Smart people, like Mr. Goyal, carry old baggage into their new roles?
Doing so on the whims of an ex-Power Minister is a financial hara-kiri
The price it pays for it is over Rs. one lakh crore in Capital investment
The old baggage of Minister is affecting his decision-making in his present avatar
The Railway Ministry would be well advised to spend its money and management time on productive and fruitful ideas
Isn’t it surprising how even seemingly smart people carry their old baggage into their new roles? The Electrical Department of Indian Railways now controls Diesel Traction through its Chief Electrical Engineers in Zonal Railway Head Quarters and the Member Traction in the Railway Board. In spite of this total ownership, it is bent upon eliminating diesel locomotives from the Indian Railways’ network, a behaviour typical of a celluloid stepmother, who, in spite of being the owner of the household treats the stepchild with hatred and disdain.
Likewise, the old baggage of Piyush Goyal is affecting his decision-making in his present avatar. As the Power Minister, he had offered to electrify the entire Indian Railway network through the Power Finance Corporation. This was no charity or a forward-looking thought of the man. He was just being a good salesman.
India has surplus electricity. It may appear surprising, but the reality is that there is surplus power if only paying consumers are considered, thefts disregarded. Piyush Goyal had found a good customer in Indian Railway, which pays on time and in full. It was a good business proposition to lend money to Indian Railway for electrification so that the inefficient power plants, which were shutting down like ninepins, could be kept alive.
Fortunately, the Finance of Indian Railway saw through the game of the Power Minister and declined the offer. A parallel can be drawn in the bilateral loan of Japan to India to build the High-Speed Rail for over one lakh crore Rupees, where the main purpose is to keep alive the stagnating Japanese industry and not the avowed technology boon to India.
Now, the same Power Minister is the Minister for Railways. Not only is he carrying the old baggage, but he also now controls the levers of Indian Railway’s Finance or of its Finance managers. He has ordered complete electrification of the Indian Railway network, over 35,000 kilometres of rail track over next four years. This is not only a complete disregard for technology and manufacturing systems, but also for business common sense.
At present, there are nearly 5,500 diesel locomotives in India. When the entire network is electrified, most of them will have to be scrapped, for that is the very purpose of electrification - reduce diesel bill. Even assuming that about 1,500 diesel locomotives are retained in service for applications in shunting, disaster management and exigencies, nearly 4,000 perfectly working units will be simply thrown away, a loss of nearly Rs. 30,000 crore of a national asset.
To replace these diesel locomotives a similar number of electric locomotives will need to be inducted. Now, the production capacity of the whole world put together cannot supply 4,000 electric locomotives to India in next four years.
India is not the only market, there are other buyers too. Indian manufacturing units, viz. CLW, DLW, BHEL, DMW etc. cannot gear up to deliver one thousand electric locomotives over the next four years either. People, who think otherwise, have no idea of production systems and logistics.
Financially speaking, the proposal is an unmitigated disaster: Rs. 35,000 crore for electrification of 35,000 kilometers, Rs. 60,000 crore for additional 4,000 electric locomotives at Rs. 15 crore each - nearly one lakh crores over the next four years!
I am not adding the cost of maintaining infrastructures such as new or modified loco sheds, additional manpower for newly electrified tracks, cost of training and redeployment. Add to it the logistical nightmare of procurement of maintenance spares and there stocking.
The diesel bill of Indian Railways is about Rs. 16,000 crore. The cost to the economy is only half of that since nearly half of the purchase price of diesel goes back to the government as taxes. So, considering that Indian Railway saves about three-fourths of the real cost, i.e. Rs. 6,000 crore out of Rs. 8,000 crore to the economy, the price it pays for it is over one lakh crore Rupees in Capital investment.
Now, the outgo on the interest of one lakh crore alone would be more than the saving that is promised, let alone the repayment of Capital! Add to it the cost of sunk Capital of Rs. 30,000 crore in diesel locos being trashed.
Indian Railways is not short of working Capital, or revenue, as it boasts of a sub-hundred operating ratio. What is scarce is Capital for new investments. New investments should be done in areas that give a maximum return, such as a new North-South corridor like the Dedicated Freight Corridors, or track improvement works, that can improve safety and average speeds at the same time, thus improving throughput substantially. There are many such areas crying for investment.
It is not that a train hauled by a diesel locomotive loses money. If that were the case, the American Railroad companies would have folded up long ago. The Railway Ministry would be well advised to spend its money and management time on productive and fruitful ideas. Throwing away diesel locos and electrifying the network just because it was an old departmental agenda of Electrical Engineers of Indian Railway or doing so on the whims of an ex-Power Minister is a financial harakiri that Indian Railway will never be able to recover from.
- Written by a Senior Railway Official who do not want to be named.