Paper submitted by R Elangovan about FDI in Railways

THE CONVENTION ON CHALLENGES AHEAD OF LOCOMEN AND RAILWAYMEN

ORGANISED BY AILRSAAT CHENNAI ON 06.02.2015

PAPER PRESENTEDON PPP AND FDI IN RAILWAYS

BY R.ELANGOVAN,DREU

Prime Minister Narendra DamodarModi  announced that there will be no privatisation of Railways in a meeting he addressed the Varanasi diesel engine workshop workers on 19,December 2014.He said that it is a rumour, baseless and wrong.Norailway employee will be affected. He asked the workers not to believe the rumour.

Shamefully he did speak there this after taking all staff council members representing all unions in to police custody removing them from the meeting spot till the meeting concluded.

The third day,on 21 December 2014 sriArunendraKumar,the then chairman,railway board ,in a PTI news, said that 10 sectors have been opened for 100%  FDI which means, he said,”almost all areas of railway working”.

THE HISTORY

Though the Indian Railway ACT 1889 during British period or after amendment The Railway Act 1989 permit Non-Government railways the Indian successive governments followed a policy of reserving Railway Transportto central Government.In 2009,in a position paper published by planning commission of UPA Government they interpreted the term Railway Transport as only Railway Operation and said  that other areas likeDesign,Finance,Construction,Maintenance etc. Can go to Private.Thus all such areas have been outsourced we know.But railway operation remained with railway.For example in 8 PPP port connectivity projects including PIPAVAV project the Railway operation remains with railways.But outsourcing has been resorted to in ticketing,catering,cleaning,maintenance including track and rolling stock,signal and telecommunication even   in production units in perennial nature of work also.Thus there are about 7.5 lakh contract workers in Indian railways.All activities in CONCOR,IRCTC,RITESetc are outsourced.

Modi government on 22.8.2014 issued an amendment to 1991  Industrial Policy statement that in 10 areas of Railway working apart from CONSTRUCTIONandMAINTENANCE OPERATION ALSO WILL BE OPEN FOR PRIVATE.Later on 27.8.2014 the Government amended the FDI POLICYdated 17-4-2014 issued by UPA Govermentand included these 10 areas in to the circular and amended it that 100%FDIcan enter in these 10 areas through automatic route without any restriction.

Suburban transport, Mass Rapid Transport, High speed lines, Dedicated Freight Corridor, Passenger and Goods Terminals,signalling,electrification,coach and engine factories and maintenance of rolling stock,sidings connecting main lines are those 10 areas. Later 7 more areas were included by a circular by Railway Board.What Mr.ArunendraKumar said is true that almost all areas of Railway working go to private, FDI.

This means almost all categories of railway including operating and running staff will be affected.All staff in privatised sector will be private employees with no guarantee of employment ,reduced pay,no running allowance,no any system of pension either old or new ,no hospital facilities etc.

BRITISH INDIA

During British rule railways were earlier built and operated by private.As private did not show interest in expanding railways  British Indian government paid 5% assured rate of returns.But private showed inflated investment and availed double benefit.Even then they did not come forward to expand.Therefore the British government nationalised railways in 1924 and then only railways could be expanded to the requirement by government investment.Now Modi government intends   to take   IndianRailways to pre 1924 position.

RECENT INDIAN EXPERIENCE

Delhi Metro Rail Corporation is a Central Government system.A PPP project under BUILD OPERATE TRANSFER (BOT) model was handed over to Reliance Infra with an investment of Rs 2700 cr. eachto build and operate  express rail service from NewDelhi to airport. Reliance constructed the projectcalled AIRPORT EXPRESS LINE at the cost of DMRC and after opening the systemit started leaking in the 21 km underground railway, clips started falling,girders started cracking.Though the minimum fare in the DMRC is Rs.8, it fixed minimum fare as Rs 80, and to airport, for20 km, it fixed at Rs.150.Initially it was expected to run at a speed of 135kmph.It was also expected that there will be 42000 passengers a day.But nothing happened. Only 20000 patronage was there.Speed was restricted to 50 kmph. One day the operation was stopped .The agreement was to operate for 30 years. But within 18 months Reliance ran away. DMRC took over,repaired and runs now with reduced minimum fare of Rs 20 and Rs 80 for airport.Had there not been the GOVERNMENT DMRC, the grass and bushes would have occupied the line and the subway.

