Indian Railways Runs Right Under Yadav’s Leadership

NEW DELHI – A visitor to the New Delhi railway station could not be faulted for thinking nothing has changed. Tobacco stains still speckle the platforms, bleary-eyed migrants are sleeping on the floor and the stink of garbage rises up from the tracks.

But with a few minutes wait, the tracks bring a fresh sight. A modern train able to hit 93 miles-an-hour pulls up, the first of its kind in India. A trip that used to take four hours now takes two. And that’s just the beginning.

The man who brought about this transformation is an unlikely candidate. Railway minister Lalu Prasad Yadav was previously known for cracking jokes in rough Hindi, corruption scandals and ruling over the chaotic state of Bihar. Some journalists even had cow dung poured over their heads during his recent party for Holi, a Hindu holiday welcoming the Spring.
But despite this checkered past, few now doubt that Mr. Yadav has presided over an impeccable business turnaround. He’s the darling of industry groups and business paper headlines, doling out privatization of container traffic and 24-hour food courts. But more importantly, he’s taken the world’s largest employer — a government giant of 1.5 million employees — and grown revenues by 15.5 percent without raising fares.

Says D. Panandiker, head of RPG Foundation, an economic think-tank, “Indian Railways has turned around and made an estimated profit of Rs 112.8 billion in 2005-2006. What is important, however, is that, unlike previous Ministers, Mr. Yadav has looked upon Railways as a commercial enterprise and not a social welfare institution… [He] is a hard task-master and will ensure his subordinates carry out the projects.”

It wasn’t so long ago when India’s corporate community was fiercely opposed to Mr. Yadav. In 2005, he announced, “A ban will be imposed on serving of cold drinks like Pepsi, Cola and Fanta in trains… From now onwards, passengers would be treated to milk, buttermilk and other tasty drinks.” He also attempted to ban plastic cups from being served on trains, replacing them with ‘kulhars’, which are hand-made mud pots often used to serve tea in rural areas.

Yet now the Railway Ministry has announced that they will be allowing 4,000 soft drink vending machines in stations within a year, as well as bank ATMs. All this has brought up questions concerning his sudden change of thinking. The Indian Railways refused to comment on this.

Among the giant government-owned businesses which dominate the landscape here, success stories are few. And though the Indian Railways has provided the back bone of transport for the country since the British rule, it was rarely looked at as something pleasant to ride or profitable to run.

With its separate budget announced just before the federal budget each year, fare cuts were handed out with great fanfare to win over voters. Meanwhile, though, the Railways was sinking into debt. Air-conditioned class fares were routinely raised to keep the operation afloat.

“We understand the needs of the market and our customers. In today’s competitive environment, we can’t increase demand by hiking tariffs,” Mr. Yadav said in a recent media interview.  And there’s no doubt about increased competition. Truck and road transport has been eating away at railway’s share of the freight business for decades, and burgeoning budget airlines are luring away upper-class train passengers. Many chief executives of new airlines admit they are in direct competition with railways.

With salaries and expectations rising among Indian middle-classes, most families are not content to be crammed into dusty train cars for a three-day ride when they could pay a bit extra and fly.

And it’s a reflection of India’s new-found economic clout that Mr. Yadav has also proposed a new kind of class: air-conditioned compartments priced for the poor. Compared to the current sweltering conditions of lower-class railway cars, the concept is revolutionary.

Other revolutionary concepts are on the way as well. Privately-run budget hotels, which will cater to India’s growing number of tourist arrivals, are approved to be built on Railway-owned land at train stations.

Fourteen corporations have bid to carry freight in the newly-open cargo sector. This will do much to help the choked transport system in the country, where rail cargo containers sometimes takes nearly five days to unload.

But not everyone welcomes these changes. The previous contract holders for Railway catering are bristling at the thought of opening up new bids for food service. They have filed over 70 court cases, though the Railways has won almost all of them. After bucking off the cronyism, the size of the mobile food business has increased nearly ten times during the past year.

It’s a lesson much advocated by Prime Minister Manmohan Singh, who was also the economic architect of India’s liberalization in 1991. Mr. Singh is pushing for closure of failing public corporations and transparency in contracts as his government gallops to keep up with India’s growing international image.

He may find it comforting to know that the biggest monolith of all is well on the way to reform — the biggest engine that could.

By Erica Lee Nelson

Published in The Washington Times, April 15, 2006