Case Study: Pakistan Railways

ACKNOWLEDGMENTS

Case Study: Pakistan Railways

TABLE OF CONTENTS

Introduction ....................................................................................................................................2 History .............................................................................................................................................3 Services ............................................................................................................................................5 Importance ......................................................................................................................................6 Sources of Revenue .........................................................................................................................7 Issues and Challenges .....................................................................................................................8 Recent Liabilities and Losses ........................................................................................................14 Recommendations for Reform ......................................................................................................15 Modernization Activities .............................................................................................................16 Development Schemes ..................................................................................................................17 Sources of Information .................................................................................................................18

Case Study: Pakistan Railways

INTRODUCTION

Case Study: Pakistan Railways

HISTORY OF PAKISTAN RAILWAYS

The idea of a rail network was first thought of in 1847, with the possibility of Karachi becoming a major seaport. Sir Henry Edward Frere, who was appointed as the Commissioner of Sindh, sought permission from Lord Dalhousie to begin a survey for a Karachi Seaport and a survey for a railway line in 1858. The proposed railway line would be laid from Karachi (city) to Kotri. A steamboat service on the Indus and Chenab rivers would connect Kotri to Multan and from there another railway line would be laid to Lahore and beyond. On May 13, 1861, the first railway line was opened to the public, between Karachi (city) and Kotri, with a total distance of 105 miles (169 km). By 1886, there were four railway companies operating in what would become Pakistan; the Scinde (Sindh) Railways, Indian Flotilla Company, Punjab Railway and Delhi Railways. These were amalgamated into the Scinde, Punjab & Delhi Railways Company and purchased by the Secretary of State for India in 1885, and in January 1886 formed the North Western State Railways, which was later on renamed as North Western Railway (NWR). This would eventually become Pakistan Railways in 1947. Another railway line between Karachi and Keamari was opened on June 16, 1889. In 1897, the line from Keamari to Kotri was doubled. It was the year 1857 when the idea was suggested by William Andrew (Chairman of Scinde, Punjab and Delhi Railway) that the railways to the Bolan Pass would have strategic role in responding to any threat by Russia. During the second Afghan War (187880) between Britain and Afghanistan, a new urgency was needed to construct a Railway line up to Quetta in order to get easier access to the frontier. On 18 September 1879, under the orders of Viceroy Council, work begun on laying the railway tracks and after four months the first 215 km of line from Ruk to Sibi was completed and become operational in January 1880. Beyond Sibi the terrain was very difficult. After immense difficulties and harsh weather conditions, it was March 1887 when the railway line of over 320 km long finally reached Quetta.[5] By 1898, as the network began to grow, another proposed railway line was in the works from Peshawar to Karachi. It closely followed the route taken by Alexander the Great and his army while marching through the Hindu Kush to the Arabian Sea. During the early 20th century, railway lines were also laid down between Peshawar and Rawalpindi and Rawalpindi to Lahore. Different sections on the existing main line from Peshawar and branch lines were constructed in the last quarter of 19th century and early 20th century. In 1947, at the time of independence, 3,133 route kilometres (1,947 mi) of North Western Railways were transferred to India, leaving 8,122 route kilometers (5,048 mi) to Pakistan. Of this

Case Study: Pakistan Railways

6,880 route kilometres (4,280 mi) were Broad gauge, 506 kilometers (314 mi) were Metre gauge, and 736 kilometers (457 mi) were Narrow gauge.[6][7] In 1954, the railway line was extended to Mardan and Charsada, and in 1956 the JacobabadKashmore 2 ft 6 in (762 mm) gauge line was converted into broad gauge. In 1961, the Pakistani portion of North Western Railways was renamed Pakistan Railways. The Kot AduKashmore line was constructed between 1969 and 1973 providing an alternative route from Karachi to northern Pakistan. In February 2006 the Mirpur Khas-Khokhrapar 126 km metre gauge railway line was converted to broad gauge.

