Educative meeting with Mr. #Suresh Prabhu, #Railway Minister
Yesterday we attended interactive session by Rail Minister Mr.Prabhu and his team including rail board chairman, MD and zonal heads. We think railway as a sector offers lots of potential. Worth paying attention as an investor.
Details:
What was promising in that 2 hour session?
· Delegation of authority was spoken and noticed as rail minister in his speech focused a lot towards decentralization and delegation. One example he said was GE-Alstom Locomotive deal win. According to him, he was not aware who got the final winning order unless winning party called him and conveyed thanks. He was not at all involved into the selection process. Entire process was made extremely transparent and coordinated by respective senior team members.
· He focused a lot towards augmenting revenue, reducing cost, improving productivity and enhancing safety & hygiene. (Below see more details on it)
· His approach towards use of IT to reduce manpower interface and increase transparency was visible. Countries such as France, Spain, Japan etc have offered to modernize stations.
· According to him, any project which is not bankable will not be introduced at all. Having said that, priority was on ROCE. Thus, most of the capex announced has feasibility and funds tie up is underway in most of them. Average duration for project approval is reduced to 6 months compared to 24 months earlier. Apart from Rs.1.50 Lakh cr from LIC, funds are being arranged through partnership & PPP and railway is in the process of setting up fund with world bank as anchor investor.
· He focused a lot towards announcement of proposal and implementation of the same. In last year’s budget he has implemented 139 budget proposals and same is reported to parliament.
· Dedicated Freight Corridor (DFC) has picked up momentum with awarding of 24000 contracts in 2015-16 vs. average of 2600 contracts between 2009 to 2014. Target for commissioning is 2019. Further feasibility studies for three new DFCs are completed. It will be through PPP.
· Focussed to roll out accrual & outcome based accounting across full organization in next few years.
(1) Augmenting revenue: - Non railway revenue to be increased to 20-30% compared to negligible as of now. It would be from advertisement and real estate monetization. Station development via PPP and higher FSI is talked about. Augmented capacities in both passenger and freight will be pushing revenue up.
(2) Cost reduction: - Last year saved more than Rs.12000cr from various activities including wastage reduction and electricity saving. This exercise to continue as there seems to be lot of scope for this. Operating ratio is expected to be 92% despite of taking hit from pay commission.
(3) Productivity improvement: - Substantially increase the average Kms broad gauge lines commissioned per day. Current run rate is 7kms/day from last six year’s average of 4.3kms/day. Govt. is targeting about 13kms/day in 2017-18 & 19 Kms/day in 2018-19. Electrification too has increased substantially from 1100kms per year during 2009-14 to 1600kms in 2015-16 and targeting 1800 kms for 2016-17. Broad gauge commissioning has increased to 2500 kms/year in 2015-16 vs. last five year average of 1520 Kms/year. Govt. is intending to shift 20% of freight traffic to high axle load wagons by this year end and 70% by 2019.
Capex is being spent aggressively to achieve these. Last year spent 94% i.e Rs.94000cr compared to average spend of Rs.48100cr for 2009-14. Target is set for 2016-17 at Rs.121000cr and of that ~Rs.59000cr funding is already tied up. Total planning for the next 5 years investment stands at Rs.856000cr and within that Rs.540000 has been approved.
(4) Safety: - Eliminate all unmanned level crossing in next 3 years. Induct clollusion avoidance system on high density network in next 3 years. Overall causalities have reduced to 309 vs. 692.8 and accidents have reduced to 107 vs. last five year average of 135.4.
Few tall claims; but even if achieved 50% then it would be fantastic. Time period 2020.
- Reserved accommodation on trains to everyone and no wait listing.
- Time table based freight trains
- Elinination of unmanned level crossing.
- Passenger train punctuality to be 95%
- Speed of passenger and freight train to be augmented by 60% to 80km/hr and 50km/hr respectively
- Zero direct discharge of human waste
- Semi high speed train along the golden quadrilateral.
Details:
What was promising in that 2 hour session?
· Delegation of authority was spoken and noticed as rail minister in his speech focused a lot towards decentralization and delegation. One example he said was GE-Alstom Locomotive deal win. According to him, he was not aware who got the final winning order unless winning party called him and conveyed thanks. He was not at all involved into the selection process. Entire process was made extremely transparent and coordinated by respective senior team members.
· He focused a lot towards augmenting revenue, reducing cost, improving productivity and enhancing safety & hygiene. (Below see more details on it)
· His approach towards use of IT to reduce manpower interface and increase transparency was visible. Countries such as France, Spain, Japan etc have offered to modernize stations.
· According to him, any project which is not bankable will not be introduced at all. Having said that, priority was on ROCE. Thus, most of the capex announced has feasibility and funds tie up is underway in most of them. Average duration for project approval is reduced to 6 months compared to 24 months earlier. Apart from Rs.1.50 Lakh cr from LIC, funds are being arranged through partnership & PPP and railway is in the process of setting up fund with world bank as anchor investor.
· He focused a lot towards announcement of proposal and implementation of the same. In last year’s budget he has implemented 139 budget proposals and same is reported to parliament.
· Dedicated Freight Corridor (DFC) has picked up momentum with awarding of 24000 contracts in 2015-16 vs. average of 2600 contracts between 2009 to 2014. Target for commissioning is 2019. Further feasibility studies for three new DFCs are completed. It will be through PPP.
· Focussed to roll out accrual & outcome based accounting across full organization in next few years.
(1) Augmenting revenue: - Non railway revenue to be increased to 20-30% compared to negligible as of now. It would be from advertisement and real estate monetization. Station development via PPP and higher FSI is talked about. Augmented capacities in both passenger and freight will be pushing revenue up.
(2) Cost reduction: - Last year saved more than Rs.12000cr from various activities including wastage reduction and electricity saving. This exercise to continue as there seems to be lot of scope for this. Operating ratio is expected to be 92% despite of taking hit from pay commission.
(3) Productivity improvement: - Substantially increase the average Kms broad gauge lines commissioned per day. Current run rate is 7kms/day from last six year’s average of 4.3kms/day. Govt. is targeting about 13kms/day in 2017-18 & 19 Kms/day in 2018-19. Electrification too has increased substantially from 1100kms per year during 2009-14 to 1600kms in 2015-16 and targeting 1800 kms for 2016-17. Broad gauge commissioning has increased to 2500 kms/year in 2015-16 vs. last five year average of 1520 Kms/year. Govt. is intending to shift 20% of freight traffic to high axle load wagons by this year end and 70% by 2019.
Capex is being spent aggressively to achieve these. Last year spent 94% i.e Rs.94000cr compared to average spend of Rs.48100cr for 2009-14. Target is set for 2016-17 at Rs.121000cr and of that ~Rs.59000cr funding is already tied up. Total planning for the next 5 years investment stands at Rs.856000cr and within that Rs.540000 has been approved.
(4) Safety: - Eliminate all unmanned level crossing in next 3 years. Induct clollusion avoidance system on high density network in next 3 years. Overall causalities have reduced to 309 vs. 692.8 and accidents have reduced to 107 vs. last five year average of 135.4.
Few tall claims; but even if achieved 50% then it would be fantastic. Time period 2020.
- Reserved accommodation on trains to everyone and no wait listing.
- Time table based freight trains
- Elinination of unmanned level crossing.
- Passenger train punctuality to be 95%
- Speed of passenger and freight train to be augmented by 60% to 80km/hr and 50km/hr respectively
- Zero direct discharge of human waste
- Semi high speed train along the golden quadrilateral.
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