Public-private partnership: Railways earns Rs2.48b from Business Express

Three-year rentals help state entity, private group says struggle ongoing.

LAHORE:

The joint venture between Pakistan Railways (PR) and Four Brothers Group for a privately-operated Pak-Business Express is proving to be profitable for PR as the state-owned corporation earned Rs2.48 billion in the first three years of the train’s operations.

The amount PR has earned is in the form of daily rentals, which were initially Rs3.2 million at 88% occupancy before being revised to Rs2.2 million at 65% occupancy ratio.

The management of Business Express, however, claimed that they have not earned substantial profits yet. However, the experience has taught them how to operate as they now gear up for bigger ventures in the future.

“The only thing we earned during this time is a brand name for our product — when anyone talks about public-private partnership in railways, they mean us,” said Pak-Business Express Director Operations Mian Shafqat while talking with The Express Tribune.

Since its inauguration, the venture has received substantial media attention for various reasons including the uneven 88:12 ratio in favour of PR.

The ratio means that PR pockets Rs88 from every Rs100 earned, while Pak-Business Express utilises the rest to meet expenses and generate profit.

On the other hand, PR’s role includes maintaining railway tracks, providing technical manpower to look after the train and fuel that costs Rs0.6 million per day for a round trip.

Realising the burden, the management at Business Express has taken corrective measures. “We realised the contract we signed initially was not providing us a level playing field — someone had to correct it. Thus, we’ve taken appropriate steps to keep this venture alive,” Shafqat added.

The struggle to revise down the occupancy ratio had created a major tussle between both stakeholders, as railways authorities claimed that this matter was not worth putting in the federal cabinet meeting.

However, PR tried to challenge the revised rates in different courts but was not successful. Within this time span, both parties have claimed outstanding dues. Railways is still calculating daily rentals at 88% occupancy, which according to them have crossed Rs1 billion.

On the other side, the Business Express management is claiming Rs160 million in the form of infrastructural development.

Shafqat claims that their maximum train occupancy goes to 62%. “If we talk about passenger ratios of developed economies, no country has reached 100% or even 80%. If the ratio crosses 50%, it means that you have reached the breakeven point,” he said.

“We have established a brand in Pakistan in and, despite the conflict, PR has earned Rs2.48 billion from us in three years,” he said. 

Published in The Express Tribune, February 26^th,  2015.

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