TRAINS - COST-EFFECTIVE MODES OF TRANSPORTATIONS
Mar 7 - 13, 2011
While the exorbitant increase in fuel prices has multiplied the cost of freight transfers through different modes of transports, yet the Pakistan Railways is still the cheapest source of goods movement, which calls for the attention of the planning commission to make railways more vibrant to beat the heat of inflationary pressures.
Although the government is committed to developing communication infrastructure and modernizing rail networks reflected in several initiatives, to make these initiatives more effective the government and private sector's partnership is of vital importance to revamp the railways on war footings.
Adil Anwar, Chief Executive Officer of the Infrastructure Project Development Facility (IPDF), a subsidiary of the Ministry of Finance, while speaking at a recently held "Investors Forum on Pakistan Railways Public Private Partnership Projects", organized in Karachi, observed that time has come to restore confidence of the private sector for promoting public-private partnership (PPP) projects in Pakistan Railways having enormous potential to give the best returns to the investors.
It is unfortunate that despite having capacity to deliver and provide a strong support to the economy, Pakistan Railways was given a cold shoulder by the policymakers, which had to suffer huge losses primarily due to criminal neglect of the past regimes.
The present government in order to offset the adverse impact on railways was taking remedial measures to undo the wrongs of the past. Working in line with the sprit of making railways more vibrant, innovative plans were afoot in partnership with the private sector to revamp Pakistan Railways and restore this prime national institution to its original glory.
It will not be out of place to mention for the interest of the freight forwarders that IPDF has initiated 'Track Access Project' to fulfill the potential backlog of rolling stock (locomotives and wagons) for the Pakistan Railways. The project is primarily meant for transport operators, power plants, oil marketing and refinery companies, freight forwarders and cement manufacturers.
The project would also go a long way in helping to operate freight and passenger trains on the track of Pakistan Railways on the basis of FOOT (Finance, Own, Operate and Transfer) basis, whereby the private operator will pay the relevant track access charge to Pakistan Railways for utilizing its infrastructure.
The private investors would benefit immensely from such an initiative as the freight transfer is increasing at five per cent on average per annum with Pakistan Railways share remaining over 15 per cent in terms of reliable commodities. Similarly, rail continues to remain the cheapest mode of transferring freight in Pakistan and the cost is estimated to be around 50 per cent as compared to road transport.
The Track Access Project had envisaged an average cost of Rs4 billion for operating one train a day. The envisaged concession period is also expected to be 20 years, which is the useful life of the locomotive. The routine operations and maintenance will be undertaken by the private sector, whereby the major overhauling expenditure will be undertaken by Pakistan Railways.
According to Shahid Hussain Raja Chairman Railways, about 40 trains incurring losses are going to be grounded and private sector would be encouraged to invest in Pakistan Railways. He also said that products for which the financial model has been made include transportation of oil, general cargo, container cargo, rock phosphate, coal, and cement. The products have been chosen on the basis of highest demand, whereby Pakistan Railways has the current demand to transport three trains/day for products such as oil.
The current turnaround time is also expected to be four days for rock phosphate and oil, five days for general cargo and container cargo and seven days for coal and cement.
The numbers translate into a project internal rate of return (IRR) of 22 per cent for the private sector and an average payback of 5-6 years. The equity IRR comes in the range of 30-35 per cent on a debt to equity ratio of 70:30. The rate of return on investment by the private sector is so attractive that could pull a crowd of investors provided the government assures the investors of consistency in the policy with a legal cover provided to the private sector investors. The initiative of the government to involve the private sector's investment would not only help improving the quality of service but also be a cost effective measures to beat the inflationary pressures at the end of the day.
ROLE OF RAILWAYS IN URBAN TRANSPORT
In a way, the commuters in all major cities of the country are hostage to the transport mafia, which operates at its own terms and whims and usually causes great hardships for the commuters especially in Karachi and Lahore by frequently calling strikes to press the government for their demands.
Last week the transport went on strike against what they called the exorbitant rise in diesel prices and demanded of the government either reduce the enhanced POL prices or allow them an increase in fares. Although their demands were also supported by the political forces, yet the people had to suffer for two days due to absence of public transport in Karachi.
The nuisance of frequent strikes called by the transporters association paralyses all socio-economic and commercial activities besides causing huge losses to industries running in billions of rupees.
In order to address chronic issue, time has come that the government should materialize much sought after programme of mass transit, which is in vogue throughout the developed world. Introduction of swift light trains on a ring rail track around the city as well as on main thoroughfares of the city would help citizens to get rid of the clutches of the transport mafia in Karachi as well as other mega cities of the country.