ARGENTINA

In Argentina, there were 95000 employees and 37000 route KM of track when it was privatised through FDI.After some years many lines had been closed as not making profit.At last there were only8000 KM of track and left with only 15000 employees.The Govt.has had to subsidise fares to protect the passengers on the existing lines.This experience has been made available in the position paper on railways in 2009 mentioned earlier.

Why then PPP or FDI slogan by the Governments?

Indian Railways is making profit every year.Last year it made a profit of Rs 8000 cr even after paying Rs.5000 cr. dividend to the Central Government and meeting a net social service obligation of Rs 21000 cr.If the Central Government subsidises railways for social service as other countries do and does not take dividend then there will be much more profit.

However, Indian Railways do not have the huge money needed to expand railways and to erect factories for  manufacturing rolling stock,augmenting capacity by more and dedicated lines and strengthening safety and improving efficiency and safety.

VARIOUS COMMITTEES

Sam Pitroda committee on modernisation and Anil Kakodkar committee on safety recommended for an investment of Rs 5.69 lakh cr and Rs 1lakh cr. respectively.They have  not been implemented.367 on going projects like doubling,guage conversion and new lines need Rs.1.82 lakh cr.East and west Dedicated Freight Corridors need 1 lakh cr.Coach and engine factories need Rs 1 lakh cr.Apart from this 12^th plan needs anotherRs. 5.19 lakh cr.

PLANNING COMMISSION (Now Abolished)

Planning commission studied Indian Railways.According to it the share of railways in the national transport has come down.In goods traffic railway carried 89% of total tonnage.It came down to 30% in 2011. It will come down further in the present scenario to 25% in 2020.Passenger traffic by railway constituted 74.3% in 1951 which came down to mere 12.9%in 2011. On the contrary the road sharewent up to 86.7% from 25.7% during the same period.

It suggested that rail share should be increased in the interest of the nation,because it is cost effective,energy efficient, and has comparatively less accident and less death rates and less pollution.

PROJECTED EXPENDITURE FOR 2012-2032

It, therefore, recommended an investment of Rs 35 lakh cr for 20 years: Rs.12.65 lakh cr.Fornewlines, doubling, dedicated lines, gauge conversion etc. Rs.15.65 lakh cr. for rolling stock;1 lakh for station development; Rs.50,000 cr. each for passenger and goods terminals; Rs.4 lakh for technology upgradation and Rs.1 lakh cr. for suburban rail development.

If inflation is taken in to account, every year, an investment of Rs.2 lakh cr. is needed.But what is spent is only about Rs. 50 thousand cr. a year.

Railway manages even this amount through internal resource generation,budget support,borrowing.Shortfall, it wanted, to manage through PPP.

PPP

Railways expected an investment of 20% of total investment in 10^thplan , but could mobilise only 0.95%.In 11^th plan it expected an investment of 36%,but could mobilise only 4%.In current 12^th plan it expected to mobilise Rs 1lakh cr.,  that is,Rs. 20000 cr. a year. In the first two years it could mobilise only Rs.1500 cr. and Rs.2500 cr respectively.The current year it expects to mobilise only          Rs.6000 cr . It will also end in the same fate. All these forthcoming investments come only in areas like wagon investment schemes ,port connectivity etc.

No amount comes for safety or development projects.The parliamentary standing committee on railways(2014-2015)opined that the projects being long gestation activity the PPP is reluctant to come.

RAEBAREILY

Examine the Raebareily coach factory project.It was originally planned to be constructed through PPP or FDI.Even global tender was floated.Foreign companies participated and demanded whether railway will give them the LHB technology to manufacture LHB coaches as per the requirement.  Though railway agreed ,they did not rise up.It is built up now on railways own money.Even after 8 years the production has not started.Madhepura electric engine factory and Marowradiesel engine factory proposals also hang on in the same way.The eastern and western dedicated freight corridors also planned to be built through PPP did not take off even after global tender.They are built now from our own sources and obtaining loan from world bank and Japan international cooperation agency.(JICA).

