Hurtling to a crash?: Railways says it can’t meet debt obligations
Seeks freeze on interest payments, PM’s approval to sell lands and retire debts.
ISLAMABAD:
Pakistan Railways’ (PR) downward spiral became manifest last Tuesday when the organisation expressed its inability to retire loans and pay interest, and sought the prime minister’s approval to sell its assets to meet mounting debt obligations.
The railways’ top management briefed Prime Minister Yousaf Raza Gilani in a meeting convened to review the organisation’s health, said sources in the finance ministry.
Over two-thirds of PR’s tracks need repair, and the entity has 105,000 employees, against a requirement of 40,000, said a ministry official.
The premier, however, was unmoved by the deteriorating situation, and instead of taking direct action, referred all financial matters to the finance ministry.
He did call for expediting the process of setting up an asset management company, to sell PR’s assets, sources said.
The railways’ management reportedly told the premier that “there is no possibility in the immediate foreseeable future to retire the Rs40 billion overdraft taken from State Bank of Pakistan (SBP) to meet expenses.”
Furthermore, they said the entity “cannot afford at this stage to make payments on account of interest and penal interest.” The organisation requested a “moratorium on at-source deductions on account of interest and penal interest” and sought permission for selling assets for retiring the debt and interest payments. PR is spending up to Rs9 billion annually for debt servicing.
Railways’ woes
Saeed Akhtar, General Manager PR confirmed to The Express Tribune that the organisation had expressed its inability to meet its debt obligations.
However, he said, the railways would keep servicing commercial loans and the moratorium was suggested only for SBP loans.
The premier directed secretaries of finance and railways to sort out the modalities, but no final decision was taken on the moratorium request, Akhtar said.
He also confirmed seeking approval for selling railways’ land to retire debts but the prime minister directed the request to the Council of Common Interest – the body that resolves inter-provincial issues.
Akhtar blamed the delay in decision-making, by successive governments, for railways’ woes.
“The decision on strategic network funding has long been pending and has brought the railways to the present condition”, he said.
The organisation’s expenses have shot up to Rs50 billion, against revenues of Rs12 billion. The government’s decision to increase employees’ salaries by 50% but not increase fares, despite a 30% rise in diesel prices widened the gap between expenses and revenues, Akhtar said.
Sources said the prime minister directed the railways to prioritise operationalisation of out-of-order locomotives in the next six months.
Meanwhile, PR proposed shutting down five non-economical routes to cut down costs. At present, only two routes are commercially viable while another 13 can be made viable, sources quoted the organisation as saying.
Published in The Express Tribune, December 25th, 2011.
Pakistan Railways’ (PR) downward spiral became manifest last Tuesday when the organisation expressed its inability to retire loans and pay interest, and sought the prime minister’s approval to sell its assets to meet mounting debt obligations.
The railways’ top management briefed Prime Minister Yousaf Raza Gilani in a meeting convened to review the organisation’s health, said sources in the finance ministry.
Over two-thirds of PR’s tracks need repair, and the entity has 105,000 employees, against a requirement of 40,000, said a ministry official.
The premier, however, was unmoved by the deteriorating situation, and instead of taking direct action, referred all financial matters to the finance ministry.
He did call for expediting the process of setting up an asset management company, to sell PR’s assets, sources said.
The railways’ management reportedly told the premier that “there is no possibility in the immediate foreseeable future to retire the Rs40 billion overdraft taken from State Bank of Pakistan (SBP) to meet expenses.”
Furthermore, they said the entity “cannot afford at this stage to make payments on account of interest and penal interest.” The organisation requested a “moratorium on at-source deductions on account of interest and penal interest” and sought permission for selling assets for retiring the debt and interest payments. PR is spending up to Rs9 billion annually for debt servicing.
Railways’ woes
Saeed Akhtar, General Manager PR confirmed to The Express Tribune that the organisation had expressed its inability to meet its debt obligations.
However, he said, the railways would keep servicing commercial loans and the moratorium was suggested only for SBP loans.
The premier directed secretaries of finance and railways to sort out the modalities, but no final decision was taken on the moratorium request, Akhtar said.
He also confirmed seeking approval for selling railways’ land to retire debts but the prime minister directed the request to the Council of Common Interest – the body that resolves inter-provincial issues.
Akhtar blamed the delay in decision-making, by successive governments, for railways’ woes.
“The decision on strategic network funding has long been pending and has brought the railways to the present condition”, he said.
The organisation’s expenses have shot up to Rs50 billion, against revenues of Rs12 billion. The government’s decision to increase employees’ salaries by 50% but not increase fares, despite a 30% rise in diesel prices widened the gap between expenses and revenues, Akhtar said.
Sources said the prime minister directed the railways to prioritise operationalisation of out-of-order locomotives in the next six months.
Meanwhile, PR proposed shutting down five non-economical routes to cut down costs. At present, only two routes are commercially viable while another 13 can be made viable, sources quoted the organisation as saying.
Published in The Express Tribune, December 25th, 2011.