Railways perennially off the track

The newly-appointed Railways Minister Azam Khan Swati is reported to have stated that Pakistan Railways is incurring on an average, an annual loss of Rs 35 to 40 billion, adding that the government plans to revive the organisation sooner rather than later. Last week, the Senate in its hearing, was apprised that Pakistan Railways has posted an accumulated loss of Rs187 billion in the last five years whereas its highest-ever loss of Rs 50.15 billion, in a single year, was witnessed in the fiscal year that ended on June 30, 2020.

Last month, the Supreme Court, too, had ordered the transformation and revival of this national entity and had given a four-week deadline to the government for initiating process. Headed by Chief Justice Gulzar Ahmed, the bench had taken a suo motu notice in view of the dismal performance of the railways.

Pakistan Railways has been reprimanded, year after year, by every government. Whereas, every minister, on assuming charge of Railways, expresses strong optimism about the revival prospects of this organisation. But no warning or admonishment ever went beyond promises and every railway minister’s tenure ended in deep frustration and helplessness.

This is not surprising as Pakistan Railways, with its present organisational structure and business model, has no chance to be turned-around as a profitable and efficient entity.

The arrival of Railways in the subcontinent was a revolutionary infrastructural development. It was in 1832 that the British East India Company established Railways in the region. In the first phase, it was industrial railways for the transportation of heavy material and goods. It was in 1852 that passenger transportation was added to the system. Right from its inception, the fiscal viability of operation was based on a business model with high revenue generation out of transportation.

The few prized assets inherited by Pakistan from the British, is the railway infrastructure network and the irrigation canal system, both spread out from one corner of the country to another. Till late sixties, Pakistan Railways was the principal mode of passenger and cargo transportation. Its share in freight was a good 70 percent. High revenue generated from cargo compensated moderate revenue generated from passenger traffic, as is the worldwide phenomenon. Railways was then one of the prime institutions of Pakistan. It was profitable and excelled in service and efficiency.

It was in the 1970s, when the business and operational model of railway was dramatically altered, with the entry of private transporters in freight business and the National Logistics Cell (NLC). Pakistan Railways’ share in freight was reduced from 70 percent to negligible, thereby, adversely affecting the fiscal balance. Railways soon started to record losses and consequent deterioration in its service prevailed, year after year. Political and bureaucratic interventions, overstaffing, the well-entrenched and influential road transport lobby, vested interests and state leadership’s indifference never allowed Railways to stage a comeback.

A window of opportunity was made available to Railways in the early 1990s, with the influx of Independent Power Producers (IPPs) in Pakistan. The proposal by the lenders was to transport oil, from Port to IPPs by freight trains. A substantial investment was pledged to develop railways infrastructure under a viable business plan. But the fraternity of vested interests did not allow Railways to cash in on that opportunity.

To turn around the Railways, the business model worked out in 1850 and practiced hitherto in the developed world has to be restored or reintroduced. The freight business snatched from railways has to restore to it. Once done, the rest is easy to manage.

(The writer is former President of Overseas Investors Chambers of Commerce and Industry)

Copyright Business Recorder, 2021