Case Study: Pakistan Railways

SERVICES
Today, Pakistan Railway comprises 8,775 route km, 781 stations and 42 trains halts. It has a fleet of 546 diesel electric locomotives, 25,815 wagons and 2,099 passenger coaches. Pakistan Railways is multi system and operates on three gauges, i.e. broad gauge, meter-gauge and narrow gauge. Maintenance is provided by three major locomotive workshops and thirty-five smaller workshops. Signaling facilities at important stations are track circulated within interlocking limits. Most routes have VHF radio coverage for communication between train dispatchers and trains. Telephone Communication is over wire lines and microwave. Freight traffic during the past five years has averaged 5-6 million tons per annum. It was 15 million tons per annum in the 1960 but trucking has steadily taken over the freight market. The volume of freight traffic in 1995/96 was approximately 5.1 billion-km. PR carried about 145 million passengers per annum in the 1970 but during the past five years, it has dropped to 70 million per annum. However the average distance per kilometer has increased from 80 km in the 70's to about 260 km today. Pakistan Railways website, www.pakrail.com, is also available worldwide which makes more convenient for people, now available through you can plan your journey and can see which train is available to serve you, and then you can check seat availability, freight rates, train timings and general information about Pakistan Railways

Case Study: Pakistan Railways

IMPORTANCE OF RAILWAY
The dwindling sustainability of Pakistan Railways (PR) continues to be of great concern to the pride of Pakistani people in general and causes a serious dent in the image of Pakistani management prowess in particular. While the PR operations shrink with each passing day, across the border in India, the Indian Railways in contrast is hailed as the largest national employer that not only posts a healthy yearly profit, but has also been successful in expanding and improving its services over time. The PR annual budget, and in addition the funds required annually to plug its operational losses (in order to keep it operational), has in recent months generated a lot of euphoria. Sadly, the overall management structure of Pakistan Railways as it stands today does not inspire any confidence for improvement in the organizations fortunes in the days ahead - a Railways Ministry that seems out of sorts and, perhaps, lacks the leadership to meet the challenges it is confronted with; an advisory board (for turnaround of PR) that has barely met since its formation; an army of employees which is neither sustainable nor motivated; and last but not least, a management environment that focuses more on day-to-day survival endeavors than on providing any kind of long-term vision. A culture laden with dodgy deals, half-baked initiatives like those of the business train (good in theory, but poorly implemented), route privatization, partial outsourcing to overcome glaring inefficiencies, and a complete lack of discipline that invariably leads to strikes, project delays, vandalism, theft and security breaches like the one we, unfortunately, saw at the Lahore railway station last week, are all elements that issue a stark warning that this great asset of the country is be being pushed to the brink of closure.

Case Study: Pakistan Railways

SOURCES OF REVENUE
OPERATING REVENUE OF PAKISTAN RAILWAYS

Case Study: Pakistan Railways

ISSUES AND CHALLENGES

The dwindling sustainability of Pakistan Railways (PR) continues to be of great concern to the pride of Pakistani people in general and causes a serious dent in the image of Pakistani management prowess in particular. While the PR operations shrink with each passing day, across the border in India, the Indian Railways in contrast is hailed as the largest national employer that not only posts a healthy yearly profit, but has also been successful in expanding and improving its services over time. The PR annual budget, and in addition the funds required annually to plug its operational losses (in order to keep it operational), has generated a lot of euphoria. Sadly, the overall management structure of Pakistan Railways as it stands today does not inspire any confidence for improvement in the organizations fortunes in the days ahead - a Railways Ministry that seems out of sorts and, perhaps, lacks the leadership to meet the challenges it is confronted with; an advisory board (for turnaround of PR) that has barely met since its formation; an army of employees which is neither sustainable nor motivated; and last but not least, a management environment that focuses more on day-to-day survival endeavors than on providing any kind of long-term vision. A culture laden with dodgy deals, half-baked initiatives like those of the business train (good in theory, but poorly implemented), route privatization, partial outsourcing to overcome glaring inefficiencies, and a complete lack of discipline that invariably leads to strikes, project delays, vandalism, theft and security breaches like the one we, unfortunately, saw at the Lahore railway station, are all elements that issue a stark warning that this great asset of the country is be being pushed to the brink of closure.

