15 - 21, 2011

Finally, the government has responded to the hue and cries of the minister for railways for the last many weeks that the organization was on the verge of collapse. Finding no other option to save seemingly fast sinking ship of Pakistan Railways (PR) the incumbent government has now approved a package of over Rs10 billion along with other measures like increase in overdraft facility to help the cash-starved state-owned entity.

Experts have however described the announced package as only a peanut. PR needs a large cash infusion just to stay alive. Unfortunately, the government of Pakistan, the usual savior of ailing public sector enterprises is also strapped for cash.

According to World Bank's monthly Bulletin (August), PR is one of the largest loss-making public sector enterprises. Accumulated losses since 2006\7 now exceed to Rs80 billion: overdraft with State Bank is in excess of Rs40 billion and capital expenditures, pension and loan liabilities drain another Rs18-19 billion each year.

PR is thus now totally dependant on government of Pakistan not only for funding its renewals and new investment but also for providing sufficient funds to enable operations. Instead of PR supporting Pakistanís economy, Pakistan is supporting PR. PR's decline started in the 1970s with a curtailment of its autonomy and political interference in its affairs. Interference from politicians and bureaucracy, inability to modernize management practices, mismanagement, and corruption are the core reasons for the disintegrated state of affairs.

According to the details, cabinet committee on restructuring (CCoR), on August 5, 2011 decided that Rs6.1 billion would be provided through a banking consortium for rehabilitation of locomotives while Rs4 billion would be provided through re-prioritization of public sector development program (PSDP) of FY 2011-12 for improvement of tracks and rolling stock.

Similarly, Rs15 billion have already been allocated for PR in PSDP, release for which shall be fast-tracked; and line of credit from Pakistan State Oil (PSO) to PR has been increased to Rs2 billion to ensure smooth supply of oil to PR.

It is important to note that Pakistan Railways is in direct need to arrange money for 250 non-operational locomotives of Pakistan Railways to immediately make them functional, the ministry sources said adding that so far around 4,000 wagons were waiting for locomotives and with the revival of 250 non-operational locomotives, the ailing organization running into deficit may be stable for sometime.

Pakistan Railways, which turned 50 this year, has become old and now is frail enough to be on crutches. It has reached a critical juncture and the authorities have to move fast to save it from a total collapse. It needs a massive dose of financial assistance for its badly needed overhauling and restructuring. If it is not done immediately on war-footing, it might disappear from the scene like many other government departments including the road transport corporation which was wiped out in the past.

One of the largest public sector service organizations of the country which was running in profits and providing a much needed cheaper mode of traveling to the general public for over 100 years has reached its present stage because of poor administration, overstaffing with highly incompetent staff and massive corruption and leakage of revenues since decades.

It has been running in losses for the last three decades or so despite having an unbelievable share of landholdings besides being a source of cheap transportation for millions of people on daily basis. Less revenue generation, mainly because of unchecked rampant corruption and flow of expenses on the high side have taken its overdraft to the tune of Rs40 billion up to March-end this year and is constantly on the rise with each passing day.

It is now unable to maintain, repair, and overhaul its existing assets including locomotives, rolling stones, track, and even its signaling system. Now it has reached the stage that, almost every week, it has to call off its two or three services for want of fuel. Almost all uneconomical routes have been suspended on the grounds of loss making.

Frequent failure of available locomotives has made it difficult to maintain a credible operation.

According to some insiders, the present indifferent attitude of the government towards the serious collection of Pakistan railways is deliberate and on purpose.

Some high-ups in the incumbent government are keen to create conditions justifying its privatization. The main attraction is the precious land owned by the Pakistan railways throughout the country.

According to the experts, however, privatization is not the correct solution for an organization, which is not purely commercial. One should keep in mind that the railway is not a purely commercial enterprise. It is a service department and profit alone cannot be the consideration to run it.

If it is fully privatized, the business-minded owners guided by purely business considerations, will be fully justified to shut down all loss-making routes, but it should not and cannot be allowed to happen in larger public interest.

The railways cannot and should not be judged by the yardstick used for judging ordinary commercial organization.

However, some economists of international repute from the subcontinent believe that Pakistan can learn a lot from Indian experience in this respect. About 10 years back Indian railway was almost in the same pathetic conditions as Pakistan is facing today. But soon it improved and again started showing profit by the year 2007.

During the three years (from 2007 to 2010), it made a whopping profit of over Rs346 billion without increasing passenger fare or freight charges. Through improved management, downsizing, outsourcing, product innovation and introducing line-ticketing, Indian railways has now become India's second most profitable state-run enterprise.