Railway minister Suresh Prabhu is confident that he will be able to exceed Rs 8.5 lakh crore investment target by 2019. Elaborating further, he says there are 400 station development plans underway for which he is in talks with investors from Singapore, China, Korea and Japan.
He also adds that railways is looking at Rs 60,000-70,000 crore plan for Make-in-India programme. Prabhu says the dedicated freight corridor has got investments of Rs 17000 crore in six months, and more tenders will be issued under freight corridor programme.
He further says that the railways cannot rely on just increasing freight rates for revenues. He is also working on a plan to end cross-subsidisation of freight rates and passenger fares.
Indian Railways got the first tranche of money from LIC on Tuesday of Rs 2,000 crore. Prabhu says, after LIC, railways is in talks with IDBI. He is also working on a plan to monetise assets including strategic divestment of rail PSUs.
Below is the verbatim transcript of Suresh Prabhu’s interview with Ronojoy Banerjee on CNBC-TV18.
Q: Let me first start by asking you Rs 2,000 crore you have now got from Life Insurance Corporation (LIC). How and when will this money be invested?
A: First of all the problem in railways has been lack of investment which has lead to congestion, which has lead to delays in trains running, which has lead to limitation of handling the amount of freight that we can handle which is two thirds of revenues for the railways. It has also affected customer service. It has created safety issues. So, first of all of this needs money. The money if you want to raise only from increasing freight which is not desirable or getting more money from the Finance Ministry which in turn is also worrying. So, we said we will not go by that. So, at first when I was preparing the budget I said, let me identify the need for investment. On that basis we created this Rs 8,50,000 crore. We are not borrowing not even half of that but we have a complete planning about how we will raise the resources and therefore money from LIC is the best option for railways. 30 years repayment, linked to government securities (G-sec) so, now the rate has fallen again because of the interest rate falling down and also matching with the requirement of LIC because LIC policyholders will also be benefitting because of railway growth story.
Q: So, today you have got a tranche of Rs 2,000 crore. Tell our viewers where will this money this Rs 2,000 crore be invested primarily?
A: All money which is going is going for doubling, tripling, or somewhere where the congestion removal or traffic facilities. These are all very high payback money. In fact if you go by equity payback, basically you can work out IRR based on project IRR or you can go on equity internal rate of return (IRR). If you go by equity IRR, the IRR will be even 20 percent plus. This is how the State Bank of India (SBI) cap has worked out for us because I said I knew this but let me ask the professional to work out on this. So, therefore equity IRR will even be higher and that is what always happens. When you take institutional finance the equity IRR improves considerably because the project IRR remains the same but if you have financed the entire project from internal resources IRR is low. So, these are the best way to improve your IRR and also to get your equity IRR.
Q: One pillar of your tenure so far as the railway minister which is still less than one year is of under investment as you said. However already in the first two quarters you have exceeded the target that you had set. It was Rs 28000 crore, end of September it is Rs 33000 crore. So, then we are well on track to exceed the Rs 1 lakh crore that you have set for yourself for this financial year?
A: Rs 1 lakh crore is something which I had mentioned in my Budget for which Rs 27000 crore you are comparing is the right thing. However additionally ultimately as a economy as a whole will benefit when you make investment into railway sector. So, dedicated freight corridor already in last 6 months Rs 17000 crore worth of tenders have been issued which were not issued aggregately for last six years. Remaining fiscal we will be able to issue the tenders for most of it. We are already finalising contracts worth Rs 60000-70000 crore of manufacturing in India from the top companies of the world. This will again bring in new investment.
Q: When do we start seeing this?
A: I cannot announce it just now because elections are there etc. Thirdly we did SPVs with state governments with our customers like coal, steel, that itself will bring in another several thousands of crore. Fourth, is something which we are doing with the state governments. In the next 5 years 17 states would invest a huge amount of money along with us. So, Maharashtra has already set aside Rs 10,000 crore for this. Rs 10,000 crore their money and Rs 10,000 crore we put in, we leverage it.
Q: So five-year target of Rs 8.5 lakh crore that you have, you are well on track?
A: More than that because Rs 8.5 lakh crore never included the possibilities of investing like this. Then, 400 station development which is already opened up and which should happen but we are trying to get a lot of support from others. I have already talked to Singapore companies, today Australian minister was here, I requested him, China, Japan, Korea all these countries are being mobilised.
I had a meeting with the Foreign Minister to request her to mobilise all the missions. All of that put together should get huge investment into railway station and that again will spur the economy. So, when we talk about investment into the railway as a sector it is not just Budget which is the one source investment that is coming in, that source anyways is being done but additionally a large amount of money is coming into the railway system which is not reflected into the Budget. So, when you compare the Budget numbers, there we are on track but more than that is something which is coming in which is not even mentioned in the Budget.
Q: It is much more than just looking at it purely from the perspective of Budget and we are well on track to exceed Rs 8.5 lakh crore.
A: Also the one point I forgot is PSUs. Konkan Railway is starting doubling plan by leveraging their own balance sheet. Konkan Railway is not having doubling tracks and also electrification. Konkan Railway can easily save Rs 200 crore every year only because they electrify the tracks. So, just imagine the repayment ability of the Konkan Railway.
Q: We understand that the railway is also internally been working on a plan to make strategic divestments in some of their rail PSUs. Can you throw some light on that?
A: Today that is little premature to talk about it.
Q: Are you putting at least as a thought?
A: I don’t want to give an answer which is not appropriate at this stage. We are trying to monetise all the assets of railways, part of monetisation plan is something which we are doing in terms of station development which can bring in huge amount of money. All over the world the railways get 30-40 percent of their revenue from non-rail operations, India is hardly anything. So, this is one way of increasing a stream of revenue for the railways from the sources other than core railway operation.
Similarly 500 wi-fi at the station which again will bring revenue to the railways. So, these are the various ways of monetising it. I will not be able to tell you more. I always believe in do first and announce later.