SOME ISSUES
1. Shortage of Locomotives According to news reports from 2011-12, of PR's 500 locomotives, only around 70 are operating because of a lack of money to purchase fuel, pay salaries and maintain equipment. Pakistan Railways had terminated 106 trains due to a lack of money to purchase fuel and to pay employees and pensioners, Shahid Mehmood, a spokesman for Pakistan Railways (PR), told Central Asia Online October 15 2011. According to published reports there were 206 trains operating before the cuts, and since then the number of operating trains has fallen to only 70, with 74 engines. The service cuts mean each engine has to haul more passenger cars at lower speeds, as well as causing further losses in freight revenues. The dry ports which manage freight business show even grimmer prospects as hundreds of bogeys are parked with no engine to pull them.

Case Study: Pakistan Railways

However, those providing transport services outside the port have found plenty of business. Goods are now being transported through road networks instead. Some experts argue that the continuation of transport through roads is detrimental not only to the financial health of PR but also the environment of the country as it results in traffic congestion and damaged roads.

2. Inadequate Technology and Infrastructure Pakistan Railways have the responsibility of developing and maint aining their infrastructure. The task becomes more difficult as Rai l w a y s h a v e t o d e p e n d o n centralized structures for approval and funding. This makes it less competitive in response to road carriers who do not have to invest in basic infrastructure like roads. Following a shift in the priorities of the Government after seventies, when the emphasis shifted to the road sector, investment fell sharply in the Railways sector resulting in deterioration of infrastructure, and failure to expand or improve Pakistan Railw ays network. R a i l w a y p e r s o n n e l h a v e h i g h l i g h t e d a g i n g a s s e t s a s o n e o f t h e critical factors causing poor performance of Pakistan Railways. Normally a locomotive consists of six traction motors while the Pakistan Railways is operating them with only three or four motors. This is the major reason of mid way breakdown. A number of trains lack facility of light at nights because of the failure of the generators and illattitude of workers, and mismanagement of fuel and money. The passengers have to suffer in either case.

3. Mismanagement In an interview conducted in the end of December 2011 by The Express Tribune, Sagheer Cheema, a mechanic who has been with the organization for 25 years, speaking on the current disarray that engulfs Pakistan Railways (PR), he alleged that Senior officers who are qualified engineers at the public sector organization have been siphoning off commissions from deals for needless machinery. Poorly time schedules, numerous unscheduled stops, over staffing and inefficiency of the workers, lack of a proper accountability system, are all factors that represent the inefficient management of the railway system that have been a major contribution to its gradual decline.

4. Passenger Problems The suspension of most short-distance trains affected thousands of passengers who used innercity rail travel to get to work. Routes to and from major cities suffer a different predicament, as

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trains are not suspended but are often several hours late, with some journeys delayed for up to hours or even days. But business continues to boom for transporters outside the rail network, and commuters have begun to complain about the economic feasibility of the system compared to travelling by train. Commuters argue that using alternatives for transport also leads to increased costs, hiking up inflation in the country and adding to the woes of an already ailing Pakistani economy.

5. Declining Market Share Railway sector in Pakistan has not maintained its position in the transport sector. The market share of Pakistan Railways kept on declining with the passage of time. Roads have steadily become the more preferred form of transportation as shippers have moved to trucks because of PR's inefficiency and theft. An example of PRs declining market share is that it is moving only 11% of total petroleum products and 2% of the total containers. A more professionally managed and independent railways have immense growth potential.

