Profits derailed: Govt agrees to release Rs11.5b to Pakistan Railways

Revenu­es are meetin­g only one-fifth of the spendi­ng needs. Losses incurr­ed amount to Rs3 billio­n per month.

ISLAMABAD:

The government on Friday agreed to release Rs11.5 billion to Pakistan Railways for repairing locomotives and refurbishing tracks, but the bailout package will not pull the state-owned entity out of the financial mess.

The decision to release the amount was taken in a meeting between the ministers for Railways and Finance. The finance minister agreed to release the funds by next month – the first month of the new fiscal year.

The government had not allocated the amount in the new budget, and release would likely strain resources, negatively impacting the budget deficit ceiling. The package was over and above the Rs25 billion subsidy the government had allotted in the new fiscal year to make up for railways losses.

Currently, railway revenues are meeting only one-fifth of the spending needs. Losses incurred by the entity amount to Rs three billion per month, said Railways Minister Haji Ghulam Bilour.

The Cabinet had approved the bailout package last December, but Finance Minister Abdul Hafeez Shaikh was reluctant to hand out the funds, without vetting the recovery plan. This left PM Syed Yousaf Raza Gilani in an awkward position, amid threats by Bilour that he would resign.

During the meeting, Bilour criticized economic managers for undue delays in releasing the package, saying that in case of timely release of funds, the ministry had the capacity to repair around 12 locomotives in a month.

The railways will spend Rs 6.1 billion on maintenance of 145 locomotives, Rs two billion each on rehabilitation of tracks and coaches and Rs one billion would be reserved for future use. He said after maintenance, 75 per cent of locomotives would be used for freight carrying, while the remaining 25 per cent for passenger coaches.

Bilour said spare parts would be imported from United States and China, 12 to 15 locomotives would be repaired each month to minimize losses. He criticized the policy of giving undue backing to National Logistics Cell – the commercial logistic arm of the military, at cost of Pakistan Railways, a move which deteriorated the entity’s financial position.

Published in The Express Tribune, June 25^th, 2011.