Railways in crisis: Losing track of humanity

The deadline for restructuring Pakistan Railways (PR) has been postponed once again.

On March 10, 2010, the federal cabinet had announced plans to restructure nine government institutions, including Pakistan Railways. The hope was that this would help cut losses worth billions of rupees being incurred by state entities. The restructuring plan of the PR included splitting it into four separate units: passenger, freight, infrastructure and manufacturing, each with its own board of directors to oversee operations.

The PR management has been instructed to reorganise the company in such a way that it should stop relying on the federal government for subsidies and grants; it should fix its operations to cut losses and generate more revenues from its resources.

Profit versus accessibility

“We were never mandated to be profitable. Pakistan Railways was supposed to provide affordable and safe transport for passengers and freight across the country, especially in areas not readily accessible by other means,” responds its public relations director Shahid Mohar. The state-run rail had operated routes to many areas, he says, despite being economically unfeasible, because the organisation was focused towards providing a public service. “Now the federal government does not want to continue supporting deficits that are unavoidable if we stay focused on public service only.”

Mohar adds that passenger train services are not as profitable as the freight business, but at present the national railways do not have enough locomotives to run passenger routes, as well as satisfy demand for freight routes. “Out of 520 locomotives, 290 are inoperative,” says Mohar.

According to Mohar, “not a single spare part has been received in the last 11 months from the Chinese firm that was handed a $15 million deal last year for the maintenance and construction of new engines.” Moreover, “the locomotive factory has been lying idle for three years.” Given these limitations, “railways cannot even give 40 engines to the freight business right now.”

Critics contend that the rail sector, like many other government-run enterprises, has been exploited by successive governments to provide jobs for their favourites. Rail officials say that while salaries amounted to Rs12 billion in the last fiscal year, pension payments stood at a whopping Rs7 billion. “This shows you how many people have been inducted into this department over the years,” comments a senior official, on condition of anonymity.

Allegations of corruption

Transparency International (Pakistan) chairman  Adil Gilani goes further and alleges that the real cause of losses and inefficiency in railways is rampant corruption. “Pakistan Railways is drowning because of decades of inefficient management policies and the appointment of corrupt ministers who have only been concerned with creating jobs for their cronies instead of focusing on the revival of this failing system,” he says. Gilani contends that restructuring is unnecessary and terms it “another scheme to create more jobs, hand out more contracts for dubious studies and embezzlement of more taxpayer money.” In his opinion, “if they [PR] just start making appointments based on merit and start issuing tenders fairly instead of in favour of their cronies, the whole system can be brought back on track in time.”

Transparency International (Pakistan) is not the only entity to accuse Pakistan Railways of being an institution with extensive corruption. On April 26, 2010, the government itself acknowledged that the current dismal state of the railways has been caused by corruption among officials when Public Accounts Committee chairman Chaudhry Nisar Ali Khan said, “all government departments have misused the railways from the day Pakistan came into existence”.

And in May 2010, an American firm producing locomotive engines cried foul over the tendering process for the procurement of 150 diesel locomotives. A representative of General Motors/Electromotive Division (EMD) Colonel Sami Khan lodged a formal complaint with Federal Railways Minister Haji Ghulam Ahmed Bilour for the violation of Public Procurement Regulatory Authority (PPRA) rules and unfair practices in awarding tenders for the order. The official response was that the tender had been issued in line with PPRA rules.

The tender for import of 150 locomotives was made after the PR finally decided to stop buying more locomotives from China under a 2001 agreement. At the time of announcing this shift in procurement strategy, rail officials had themselves said that the locomotives obtained from Chinese firm Dong Fang Electric Corporation of China were obsolete and too heavy to be sustained by local tracks. In fact, the under frames of at least nine locomotives purchased from the Chinese firm in 2001 had cracked by 2005. Current railways administration is quick to criticise their predecessors for allotting contracts in violation of the PPRA rules, but watchdog groups such as Transparency International (Pakistan) and foreign firms competing for tenders see little difference between successive groups that have assumed responsibility of Pakistan Railways.

More freedom demanded

Rail officials contend that mismanagement and corruption can be curtailed if government involvement in the enterprise is limited. “There are too many vested interests in the management, the board of directors and management have to be made more independent from the federal government,” says deputy chief engineer Rao Zulfiqar. “We need well-defined targets and a free hand to achieve them,” he adds.

Pakistan Railways ran a deficit of Rs26 billion in the fiscal year 2010. Of these, Rs15 billion was attributed to the operational deficit while Rs11 billion were incurred in other expenses including Rs4 billion in debt servicing of outstanding loans from the State Bank of Pakistan and other creditors. Revenues of Rs24 billion were generated during the same period.

People: the forgotten variable

Officials assert that a higher proportion of earnings come from freight services as compared to passenger services. They highlight that despite the economic viability of freight routes, only six million tons of freight were transported through PR in fiscal year 2010, because the majority of the resources were used up in transporting 85 million passengers in the outgoing year. They contend that by cutting down passenger trains, the PR can earn more revenue from freight routes.

Economists concur with this assertion, pointing out that at present 55 per cent of the country’s oil import bill comprises diesel purchases. They say that if more freight can be transported via trains instead of trucks, the country’s consumption of diesel will come down, easing the strain on the external account and foreign exchange reserves. But the human toll of reducing passenger trains has not been equated in this re-structuring plan.

Already, PR has announced that it will no longer run 19 special trains on 16 different special events, including Eid and the annual urs celebrations at Sehwan Sharif. Some of the other more noteworthy routes that were shut down as recently as mid-July include Sialkot Express, Mehran Express, Chiltan Express, Tezrao Express and, of course, Shalimar Express. These trains connected some of the most populous cities of the country. “In a country where about 40 per cent of the population lives below the poverty line, how can a basic public service be shut down on the pretext of improving profitability?” questions economist AB Shahid. “Even if railways are to be privatised, the state must ensure that the national grid remains operational.” Meanwhile, Mohar says that PR wants to shut down 102 passenger trains.

Social sector experts assert that the railway is a symbol of the federation. Unfortunately, at the moment both the government and Pakistan Railways seem content blowing the horn of profitability without addressing the underlying concerns for public service or addressing the root cause of billions of rupees of losses: inefficiency and corruption.

Published in The Express Tribune, August 16^th, 2010.