6. Increasing Budget Deficit The biggest problem for Pakistan Railways is the soaring budget deficit. Although railways are traditionally not expected to earn profit, however, it is legitimate to expect from railways to meet at least operational expenses. A government spokesman said the Federal Cabinet approved Rs 10.1 billion (US $120m) in August of this year for PR to upgrade equipment, but only Rs 1 billion (US $10m) has been released, out of concern over PRs management. Federal Minister of Railways Ghulam Ahmad Bilour said October 18 that PR has had an annual operating deficit over the last five years, rising from Rs 4.7 billion (US $54.6m) in 2007-2008 to an expected Rs 26.3 billion (US $30m) for 2010-2011. Bilour said PR needs more locomotives to make it a profit-earning entity, adding that currently there are not enough freight trains because all the locomotives are used for passenger trains. The railway is considered the transport of the poor as it runs from south to north and east to west with relatively affordable fares. If it terminated its operation, about 7m passengers, mostly poor, will be severely affected, said Mohammad Ali Qazi, a government official from Sanghar, Sindh, who regularly rides PR. The annual losses have resulted in a PR debt of Rs 40 billion (US $460m), to the Pakistani National Bank, for which it has been paying Rs 4.6 billion (US $50m) in interest annually, he said. At the same time revenue has declined for the past three years, from Rs 22 billion (US $254m) in 2009, to an estimated Rs 12 billion (US $140m) this fiscal year.

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For 2011-2012 Rs 45 billion (US $520m) has been earmarked for PR in the federal budget, while expenditures in the 2010-2011 fiscal year were Rs 51.78 billion (US $600m). Bilour said the continuous decline in revenue and increases in passenger fares and freight rates have resulted in the non-payment of salaries and pensions. He said that 100 more locomotives are required immediately to meet the demand for freight trains.

7. Corruption Deputy Parliamentary leader of the Muttahida Qaumi Movement in National Assembly Hyder Abbas Rizvi blamed corruption and political appointments for PRs problems. If we look at the history, like other government corporations, vacancies in PR were also awarded to political workers without merit, thus crumbling (its) very fabric, he said. The PR system has also been poorly maintained, he said. Other MPs also cite corruption and cronyism as major causes of PRs problems. If railways in other countries are profitable, then why not in Pakistan? asked MP Ahsan Iqbal of the Pakistan Muslim League-Nawaz. Ahsan suggested public sector organizations, including PR, need autonomy in order to operate efficiently. The railway is cheapest mode of transportation and widely used by the poor and lower class and needs urgent attention of the (government), said Sheikh Rashid, former Federal Minister for Railways. He blamed the maintenance branch of the railways for the current state of PR and suggested that locomotives be immediately leased to continue services. One option the government has considered is privatization of PR. The Chief Justice has expressed his disapproval for the high-ups of Railways in the following comments: Ninety metric tons of silver worth millions was sold for mere Rs28, 000 as scrap, while a light bulb worth Rs60 is being purchased at Rs400, whereas absence of maintenance turned expensive locomotives into junk one by one, besides a Grade-18 officer, a blue-eyed boy of the railways minister, is promoted to hold a Grade-20 post of secretary purchase. In the words of Chief Justice the electricity wires meant for electric trains from Lahore to Khanewal have been stolen. Moreover, he observed that tickets were sold in advance outside ticket counters and tickets were not available at railway stations. It is also in the notice of the apex court that land mafia has grabbed Pakistan Railways land in different areas of the country.

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However, corruption is not limited to those in senior positions. Low-level corruption is hurting Pakistan Railways as well for example, a big percentage of losses are caused by ticket-less travel.

8. Missing Transport Policy No work has been done for a national transport policy in 63 years but we are trying to come up with a plan soon, says Akhtar Hussain Jadoon, the provincial minister of transport in Sindh. His view is echoed by others. The National Logistics Cell (NLC), a creation of former army dictator Ziaul Haq, led to the transfer of all transport from railway to roads, says Vice President Pakistan Railways Employees Union (PREM) Sheikh Anwar. NLC, which is a military-backed organization, manages most of Pakistans freight, along with private transporters. According to the union representative, who has been associated with the railways for 25 years now, NLC marked the beginning of the end for Pakistan Railways. While the government has not evolved a transport policy it also lagged on reconstituting the railway board to include technical staff. The board has 12 federal secretaries which never end up meeting and we had suggested that it should have a small number of representatives in March 2010, says Sardar Ayaz Sadiq, chairman of the National Assembly standing committee. He alleges that even though the prime minister agreed, there was no progress on the issue. Similar to the announcement made regarding the revamping of the railway, nothing ever happens. And how can it? Look at the federal railway minister, he can barely talk, Sadiq adds. Quoting a recent interview with the railway minister, in which he claimed to have said that many countries in the world didnt have a railway network, citing Afghanistan as one of his examples, Sadiq says that the ministers words were a haunting reminder of the road ahead. If we do not act fast, the public sector that employs the largest workforce will collapse and then no one will be able to revive it.

