visit to New Delhi, Jeff Immelt, GE chairman,said he had been involved in bidding on a programme to modernise the Indian rail network five times. “This is the first time I actually think it’s going to take place.”

Additional reporting by Victor Mallet

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