Railways, a journey through losses, terminated deals

Investors skeptical over fate of investments as public-private partnership model fails again

LAHORE: The incumbent management of Pakistan Railways is once again in hot water.

However, this time it has little to do with reasons pertaining to its commercial management or fiscal position. The criticism is stemming over Railways’ failure to run two main ventures initiated via public-private partnership as per required standards.



Pakistan Railways terminate its contract with Four Brothers Group in October 2015 to commercially operate the Pak-Business Express - Pakistan’s first luxury train.

The more recent incident was to terminate a 15-years old deal with Mainland Husnain Private Limited, signed in 2001, to establish and commercially operate a 140-acre golf course at Railways land, named Royal palm Golf and Country Club in Lahore.

Railways said both contracts were controversial, and companies failed to pay the agreed amounts. It said that the FBG and RPGCC owned Rs2.22 billion and Rs2.16 billion, respectively. The companies, however, say they have already given around Rs3 billion and Rs550 million with initial investments of Rs190 million and Rs1.5 billion for infrastructure up-gradation.

Railways currently is in talks with the FBG for its claims of outstanding dues of around Rs190 million as per the Supreme Court’s directions.

The management of RPGCC, however, managed to take back commercial control of the club and the case currently is pending in the High Court as well as the Supreme Court of Pakistan.

Investors as well as the former Railways officials are now raising questions over the fate of private investments. Though its first takeover of Pak-Business Express did not spark much controversy, the RPGCC deal has caused a ruckus.



A former manager said that Railways should first invest and transform its clubs up to RPGCC standards.

“There are so many clubs owned by Railways, none of them are generating revenues,” former general manager Pakistan Railways Saeed Akhtar told The Express Tribune. 

“I served as a secretary of railways club for five years and club finances were largely met by private members rather than railway officers who only were around 20 in number. It is not a profitable business, Railways cannot earn millions out of it,” he added.

“Pakistan Railways needs revenues for further betterment of the corporation and some profit-making projects within it,” said the Minister for Railways Khawaja Saad Rafique in a press conference earlier.  The business community, however, feels the state-owned entity should focus on its audit report which points to discrepancies when it comes to land ownership and other areas.

It was suggested that issues like transferring the untitled 414.846 acres in Dera Ghazi Khan sub-division, worth Rs4.15 billion, in the name of Pakistan Railways should be resolved soon.

The corporation has also incurred a loss of Rs11.08 million due to non-execution of fresh agreements of shops Railways leased out 25 years ago.

“I believe that Railways is not going to see a fresh wave of investments for the next decade from foreign as well as local investors after these two deals,” said Pak-Business Express former manager Mian Shafqat Ali.

“It’s not a matter of financial loss but the credibility within business circles that suffered. There is a need for an audit by an independent party to reveal what is going on in the corporation,” he added.

Meanwhile, former finance minister Dr Salman Shah stressed on the need for clear rules and regulations. “Such deals need transparency, clear-cut sharing rules and boundaries for both parties. Unfortunately, our institutions lack this and international investors choose arbitration outside Pakistan.



“If any dispute arises, it should be decided in the courts; it’s not the job of the state institution to decide, as the Railways did in those two cases.”

“If things get streamlined, then the investment to GDP ratio could rise up to 5%,” added Shah.

Akhtar, however, was of the view that it was now time for Railways to alter its role as a regulator instead of an executor. “Time has changed and so do have means of doing business in the modern world, Railways cannot turn around its fortune alone,” he added.

Published in The Express Tribune, July 10^th, 2016.

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