Greater connectivity with China, upcoming coal-based power projects and the expected development of special economic zones under China-Pakistan Economic Corridor (CPEC) would boost Pakistan Railways' passenger and freight business. According to the State Bank of Pakistan's recent report, government has already envisaged enhancing the share of railways in transportation from current level of four percent to 20 percent by 2025.
Pakistan Railway's outlook is positive as the up-gradation of mainline (Karachi-Lahore-Peshawar) railway track, constructions of dry port and cargo handling facilities would significantly improve the public entity's capacity to handle large traffic volume, the report says. During the first nine months of FY 16, Pakistan Railway (PR) earned Rs 26.4 billion, an increase of Rs 3.2 billion as compared to earnings for the corresponding period of FY 15.
At the same time drastic fall in the POL prices in global markets considerably reduced the gap between operating revenues and cost. However, the overall losses are still high at Rs 27.3 billion in FY 15 reflecting the need to introduce much wider structural reforms in the public sector entity.
The financial stress on the PR turned acute when the sharp increase in fuel prices in 2008 caused soaring of expenses because most of the locomotives ran and still run on diesel. Whereas revenues fell due to shrinking operations in the meantime, the continued financial constraints did not allow room for investment in the PR infrastructure. Thus, the rolling stock ie number of locomotives, passenger coaches and freight wagons kept on declining with the passage of time. With no notable replacement and modernisation, the maintenance cost of this old infrastructure increased to unsustainable levels.
The quality and scope of services also fell when the track length and number of routes were slashed. Although PR raised average prices to shore up revenues, the poorer and costlier services led to a sharp decline in both passenger and freight traffic.
The staffing needs of PR also did not adjust to falling business volumes. Hence, salary and related expenses kept on consuming a major share of shrinking revenues. Though the government provided several ad hoc bailout packages, such support could not bring any major financial improvement in PR.
The SBP report says that in this backdrop, the recent improvement in the operation of PR is heartening. A number of initiatives helped in realising these gains. For example, repair of existing locomotives and procurement of new ones have allowed PR to expand its operation with greater reliability. Tariffs have been adjusted downward to improve occupancy, focus on freight business has increased, and greater participation of private sector in train operation and management of terminals has improved revenues.
Quoting Pakistan Economic Survey, the report says "expansion in road network has remained on priority since late 1970s. The total road length, which had recorded an increase of 4,842 km during 1965-1975 expanded by 37,848 km in 1975-85 and further 81,402 km during 1985-95."
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