India 360: Bharat's reformer Lalu

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New Delhi: Laloo Prasad, India's Union Minister for Railways, is now a management guru. No less than students from Harvard and Wharton - two of the world's best business schools have come to seek his advice on management and to ask how he managed to turn around that shambling leviathan known as the Indian Railways and actually manage a revenue surplus of Rs 13,000 crore. Is this social justice private limited?

The emergence of Lalu as free market oriented reformer is enormously significant. After all, if the Indian Railways can be managed well, then why can’t Indian agriculture and even Indian airports? Lalu recently visited IIM Ahmedabad and explained to the students, what it takes to be a good CEO.

So does Lalu Prasad have a unique business model? This was the topic of discussion in India 360.

On the panel of experts was Union Railways Minister Lalu Prasad; former member, Railway Board, V K Agnihotri; FICCI advisor, Anjan Roy; and Pranay Gupta, he is a student of IIM, Ahmedabad.

Sagarika Ghose: Laluji, what did you tell the students from Harvard and Wharton?

Lalu Prasad: I told themm to work hard, sincerely and honestly. If they do that, then there will be no need of privatisation. We have broken the thought that if any industry is sick, hand it over to private sector. Indian Railways has proved it.

Sagarika Ghose: So, do you feel you have a unique business model, a sort of public-private partnership?

Lalu Prasad: The Government has some social obligations and cannot depend entirely on the private sector. So, the Government should manage resources, monitor them and every department should work hard to uplift Indian institutions.

Sagarika Ghose: The Government has important social obligations, but one must admit that private enterprises also do as well. The panelists will now tell us what they feel about Lalu as India's newest economic reformer. Mr Agnihotri, is Lalu Prasad truly an economic reformer? He is running a Government department as a commercial enterprise.

V K Agnihotri: Actually the Indian Railways is a Government department and if all Government rules are followed, you can’t make it like a business situation, where everything is done to get the best for the customer and also to make maximum money for the organisation. So, both things are necessary - customers must be happy and one must also make money at the same time.

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Sagarika Ghose: Let’s bring up for you some graphics on Lalu’s success formula. First of all, he slashed fares across the board instead of raising fares. There is public-private partnership, he has increased the axel load and he has privatised railway freight services. Is this a sign of hopefulness that here is someone, who is from "Bharat", who is not a English-speaking CEO type from urban areas, who is advancing the cause of economic reforms?

Anjan Roy: Absolutely, especially because he has turned around the Railways with hardcore commercial approach. For example, what he is saying that, he will introduce commercial accounting in the Railways - it is no longer a Government departmental accounting. He is once again saying that the customers of Railways must be in touch with the Railway service provider - that is the service provider has to respond to the customer. He is also giving out to the customer right to operate services, facilities in the Railway premises. He has totally categorised cargo, so these are some of the really hardcore commercial decisions.

Sagarika Ghose: Pranay Gupta, do you see Lalu Prasad as someone who is not a normal economic reformer. Is the fact that despite this, he is speaking the language of economic reform, what attracts you towards him?

Pranay Gupta: Yes, I think I would agree with that because, he is able to take decisions, which were probably remain pending for long time and which is very unlike the bureaucracy that one sees in India. And that is probably one of the primary reasons for the turnaround of the Railways.

Sagarika Ghose: So would you agree Mr Agnihotri that Lalu is a very courageous man?

V K Agnihotri: Yes, because for any kind of technical decision to be taken, courage is ultimately necessary.

Sagarika Ghose: Why does he play the comic all the time? Is it an act?

V K Agnihotri: I don’t think so, because as per my interaction with him, it is natural way of his to keep everybody comfortable.

Sagarika Ghose: What is the main reason for the turnaround of the Railways in your opinion?

V K Agnihotri: There are two reasons. One is the axel load increase and it is going to be done further. Actually Indian Railways run on 20 tonne axel load, it has now been increased to 22 tonne and it is going to be further increased to 30. Secondly, he is making sure that nothing is wasted in the services. Because Railway services are very volatile commodity, if you don’t use it today, tomorrow it is gone. So, if any seats are going free, any train is coming unloaded, you use it by some means, so that you get some revenue out of it. For example, by upgrading passengers and giving lower rates in return journey direction and things like that.

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Sagarika Ghose: Pranay Gupta, do you think Lalu Prasad does have a unique business model?

Pranay Gupta: I am not sure if it is a unique business model, but it is a business, which is running more efficiently now. For instance, the increase in axel load is the main reason for turnaround according to me. That is something which is not very unique, it was there in the US. But in India, this decision has not been taken for very long time. Mr Lalu Prasad took this decision, which was probably a bit controversial. But, that is what helped and that’s what he has been doing.

Sagarika Ghose: But someone like you – students from IIM, Harvard and Wharton – what are you looking for to learn from Lalu Prasad?

Pranay Gupta: What we are primarily looking for is that, as of now Public Sector Undertakings in India specially, have been run in a very bureaucratic manner. What we want to know and we want to learn from Lalu Prasad is how within a year or two of his coming, he has been able to turn the Railways around completely. How it has been done so efficiently? We really wonder how this happened.

Sagarika Ghose: So, it’s the first “Bharat” success story of economic reforms. Mr Agnihotri, how much is it Lalu Prasad and how much of it are his visionary bureaucrats?

V K Agnihotri: Every politician has to take inputs from bureaucrats around him. Railways is very multi-disciplined department. There are 13-14 departments and each one contributes something towards the running. To take a decision, all these advisors have to be together. Every time a final decision is taken, it is courageous.

Sagarika Ghose: So, he is taking all the right courageous decisions and he is taking them all.

V K Agnihotri: Yes, it has to be, because he is the only one who can take the decisions.

Sagarika Ghose: Anjan Roy, last question to you. What is the crucial feature or characteristic that Lalu Prasad is bringing in economic management? What is the one feature he has been able to contribute?

Anjan Roy: See, what he has been able to contribute is that, he has been able to carry forward his reforms. And the reason why he has been able to carry through his reform is that he is very shrewd, very competent politician. For example, he has re-categorised 4,000 commodities and at the same time he has left out some three-four items out of the categorisation, which will be very much cost related. So, these are the kind of things, which he is doing. And what he has done is to take away the share that road transport was taking away from Railways. He has brought that back to Railways. This is pushing up the surplus and the revenue.

Sagarika Ghose: Lalu Prasad took over as Railway

Minister in the year 2004 and is now so busy "giving a steel frame to the Railways" that he has kept his ambition to become the Prime Minister of India "pending".

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