9. Absence of a Clear Direction Among the officers of Pakistan Railways, concern for the abysmal state of affairs is universal. However, there is no clarity on a vision for a desirable change. There appeared to be the anomaly of the desire for improvement jarred with latent fears of the results of the reform. These fears result from an absence of a clear understanding of the end point of the reform. Reform for what? The question remains unanswered in the minds of most officers and a collective vision does not exist. The vague sense of vision and direction also pervades the upper echelons of decision -making. The Government has still not been
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able to articulate a clear direction for the national railways. In any case, in the absence of an overall national transport policy it is difficult to find a viable solution for railways in isolation.

10. Human resource issues PR employs more than 90,000 people, and if the rail system collapses, they would lose their jobs, adding to the countrys unemployment rate, which is more than 15%, according to statistics. Railways needed Rs2.2 billion to pay the salaries and pension to its protesting employees but the government has not released enough money to overpower the deep financial crisis. Moreover, since the trains are seldom used, most of these 90,000 employees sit idle at home and receive salaries without doing any work.

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Case Study: Pakistan Railways

RECENT LIABILITIES AND LOSSES

Minister for Railways Haji Ghulam Ahmad Bilour on Monday informed the National Assembly that Pakistan Railways (PR) total payables stood at Rs58,603.363 million till January while its total loss at Rs34,037.322 million so far. Replying to a question during Question Hour, he said that acute shortage of locomotives was main reason of loss, resulting complete closure of freight service, which was considered a key source for revenue generation. The Minister said that no new locomotives had been purchased since March 2008 and at present only 180 locomotives were functional. To another question, Bilour apprised the House that an amount of Rs253 million had been spent on repair and renovation of seven railways stations during the said period. Giving the break up, he said that a sum of Rs44.049 million was spent on Karachi railways station, Rs7.983 million on Quetta station, Rs93.231 million Sukkur station, Rs35.679 million Multan station, Rs64.087 million Lahore station, Rs5.378 million Rawalpindi station and Rs2.600 million on Peshawar station.

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RECOMMENDATIONS FOR REFORM

China and India have among the largest railway networks in the world and the two largest networks in Asia. Both countries have modernized their railway. As Pakistan has demographic conditions quite similar to India, we can learn by the strategic improvements made by India in reforming its railway, which was also suffering from acute financial problems in the 1990s. The Indian Railway (IR) has staged a dramatic turnaround in recent years. The IRs renaissance has been engineered by simple entrepreneurial practices which have evoked the admiration of the internationally renowned institution. The reforms made in the IR can be classified in two categories: one which involves no significant capital and the other which involves capital investment. The following are some innovative and effective measures taken by the IR with no significant capital involvement. a) Dynamic tariff: Previously the IR used fixed pricing for their trains. The IR introduced dynamic pricing dependent on demand. Now in peak seasons fares are higher than off-peak seasons. This measure improved the capacity utilisation and overall revenue. To implement such a plan help from information technology (IT) experts was taken to build software and websites for the ease of passengers like flight reservation system of airlines. b) Capacity enhancement: Productivity improvement by increasing wagon loading capacity and significantly reducing wagon turnaround time. Wagon turnaround time was improved by two factors: first, platform length was increased to match the length of the train carrying goods, thus reducing loading and unloading time. Loading and unloading of goods are started in the night along with day time which previously was only a day-time activity. This helped in reducing train idle time at any station.

