Railways gets bailout, but with strings attached
Pakistan Railways will finally get its Rs11 billion bailout package after Railway Minister Ghulam Ahmed Bilour finally gave in to one of the finance ministry’s demands and accepted that at least part of the money will be raised through loans from commercial banks, lessening the direct burden on the national exchequer.
(Read: Pakistan Railways loses Rs26 billion in 2010-11)
The bailout was approved by the cabinet committee on restructuring of public sector enterprises, a meeting of which was chaired by Finance Minister Abdul Hafeez Shaikh on Friday.
Of the Rs11 billion, about Rs6.1 billion will be arranged as loans from commercial banks, backed by a sovereign guarantee. The government has agreed to pay the interest on those loans, which will be used to repair the Railways’ locomotives, about 60% of which are currently not working.
The remaining Rs4 billion will be arranged from the Public Sector Development Programme. The government will use funds from the 2012 development budget to improve tracks and rolling stock. The Railways has submitted a detailed plan for that to the Planning Commission.
(Read: State of Pakistan Railways)
In addition, the government also agreed to arrange for an increase in Pakistan Railways’ line of credit at the state-owned Pakistan State Oil, the country’s largest oil marketing company. The line of credit will now be Rs2 billion, up from Rs1 billion, ensuring a smoother supply of fuel to the national carrier.
The deal was made possible after Bilour dropped his earlier demands to get the entirety of the bailout funds from the State Bank of Pakistan or the federal budget.
The Rs11 billion bailout is in addition to the Rs15 billion already allocated to prop up the ailing state-owned company. The cabinet committee decided to address every concern brought forth by the Railways. Yet officials from the railways ministry said it would still take time to rehabilitate the carrier.
“It will still take five to six months to revive the Railways, even after getting the money,” said the railways minister, adding that the finance ministry had assured them that the loans from the banks would be arranged within a month.
The government, meanwhile, appeared to be moving forward with a structural overhaul of the Railways. The board of directors of the company is likely to be restructured, a presidential ordinance for which is expected to be promulgated later this month, according to a railways ministry official present at the cabinet committee meeting. The changes, which are likely to be finalised through legislation, will likely strengthen the board of directors, adding more private sector representatives. In addition, the executive committee of Pakistan Railways will likely be given more independence to make its own decisions and improve management.
No decision, however, appears to have been taken on the finance ministry’s demand that the Railways lay off one-fourth of its workforce. Railways spokesman Anjum Parvez said that the carrier could lay off 4,000 day labourers if the need arose.
The cabinet committee also directed the Railways to restore the passenger and freight services that had been discontinued.
Pakistan Railways, once the largest carrier of freight in the country, has fallen into almost complete disrepair. According to a World Bank study, the Railways will carry as many passengers in 2011 as it did in 1955, when the country’s population was one-seventh of what it is today. However, it will carry less freight in 2011 than it did in 1955.
Published in The Express Tribune, August 6th, 2011.
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Railway Minister Bilour should be fired. This guy once left a hospital without paying the bills...he is a thief.
@My Name IS Khan
Unlike railways, airline industry can have private carriers. Except Air India, which is loss making, Indian private airlines have been making hefty profits and the industry is growing fast.
@ Kasim - India is curious. Their railways are very profitable but their airline is a disaster. That being said, we could have our railway staff learn from them. I wish both our politicians would stop hating India as we could also learn from their succcess in software and offshoring. I bt Indian companies like Wipro would love our hire our well educated urban young adults.
agree with the suggestion of ' Bilore out instead of bailout!' what a creative peace of mind! This nation has unthinkable talent, and the day is not far away that such people who make intelligent comments will be out to get rid of corrupt rulers. I am hopeful about this nation. awakening has started. thinking process is developing. soon everyone will be in action.
@privatization who in their right mind would want to buy Pakistan Railways? The recent fiasco with the KESC workers would've scared away any potential suitors.... PR/PIA etc aren't for the 'awaam', they're for politicians to stuff their party's cronies and eventually bleed the national exchequer..
Any solution to resuscitate the railway should include more transparency. This will only be possible after the perpetual railway minister Mr Bilour has accumulated funds for the next election. To make proposal feasible please kept aside money for the minister’s next election campaign because only then will he earnestly go about utilizing the rest of the cash for the good of the railway. I’ve always wondered why we have such short memories. People forget that Bilour has been the railway minister in an earlier government too. He took control over everything that had some monetary gains attached. A very hard working man, he tasked himself to personally allocate licenses for ordinary vendors operating on railway platforms. One wonders how he managed the time. Or is it the only aspect of the railways operations he understands leaving the more cerebral responsibilities to his favored bureaucrats provided they provide his pound of flesh. I agree Pakistan Railways need money but more than anything else there is need for cleaning up the Augean stables some heads need to roll – till some heads literally roll it will remain a bottomless pit sucking in much needed scare resources from this cash starved country.
And What kind of Picture is Displayed ? Whats wrong with ET team?
HAH!! People suggesting Privatization of Steel Mills must remember steel mills made a profit of 8 Billion in 2007-8. & Musharraf was going to sell it for peanuts!! NO to Privatization!!
A caption for the great picture accompanying this article:
The Human Beehive!
Outsource reilaway operation to India. Sell Steel Plant to Mittel. Problem solve.
@ Adarsh....driver is also hanging outside engine somewhere.......:P
They will all eat it..... trains will be stand still.. this bail out is just to cover Eid rush.
Railway needs a "Bilour-out" instead of bail out! This thug minister has crippled this organization
I agree with the calls here to privatize Pak Railways. The situation here is similar to the one in India regarding Air India. AI has been a very poorly managed entity for a long time costing the tax payers millions of dollars in losses every year. The employees are lazy, overpaid, bloated and ineffficient. Only privatization of these badly managed government enterprises can bring the necessary changes.
@picture above
How driver would keep watch on signals?
Pervez Musharraf was right in privatizing corrupt public entities. Look at the classic example the privatization of steel mills. Our supreme court judges prevented the privatization of steel mills on the pretext of corruption in the respective deal. Had the steel mill been privatized at the right time, we would have saved almost 30 billion Rupees which were later injected to bail out that corrupt organization. Foriegn investors from KSA and Russia would have invested 3 billion dollars to almost tripple its productive capacity and paid the government billions in the purchase deal and later in taxes. Tens of billions of Rupees were wasted on that corrupt organization. When we discourage foriegn investors from investing in Pakistan, who would come here to risk their precious capital?
privatization is only solution
@Wajahatullah Khan: ok
Correction:
In my comment of 3 hours past the word s "well qualified be read as "ill qualified"
Railways need a minister who knows the technicalities of railway system. It is evident that railways have been ruined due to the system being operated by staff well qualified to keep the wheels running. We seem to have NO fear of God and are free to act at will, as we like. A determined effort and qualified staff can only save this mirror in which we can see our national face.
No money without a credible plan -- including lay-off's.
Just privatize it
And which private firm or individual will want to even attempt to do that? If people have not learned from KESC or PTCL then God help them.
Railway has become another money sink hole and ais a massive loss making unit of the government. Another good example of bad governance,corruption, bad planning. Shut it down.Privitise it.Float International tenders for privatisation and have Internation firm evaluate the offers.