Dec 28, 2009 - Jan 03, 2010

Pakistan has ultimately signed the much-delayed loan agreements with China to purchase coaches and locomotives from Chinese Dong Fang Electric Corporation (DEC) and China Machinery Import and Export Corporation (CMC) for Pakistan Railways.

Under the deal, China's EXIM Bank would provide credit to the tune of $110 million for the purchase of 75 locomotives and $134 million for 205 coaches. The United States' General Electric Corporation has been battling for winning Rs8 billion contract to supply 75 locomotives to Pakistan Railways. The same China's Dong Fang had supplied 69 substandard locomotives in 2001 that proved a disaster for the country's railways system.

The excessive weight of locomotives, crack in engines and consistent requirements of maintenance created a mess for the Pakistan Railways. Critics say that a corrupt mafia in the Pakistan Railways has been active to strike a new deal for 75 more locomotives from the Dong Fang which could wreck the whole system. Chinese locomotives are not used anywhere in the world as its consumption is more than others available in the market and its maintenance cost is also higher than others.

Under the loan agreements, Pakistan Railways will purchase 75 locomotives from DEC and 205 coaches from CMC, reported Associated Press of Pakistan (APP). The two loan pacts were signed with China's EXIM Bank in Beijing, as Pakistani delegation led by Member Finance Pakistan Railways Jehangir Aziz visited China.

Last year, the country had refused to finalize a Rs 8 billion deal to procure 75 locomotives from an already failed supplier- Dong Fang. The deal was however finalized during recent visit of Railways minister to China.

Some analysts believe that the locomotives from the Chinese company would be cheaper only at the time of purchase, but their lifetime cost will be much higher as compared to those of international quality.

Pakistan Railways is the state-owned railway company that provides an important mode of transportation in the farthest corners of the country. It has been a great integrating force and forms the life line of the country by catering to its needs for large scale movement of people.

Plagued by corruption, Pakistan Railways is currently facing a loss of Rs 28 billion which was Rs 23 billion last year showing a loss increase of Rs 5 billion in a year. Railways is paying Rs 609 million in form of salaries to the employees, but these workers and officers are not delivering 100 percent, according to Senator Talha Mahmood, the chairman Senate Standing Committee on Interior.

Chinese firm, being the lowest bidder in the international tender, was awarded the contract in July 2008. Critics say that the rules of the business and the Pakistan Procurement Regulatory Authority (PPRA) were overlooked while giving the contract to the Chinese company. The tender for the procurement of 75 locomotives was awarded to the Chinese company despite the fact that the technical committee had rejected its technical proposals thrice in the past. The said technical committee was changed after the new secretary railways took over charge who got approved both technical and financial proposals of the controversial company by forming new committees.

The US firm had reportedly offered $227 million for the contract as against Chinese offer of $107 million. American engineers had asked the government to reconsider Pakistan Railways' contract with a Chinese company for purchase of 75 locomotives. Some local media reports claim that the United States has been pressurizing Pakistan Railways to cancel the purchase contract and award it to the US company.

China has been actively involved in development of Pakistan Railways for the last five years. The cash-starved Pakistan Railways entered several agreements with Chinese railway companies for its development and modernization of its outdated system.

In the year 2001, Pakistan Railways signed $91.89 million contract agreement with China National Machinery Import and Export Corporation for manufacturing of 175 high speed new design passenger coaches. The project was funded by EXIM Bank China on supplier credit basis.

Pakistan Railways and China's Dong Fang have already signed an agreement for establishing a rail link between Havelian and Khunjerab. Islamabad and Beijing have agreed to form a consortium to prepare the feasibility of planned train service between Pakistan and China as a joint venture between the two countries. The feasibility study will cover a 750-kilometer section between Havelian and 4,730-meter-high Khunjrab crossing over Mansehra district and the Karakoram Highway in Pakistan's northern areas, which are now called Gilgit-Baltistan.

Chinese will lay some 350 km of tracks within their territory from Kashgar terminus up to the Khunjerab Pass, linking Pakistan with China's rail network, largely following the route of the Karakoram Highway. Havellian is already linked with the rest of the rail network in the south Asian country.

Initially, the two countries plan to establish a rail link with China and finally it will connect Torkhum in Pakistan with Jalalabad in Afghanistan from where they could go into Central Asian states up to Russia. Analysts believe that a rail link connecting China with Pakistan and Afghanistan and finally with central Asia would serve the Chinese interest in the region particularly when it is major stakeholder in Saindak and Aynak copper projects in the Af-Pak region where China has made multi-billion dollar investments.

The proposed rail link will ensure China's access to energy rich central Asia serving it both commercially and strategically. The two countries plan to link the Karakoram Highway to the southern Pakistani port of Gwadar in Balochistan through the Chinese-aided Gwadar-Dalbandin railway, which extends up to Rawalpindi in Pakistan.

By extending its East-West Railway from the Chinese border city of Kashi to Peshawar in Pakistan's northwest, Beijing can receive cargo to and from Gwadar along the shortest route, from Karachi to Peshawar.

As a part of its development plan for transport and communications network, Pakistan Railways has completed feasibility study of Chaman-Kandahar section for laying railway tracks between Pakistan and Turkmenistan through Afghanistan. Feasibility study for cost, engineering and design for construction of Rail link from Gwadar to existing Rail network at Mastung district in Balochistan has also been finalized.

The new link to Gwadar port shall open up underdeveloped areas of Balochistan for developments. The core of venture is to connect Central Asian Republics (CARs) with Pakistan Railways' network through Afghanistan. Beijing would have distinct advantages for its improved transportation and access to central Asia and Gulf states.

Pakistan's northern areas are of key importance for China's plan to set up a transportation and trade corridor by establishing new road and rail links. Strategically located Gilgit-Baltistan, which connects Pakistan to China's western province of Xinjiang, is seen by both India and Pakistan as part of the larger Jammu and Kashmir issue which has not yet been resolved.

A politically stable and socially appeased Gilgit-Baltistan is must for carrying out any development agenda and rightly serves the Chinese interest in the region. Some analysts believe that November 12 elections for the first time in Gilgit-Baltistan is the part of Pakistan-China development strategy under which steps would be taken to put the ever neglected Pakistan's northern areas on the path of the fast track development.