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c) Loyalty discount scheme: The IR introduces loyalty cards for passengers and discount to large industries using railway to transport their goods. Apart from the above-mentioned less-capital-intensive tasks the IR took some measures to improve cash flow with the help of private public partnership (PPP). The IR started a wagon procurement scheme with private capital and profit gained by those new wagons is shared among partners. Also the IR is outsourcing catering and passenger amenities to the private sector. In the similar way the Pakistan Railways can be reformed by focusing on capacity utilisation, reduction in unit cost and improvement of services.

MODERNIZATION ACTIVITIES
The major emphasis of Pakistan Railways has been on the replacement of overage assets. Due to resource constraint, however, it is now engaged in modernizing certain areas as best as it can. These include the following:

To ensure more comfortable journey it has been decided to manufacture only lower class air-conditioned coaches in future. All second class coaches are being provided with cushioned seats. Reservation work has been computerized on modern lines at Lahore and Karachi stations; the system's two major reservation centres. Computerization of reservation offices of Peshawar, Rawalpindi, Faisalabad, Multan and Hyderabad is in progress and is likely to be commissioned shortly. The steps are now underway to link these stations with other major railway stations. Closed circuit televisions have been introduced at Lahore, Karachi, Multan and Faisalabad railway stations. This entertainment is being extended to Sukkur, Rawalpindi and Peshawar stations in the next phase. Subak Kharam and Shalimar trains have also been provided with closed circuit televisions and this system is being provided in Subak Raftar also. Public address system is being provided in Subak Raftar, Subak Kharam, Tezgam and Khyber Mail trains.
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Modernization of Karachi, Quetta, Hyderabad, Multan, Lahore, Faisalabad, Rawalpindi and Peshawar Railway stations, removal of hindrances on railway platforms and up gradation of approach roads are being carried out. Private Sector is being encouraged to participate in the activities of the system. As a first step, ticket selling and ticket checking on Lahore-Faisalabad and Lahore-Narowal-Sialkot Sections have been privatized. Feasibility study for a high-speed track is in hand.

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DEVELOPMENT SCHEMES
The Pakistan Railways has proposed major replacement and rehabilitation schemes for the forthcoming five year plan. An amount of Rs. 40 billion has been allocated for ongoing and new works. The major physical components which would be completed during the Plan period include:

Doubling of track from Lodhran to Peshawar (800 Km) to ensure sustained improvement in the turn round time of rolling stock and motive power; Manufacture of 51 locomotives; Rehabilitation of 101 diesel electric locomotives; Manufacture of 175 new design light-weight passenger coaches; Equipping 7000 wagons with roller bearing; Revamping of 14 electric locomotives; Procurement of 1400 high capacity wagons; Procurement of 50 wagon movers; Introduction of Management Information System; Improvement and Rehabilitation of track to cater for high speeds; Telecommunication and Signaling Network on main and important branch lines.

Today, plans are afoot to introduce bullet-train type train service between Karachi and Lahore. Although a gigantic project for countries like Pakistan, but every new idea starts from a dream and this dream may not take long to materialize.

CONCLUSION Despite the prevailing issues, the importance of railway in Pakistan cannot be denied. It plays an important role in the economy of the country. The potential of improvement is always there, if the Railway Ministry redresses its policies and pays special attention to the implementation process. The PR administration is trying to improve its services as it is planning to operate trains with private-public cooperation. Korean Railway (KORAIL) officials visited Pakistan to view the scope of operating trains on suburban routes.

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There is no shortage of passengers or freight in the country but it is a big question whether the PR administration will be able to get business or not?

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SOURCES
http://www.geo.tv/GeoDetail.aspx?ID=89702 http://tribune.com.pk/story/301469/pakistan-railways-special-report-a-journey-of-neglectincompetence-and-corruption/ http://pakobserver.net/detailnews.asp?id=125216 http://centralasiaonline.com/en_GB/articles/caii/features/pakistan/main/2011/10/26/feature-01 http://www.finance.gov.pk/survey/chapter_12/13-TransportAndCommunications.pdf http://pakrail.com/
Shahid Javed Burkis article Making the railways work (Economic and Business Review, Nov 1).

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