Mexican standoff: Railways suspends Business Express’ operations over dues
PR wants clearance of outstanding dues, business train wants to renegotiate deal.
The private company Four Brothers entered into a deal with Pakistan Railways in 2011 and made a Rs255 million investment to launch the project. PHOTO: FILE
LAHORE:
Before steaming on to the second-year of the public-private partnership, disputes between the Pakistan Railways and the management of the Business Express have touched its peak, resulting in suspension of the services for the first time since its inception.
It has been a year since the first joint-venture of Pakistan Railways and Four Brothers – Pak Business Express – rolled onto the tracks with its first executive class trains services between Karachi and Lahore. The private company Four Brothers entered into a deal with Pakistan Railways in 2011 and made an investment of Rs255 million into the project. The privately-run train is bound to pay Rs3.1 million daily for using national carrier’s rail network and infrastructure to operate its train.
The Railways announced the suspension of the Business Express for three days in an official statement due to the spiralling outstanding dues of the private venture. Conversely, the management of Business Express clearly said that they were in no mood to resume operations till the issue of revision of the daily fixed payment is resolved, which was calculated at an 88% occupancy ratio initially.
Furthermore, Pak Business Express had also decided not to pay the fixed amount for the suspended days. “Why should we pay the fee when we are not using the railway tracks, engines, diesel and coaches?” said Ijaz Ahmad, Chief Operating Officer of the Pak Business Express, while speaking to The Express Tribune.
Since the first week of operations, Business Express had failed at times to deposit the fixed agreed amount daily, resulting in the accumulation of the outstanding which Pakistan Railways claims has now gone up to Rs310 million.
Business Express is trying hard to renegotiate the agreed amount asking to Railways’ to decrease the pegged occupancy ratio of 88% to 65%, sending requests, meeting high-ups, but a common ground is yet to be achieved.
Pak Business Express claims their average occupancy level hovers around 55%, which will put them at loss even on the 65% occupancy ratio they were negotiating, making it impossible to pay the dues.
Monday will be an important day as a meeting is scheduled between the national carrier and the private-train’s management to resolve the issue. “If they agree then it will be fine, else we are not in a position to run the train at a loss,” Ahmad said.
Railways has always given favours to the Business Express and will not let the first joint-venture derail, for this the PR had offered them to pay the dues in instalments along with the fixed charges, but they failed, said Zubair Shafi Ghauri, director public relations of Pakistan Railways. However, the issue has continued to become more and more irreconcilable.
PR believes that although the venture is profitable for the carrier, the financial model of the privately-run venture was poor. The occupancy rate fluctuates accordingly and during winters, passenger traffic is lowest.
Recently, Railways was forced to cancel services due to negligible reservations rather than the usual – fuel shortage. Business Express was also facing the same dilemma, especially in the presence of a couple of other trains with a similar model.
It does not seem possible for Business Express to operate under such tough circumstances; however, the management is hopeful that once they get a concession in daily charges and outstanding dues, they will be profitable even after cutting fares for all classes, Ahmad added.
Published in The Express Tribune, January 27th, 2013.
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Before steaming on to the second-year of the public-private partnership, disputes between the Pakistan Railways and the management of the Business Express have touched its peak, resulting in suspension of the services for the first time since its inception.
It has been a year since the first joint-venture of Pakistan Railways and Four Brothers – Pak Business Express – rolled onto the tracks with its first executive class trains services between Karachi and Lahore. The private company Four Brothers entered into a deal with Pakistan Railways in 2011 and made an investment of Rs255 million into the project. The privately-run train is bound to pay Rs3.1 million daily for using national carrier’s rail network and infrastructure to operate its train.
The Railways announced the suspension of the Business Express for three days in an official statement due to the spiralling outstanding dues of the private venture. Conversely, the management of Business Express clearly said that they were in no mood to resume operations till the issue of revision of the daily fixed payment is resolved, which was calculated at an 88% occupancy ratio initially.
Furthermore, Pak Business Express had also decided not to pay the fixed amount for the suspended days. “Why should we pay the fee when we are not using the railway tracks, engines, diesel and coaches?” said Ijaz Ahmad, Chief Operating Officer of the Pak Business Express, while speaking to The Express Tribune.
Since the first week of operations, Business Express had failed at times to deposit the fixed agreed amount daily, resulting in the accumulation of the outstanding which Pakistan Railways claims has now gone up to Rs310 million.
Business Express is trying hard to renegotiate the agreed amount asking to Railways’ to decrease the pegged occupancy ratio of 88% to 65%, sending requests, meeting high-ups, but a common ground is yet to be achieved.
Pak Business Express claims their average occupancy level hovers around 55%, which will put them at loss even on the 65% occupancy ratio they were negotiating, making it impossible to pay the dues.
Monday will be an important day as a meeting is scheduled between the national carrier and the private-train’s management to resolve the issue. “If they agree then it will be fine, else we are not in a position to run the train at a loss,” Ahmad said.
Railways has always given favours to the Business Express and will not let the first joint-venture derail, for this the PR had offered them to pay the dues in instalments along with the fixed charges, but they failed, said Zubair Shafi Ghauri, director public relations of Pakistan Railways. However, the issue has continued to become more and more irreconcilable.
PR believes that although the venture is profitable for the carrier, the financial model of the privately-run venture was poor. The occupancy rate fluctuates accordingly and during winters, passenger traffic is lowest.
Recently, Railways was forced to cancel services due to negligible reservations rather than the usual – fuel shortage. Business Express was also facing the same dilemma, especially in the presence of a couple of other trains with a similar model.
It does not seem possible for Business Express to operate under such tough circumstances; however, the management is hopeful that once they get a concession in daily charges and outstanding dues, they will be profitable even after cutting fares for all classes, Ahmad added.
Published in The Express Tribune, January 27th, 2013.
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