Railway's budgetary deficit rose to Rs 40 billion in 2012

The calendar year 2012 was a difficult one for Pakistan Railways (PR) with several reported corruption cases, abuse of authority, operational inefficiency and violation of Public Procurement Regulatory Authority (PPRA) rules. In 2012 Railway's budgetary deficit rose to Rs 40 billion and revenue witnessed a further decline from Rs 15 billion this year in comparison to Rs 18 billion during the same period last year.
PR struggled with shortage of locomotives which was the reason for a sharp decline in earnings. PPRA rules were routinely violated during the year in procurement of locomotives, tendering maintenance works and in awarding business trains. A much publicised example of PPRA violation was the issuance of a tender in favour of a foreign company for purchase of 69 locomotives out of which only 15 are currently operational. However, inexplicably another tender has been awarded to the same company for supply of 75 locomotives at a cost of $105.143 million (Rs 12.7 billion). The government is paying about Rs 164,000 commitment charges per day to the foreign company as the loan for this procurement is effective.
The National Accountability Bureau (NAB) arrested General Manager Operations of PR Saeed Akhtar, for allegedly misusing his authority in relation to the multi-billion rupee scrap scam. On the orders of the Supreme Court, NAB initiated an investigation and concluded that there were violations of prescribed rules with respect to 39,000 metric tons of scrap.
With the consent of Railway Minister, an extension in tenure was granted to Saeed Akhtar which was in clear violation of Supreme Court order. GM Railway was due to retire on March 14, 2012 and was reappointed on contract on March 26, 2012 and granted one year extension by former Prime Minister Yousaf Raza Gilani.
Another PR scam surfaced when an investigation found that low quality oil was used by PR officials, which damaged 198 locomotives. Further a theft of rail engine oil worth Rs 1.5 million was unearthed in Lahore and Rawalpindi and NAB was directed to probe the matter.
PR launched Business Express Train operating between Lahore and Karachi, on Public Private Partnership however Transparency International (TI) Pakistan found the agreement to be in violation of PPRA rules.
PR was compelled to suspend 58 trains on different routes due to severe resource constraints. A decline in revenue and non availability of locomotives for freight resulted in non payment of salaries and pensions forcing the former and current staff to go on strike which led to the release of funds from the Ministry of Finance. The Auditor General of Pakistan (AGP) detected irregularities, mismanagement and operational inefficiency of over Rs 20 billion in PR. The Audit Report on the Accounts of PR for Audit year 2011-12 revealed that various offices of PR were engaged in theft of material valued at Rs 34.747 million. Misappropriation due to fictitious maintenance caused a loss of Rs 3.178 million, whereas the report further detected irregularities of Rs 589.85 million in 300 High Capacity Wagons project. Furthermore operational inefficiency caused decrease in goods and passenger earnings ie Rs 669.792 million and Rs 898.290 million respectively. Railway land valued at Rs 1581.2 million was also encroached. Delay in carrying out periodical overhauling/repairing of 522 wagons and 42 locomotives caused operational inefficiency resulting in loss of potential earnings of Rs 585.393 million.
The government approved a bailout package of Rs 11 billion in 2010 including Rs 6.1 billion for rehabilitation of 96 locomotives. However the government has yet to release this amount to PR. Government increased PR debt limit from Rs 1 billion to Rs 2 billion by issuing guarantee to Pakistan State Oil (PSO) for buying diesel.
The government earmarked Rs 31 billion in the budget 2012-13 on account of grants to PR to meet its losses. Besides this, the government earmarked Rs 22.87 billion for the PR under the Public Sector Development Program (PSDP) in the budget for 2012-13. PR also placed orders for spare parts with Electro Motive Diesel (EMD) USA for rehabilitation of 27 locomotives.
Federal Minister for PR stated on the floor of the house that with the ongoing pace of PR recovery, he did not think that this government would be able to make any significant improvement in its operation. Secretary PR Arif Azeem in a meeting revealed that Railway was in a dilapidated condition because of non-availability of financial assistance, adding that the PR had pending liabilities amounting to Rs 5 billion, besides facing low cash reserves.
The PR employees are discontented while the public perceives PR as unreliable. The available locomotives have average age of 33 years while in the rest of the world this is about 20 years. More than 55 percent track is overage, 70 percent of freight wagons are low-capacity and 86 percent of bridges are more than 100 years old. Signalling system of PR is mostly obsolete.
According to a plan for 2012-13, the Ministry would spend around Rs 22.8 billion to execute 37 projects for rehabilitation of its infrastructure and reinvigorating services in the fiscal year 2012-13. During the year 2012-13, the priority will be given to the procurement of new locomotives as the railway is currently facing shortage of around 500 locomotives. Government allocated Rs 2.5 billion for procurement of around 200 locomotives to help bridge the shortfall of engines, particularly for freight services.
Briefing a parliamentary body about the nine cases of embezzlement in Railway Department, NAB revealed that high ups of the Department were involved in corruption and embezzlement. On a case of embezzlement in the sale of scrap, NAB apprised that Rs 80 million has so far been recovered from PR and the disposal of scrap worth Rs 550 million is under process through NAB court. With respect to embezzlement in the purchase of 69 locomotives, the committee was informed that a reference has been filed against 8 officials in the court.
Following the directives of the Supreme Court of Pakistan, PR retrieved 2457 acres of agriculture land from encroachers including 1255 from Army during the last eight months. The Ministry of Railways has engaged M/s Deloitte to conduct forensic audit of PR to ascertain the reasons why railway is not functioning smoothly. The Supreme Court of Pakistan, during hearing on November 10, 2011 in a suo moto case, had directed Ministry of Railways to conduct forensic audit of PR to ascertain the reasons why the railway is not functioning smoothly.