The Challenges Piyush Goyal Faces at the Indian Railways

Twenty-two people died after the Utkal Express derailed in Muzaffarnagar in western Uttar Pradesh last month. It was one of the four train derailments is less than a month.

Facing criticism, Suresh Prabhu offered to resign as the Railway Minister. While Prabhu was moved out of the ministry in the subsequent Cabinet reshuffle, the onus to fix the problem lies with his successor, Piyush Goyal.

Goyal, the former Minister of State for Power, Mines and Renewable Energy, was elevated to a Cabinet rank and given the charge of railways. The scale of challenge he faces is reflected by the data on rail accidents over the past three years.

As many as 193 people died in train derailments in 2016-17, the most in 10 years, according to an IndiaSpend analysis. A right to information response quoted by Firstpost in a report revealed that there have been over 370 major train accidents since April 2014.

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Safety is one aspect of the problem. Goyal needs to look for new investments and consider ways to boost revenue, something his predecessor had been working on.

Safety Of Passengers

Safety is tarnishing the railways’ image...One of the issues is that a lot of specific investments are required.

Professor G Raghuram, director, Indian Institute of Management, Bengaluru.

Considering investments with safety as a major focus would be a key area to look at, said Raghuram, a specialist in infrastructure and transport systems and logistics and supply chain management.

Goyal must also ensure that there is more integration across different departments, he said. And he needs to prioritise projects.

Investments Into Existing Assets

Investment into modernising tracks, increasing the speed of trains, and rehabilitation is another challenge.

The Comptroller and Auditor General criticised the railways for delays in track electrification, which led to cost overruns of Rs 3,000 crore. Railways took nearly nine years to invite tenders for two dozen approved projects to electrify tracks, the auditor had said, highlighting the tardy progress.

It’s time railways prioritised investing on maintenance and better management, said Abhay Agarwal, partner (transaction advisory services, infrastructure and public-private-partnership) at EY. “This should be done to make existing assets better and safer,” he said.

It’s important to consider if the railways can “reduce the number of trains, increase speed, and let go of some short distance traffic,” he said. The effort should be to see where investments should be made so that the financial future of the railways is safer and better, said Agarwal.

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Revenue Growth

The railways’ revenue grew 12 percent to Rs 157,880 crore in the year to March 2015. Revenue rose 4.6 percent the following year, much lower than the 10 to 19 percent increase in the previous four years. That was the worst performance in six years, according to the Indian Railways’ website. The national transporter missed its target in the year to March too.

The railways has to compete with airlines and road transporters as far as passenger travel is concerned, and with road hauliers for cargo movement. As road infrastructure and connectivity improved, share of railways in cargo movement has come down, said Peeyush Naidu, partner at Deloitte Touche Tohmatsu India LLP. The railways has an economic advantage in long-distance transportation. Yet, it hasn’t materialised due to several constraints, he said.

Internationally, travel by railways in terms of customer experience is no different from travel by airlines, he said. “To bring about this transformation, the key is to focus on railways in terms of its business objective – of efficiently moving people and cargo.”

The key challenge facing is one of massive organisation and operational transformation.

Poor Services

The CAG in July had said the national carrier was serving food unfit for humans. Its audit found poor hygiene and substandard quality of food at stations and in the trains.

The railways is responsible for its own travellers and should ensure that hygienic food is served, IIM-Bangalore’s Raghuram said.

Catering is a service-oriented business and constraints of numerous processes and procurement may not be the best way forward, said Naidu. “Private sector involvement and operation is required.”

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(This article was originally published on Bloomberg Quint. It has been re-published with due permission)

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