TECHNOLOGY 

Technology is not the problem,it can be acquired on payment.We can see it from the Chennai metro work.We also do not lack in technology.We have produced 6000 hp electric engines learning from abroad. We have produced 24 ton axle load 5500hpdiesel engine which is available nowhere in the world.Now railway technology is available on payment and we can makein India on our own, if only money is there.

THEREFORE WHAT IS REALLY NEEDED IS THE GOVERNMENT EXPENDITURE IN RAILWAYS IN THE INTEREST OF THE NATION.

CHINA

In China,Government of China invests huge amount in railways.Every year it invests Rs.7 lakh cr.Why not India?WITHOUT MAKING GOVT INVESTMENT,  BOTH CONGRESS AND BJP GOVERNMENTS RAISE THE UN REAL SLOGAN OF PPP OR FDI IN RAILWAYS.

WHERE IS MONEY?

This question is often raised by the same people.They do not hesitate to abandon Governments legitimate incomes.

According to RAGHURAM RAJAN there is Rs 2.43 lakh cr.NON PERFORMING ASSET (NPA)due from Corporates to Nationalised banks.

Governments have foregone revenue of Rs.5.72 lakh crorefrom corporates last year, in respect of excise duty, customs duty and Income tax etc.Since 2005 Govt has foregone an amount of Rs 32 lakh crores, the very amount needed for railways for 20 years.This is as per Revenue foregone Statements of general budget documents.

BLACK MONEY

According toGlobal Financial Integrity, a Washington based organisation, in 2012 alone,Rs 6 lakh cr. black money went abroad.Altogether there are about Rs 28 lakh crore  blackmoney   outside the country.

BJP in its election manifesto promised to the people of India that It would bring all the black money into India within 100 days from its ascendance to power and give each citizen Rs. 15 lakhs .Every one knows that 100 days has already been celebrated without bringing even single rupee of the black money .

CORRUPTION AND PRIVATISATION.

Both Congress and BJP, alternately being in power, have privatised the natural resources like mines , gas,  spectrum etc., and handed over them to the Corporates for a song and thus has foregone legitimate income to the national exchequer. We know how the Govt. lost 1.76 lakh crore in spectrum allocation and Rs. 1.82 lakhcrores  in coal belt allocation.

Recently, Sri.ModifecilitatedAdani to secure Rs.6,200 cr. Loan from SBI even though he is facing NPA of Rs. 80,000 cr.

Thus the money due to the exchequer, if realised throughproper policies, there will be needed money for investment in railways.  This warrants a patriotic outlook and approach.  One has to judge the patriotic outlook of the BJP Govt. 

These Corporates do not intend to invest in Railways since it will take time to earn profit  or in some areas where there will be no profit at all.   

ASSOCHAM,  recently in Kolkata, asked the central Govt. to invest in infrastructure as the Corporates are not in a position to invest since they already are under-utilising their capacity from 30 to 40 %.

Sri BivekDevroy, the chairman of recently constituted Railway Restructuring Committee and Member of the new NITI AYOG, constituted in the place of Planning Commission, in an interview to Indian Infrastructure magazine (Jan.2015) has stated that privatization in telecom is successful.  But it is failure in Electricity. “The private finance probably can not account for more than 10% of the total amount India needs for all kinds of infrastructuredevelopment”. He  further stated that , in most countries, improvement in Railways “ involve a substantial dose of  public sector provisioning of rail services”.

The other protagonist of public expenditure in railways is Sri. Arvind Subramanian,  the chief economic advisor to Prime Minister Modi.  Accordingto  The Hindu dated 03rd Feb. 2015 he has recommended that the centre  increase the public  infrastructure spending to stimulate economyeven if this ends up pushing the fiscal deficit above the target of 4.1 % of the GDP.

Mr.Modi should come forward to invest in Railways, largely, so that  Indian  Rail infrastructure problem is solved instead of shouting  PPP or FDI in Railways like frog.

Railway men should join the National indefinite strike call given by the  JCM unions so that the  ModiGovt is stalled from its  fanatic FDI onslaught on public sector including LIC , Defence , Railways etc.,