Pakistan Railways (PR) had British origins as both finance and capital were provided by Britain. To overcome the continuing crisis of PR today, many have suggested reform, or outright privatisation. Restructuring started in 1999 with the World Bank’s privatisation project. The reform package showed a profound eagerness to transform PR into a profitable organisation. However, performance in railways means quality of service and access to infrastructure first and financial performance later. At least, this was the lesson learnt from the first ever investment in railways.
Reform is a catchy word and those involved in it are overzealous to transform. Since the restructuring process started, PR has been in a serious financial crisis with mounting debt and underinvestment in rolling stock and equipment. Cost cutting by slashing employment is the easiest route for reformers. It is not surprising that employment has contracted by 14 per cent. Talk about over-employment is not exactly not true. The employment share in engineering, commercial, accounts and transportation has declined from 90 to 84 per cent. There has been an 11 per cent reduction in track, 20 per cent reduction in passengers, 33 per cent reduction in freight and 17 per cent in locomotives. Expenses grew by 4.7 percent, while earnings lagged behind at 3.02 per cent. What else can one expect? The railways has no financial autonomy. Its net receipts are part of the general revenues of the country. Development funds are annually allocated. This system has barred the railway, from investment and expansion. Gross fixed capital formation has declined in absolute terms — from Rs5,376 million in 2000-01 to Rs1,048 in 2009-10.
Having failed to restructure PR and rendering it dysfunctional in the process, the reformers now want to make a big push into privatisation. The case has been built on the success of the privatisation of British Rail (BR), which is a myth. Formed under the companies system, the BR was nationalised in 1948. The first sign of selling off trains appeared in early 1960s when faced with losses of 87 million pounds. In light of a British government report, railway investment was frozen and closure of many lines was suggested. It will be news to Pakistanis that Mrs Thatcher was instinctively against the privatisation. She only undertook partial privatisation of peripheral businesses such as hotels, rolling stock manufactures and ferry services. It took the conservative government three decades to decide the privatisation of 1990. The early growth of passenger and freight services was due to a buoyant economy, not privatisation. The common perception is that it failed miserably. Passenger fairs and freight rates run ahead of inflation. Major accidents have increased. Competition and profitability have been placed above safety. Worst of all, government subsidies have doubled and bankrupt rail services have had to be bailed out.
In the light of this experience, the recent government decision against privatising PR provides an opportunity to do what needs to be done — autonomous professional management and investment in modernisation. It is not the shrinking of business but expansion which brings more fruit.
Published in The Express Tribune, December 25th, 2011.
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The potential in this sector is unexplored whereas this sector alone can provide enough economic activity to straighten our economy. A simple trick is required; there should be local trains running from areas which require frequent travels; Imagine a local train running every half an hour if not 15 minutes to alll the big cities from their adjoining areas of radius 50-60 Km depending on ratio of commuters; how much income can be generated doing that. All they have to do is invite investors; and get local investors to run their trains; and they shall be the ones to lay Double tracks according to their needs; just like "Virgin" did to their West Coast Railway in England.
Every body say what to do, but no body knows what the federal government think about restoration of this vital sector. Whether the government has capacity to do it, or go for private partnership, or fully privatize or close down completely, God alone knows.
why are we wasting our time in discussing these things. Lets open The Book and see how railways should be run.
All solutions for restoring the viability of Pak Railways will remain wishful thinking until the freight traffic is prioritized and incentivized. But this would pit the Railways directly against the army-run National Logistics Cell, for which road-freight is a cash cow. Who will dare bell the cat?
more details required...
interesting...at least a rationally argued point of view which can be debated further...would love to hear from other experts on the subjects...the comments left by some are also useful
Indians find it quite strange and even funny that Indian Railways' performance is praised in Pakistan and Indian education system is held up by Obama and Bill Gates.Because on both counts there are a large number of complaints in India. We find that the best universities are still in US and Indian Railways is riddled with all kinds of problems though volume wise about 8 billion people travelled in it last year. Perhaps Japanese railway should be taken as a standard to aspire. Perhaps it is the case of grass being green on the otherside.
Dont worry! Vote for PTI, Immi bhai has magic lamp, he can fix anything.
First of all, thanks for writing this informative article. Secondly, I would like to highlight that in order to turn around a service business such as Railways with such high levels of debt, somebody needs to make ruthless trade-offs by making key management and marketing changes (including changes in pricing structure and re-branding). Typically, this is something that can be done after privatization only otherwise organizational inertia impedes progress. A solution might be something mid-way between nationalization and privatization, something like a contracted outsourcing to a private party with earnings sharing. That way, govt. will be able to influence the key decisions while keeping its hands off the day-to-day operations.
@ Author..Heard of the term "Mission Impossible" ?
Dr. Sahiba, Your assertion of pressure from Manchester railways manufacturers is quite understandable and makes sense. Another major factor (though little cynical) was also extraction of resources through extensive system of railroads. We also need to keep in mind that empires, all through the history, were build and sustained through an extensive system of communication, development, and revenue collection. Our prides and prejudices aside, the credit goes to the British administration in India for building an extensive system of railroads (communication), irrigation system (development), and perhaps most effective as well as efficient system of revenue collection with only a handful of officers on the top and involving local/village leadership (numberdars) and also filling the lower echelons of bureaucracy from Patwari to Tehsildars from the local populace.Certainly maintenance of law and order (though little with authoritarian touch). Sahibs did an excellent job. What do we have now other than the mess? Where is the development and law and order has become a matter of laugh among people with a good sense of humor.