Railways seeks govt bailout

Suspension of operations due to pandemic hits revenue

ISLAMABAD:

Even after the Pakistan Tehreek-e-Insaf (PTI) came into power, the struggles of the Pakistan Railways have continued. The organisa- tion has been hit hard due to losses in revenue following suspension of operations in the wake of the Covid-19 outbreak and has sought a bailout package from the government to continue operations.

Due to the Covid-19 pandemic, shortfall in revenue in the first two months of the current financial year has accumulated to the tune of Rs5.860 billion.

The Ministry of Railways informed the country’s economic manager that the Pakistan Railways suspended all its passenger train operations with effect from March 24, 2020 in the wake of the coronavirus pandemic.

However, the train operations were partially restored and 50 out of 142 trains were again put into operation with effect from 21-05-2020 and 01-06-2020. It was decided that the occupancy of passenger trains should not be more than 60% due to social distancing requirement.

In order to meet the loss of revenue due to suspension of train operations and subse- quent partial restoration, the federal government gave an additional grant of Rs6 billion during previous financial year (2019-2020),

In the current financial year, the Pakistan Railways is continuing with limited train operations due to decrease in overall passenger traffic after the virusoutbreak and the shortfall in revenue in the first two months of the current finan-cial year has jumped to the tune of Rs5.860 billion.

Keeping in view the shortage in resources, the Ministry of Railways solicited views of the Finance Division on the summary for the Economic Coordination Committee (ECC). The Finance Division did not support the proposal stating that the Ministry of Railways has already been provided grant-in-aid of Rs40 billion for current financial year to meet the loss.

Moreover, the suspension of passenger trains services on account of Covid-19 should have also led to reduction in corresponding expenditures.

Hence, instead of demanding additional funds of Rs6 bil- lion for the whole financial year in the first quarter for current financial year, the Ministry of Railways should meet expenditures from the allocated budget for current financial year as provision of additional funds in the first quarter of current financial year with limited fiscal space was not appropriate.

In response to the observa- tions of the Finance Division, the Ministry of Railways stated that resource position of Pakistan Railways had partially improved since July 2020. However, the expenses on account of salary and pen- sion, which constituted 64% of total expenditure, were in- elastic and no reduction was possible.

The Finance Division re- leases Rs3,333 million on a monthly basis for pay and pension, which was insuf- ficient as monthly expense on pay and pension had been worked out to Rs5,420.00 bil- lion. As far as the request for additional funds in the first quarter is concerned, it was clarified that the Ministry of Finance may release funds in equal monthly instalments and not as a lump sum grant.

It was also stated that due to shortage in resources, the liabilities of pensioners on account of Commutation and Encashment had reached over Rs4 billion. Hence, the Pakistan Railways would not be in position to main- tain its cash flow without extra grant. The Ministry of Railways requested the ECC for approval of addi- tional grant of Rs6 billion at Rs500 million per month to Pakistan Railways to defray its mandatory liabilities including pay and pension.

The ECC considered the summary on September 10, 2020 submitted by the Ministry of Railways regard- ing Additional Grant-in-Aid (Subsidy) of Rs6 billion to meet the operational shortfall and directed the Ministry of Railways to submit the case after second quarter review of current financial year 2020- 21 in consultation with the Finance Division