The government could save one billion dollars annually through commercially viable Pakistan Railways, if it substantially increases traffic and charge remunerative rates.
According to a World Bank report indicated on 'focused commercial rail investment programme', it said that increasing the utilisation of existing operational assets has to be the first priority through, eg reducing terminal times, faster wagon turnaround and higher passenger load factors.
However, such increased utilisation may have a relatively limited impact and investment in the commercial rail sector would be necessary. Investments need to be subject to critical financial examination to ensure that it should increase the capacity in most effective manner. In the past, under-investment in rail wagons has resulted in PR owning a very small fleet of modern, high capacity wagons able to run at the speeds necessary to compete with road transport sector.
A substantial investment in modern wagons would be necessary if the rail sector is to carry more freight. While the investment is undoubtedly required, the source of the investment and the ownership of the wagons need not necessarily be the public sector. Many railways, even those within the public sector operate with wagons owned by customers. Within the appropriate commercial and legal frameworks, private sector investment in rolling stock may have potential in Pakistan.
The locomotive utilisation on Pakistan Railways given the average haul lengths, is low averaging only about 350-kilometres per locomotive in service. Slow speed of freight trains reduces average locomotive utilisation and more modern wagons should raise locomotive utilisation.
More locomotives would be required but to achieve the reduced transit times and improved reliability of the freight services, a change in locomotive allocation will be needed, giving much higher priority to freight traffic.
The PR's present plans allocate substantial investment to track capacity improvements. These should perhaps be reassessed according to such criteria as cost-effectiveness and the policy support to giving priority to freight.
Given the reduction in the number of trains operated since the peak levels of the past, the immediate priority for substantial additional track capacity may appear somewhat uncertain.
The World Bank report questioned; "Could the required capacity and improved train service levels be provided by modern train control systems at lower cost?" "Are the signalling and train communication investments included in the investment plan, cost-effective in terms of their likely impact on rail safety, given the number of trains run on the system?" "Does the investment require raising maximum permissible train speed from 110 km per hour to 140 km per hour support the PR's commercial viability?" "Such speeds are not required for the freight businesses. Are PR's passengers willing to pay the fare premiums necessary to justify and finance such investment? Express, mail and inter city trains average 50km/h, could significant average speeds be raised without major track investment?" "Is the rehabilitation of the existing electrified track section, and its extension, cost-effective in terms of cost and/or energy efficiency, in comparison with using the same resources to invest in modern, fuel-efficient diesel locomotives?"
At least, some of the proposed investments still seem to reflect the priorities of an engineering-led passenger railway, rather than a business-led transport enterprise.
Commercial focus for the businesses is to remove the burden of history, the PR's core commercial businesses are presently held back by the legacy of history (the need to cross-subsidise a large network of rail-lines which are no longer commercially viable or, perhaps, socially or strategically necessary).
The report said, "To achieve commercial viability and meet their potential objectives in Pakistan's transport sector, the commercial rail-businesses need to be able to compete without these costs. The rail's commercial businesses should be placed on the same commercial basis as its road competitors. If the PR's core freight and passenger services are to compete effectively on the basis of current avoidable costs, they need to be relieved of the costs of operating the large non-commercial network of lines and services as well as the costs of providing pensions to retired employees.
In addition, the financing for infrastructure costs and treatment for taxation in the road and rail sector should be placed, as far as possible, on an equal basis.
Some form of financial restructuring will be necessary, but such restructuring needs to be undertaken within the framework of modern commercial cost accounting and financial targets for management. The PR should be expected to make adequate provision for the replacement of its operating assets and meet normal financial returns on the commercial assets employed.
The restructuring of PR's finances is unlikely to raise significant issues within PR, re-balancing the priorities accorded to freight and passenger businesses may be more problematic. It is clear that freight is much closer to covering its costs than passenger services.
Moreover, there is a very large freight market within which the railways should be able to compete. Recapturing the long distance, freight market will require not only the provision of attractive rates and conditions of service, but also re-establishing market credibility for delivering reliable services. Separating the finances of the freight and passenger businesses should allow both businesses to focus on their strengths, allowing them to take decisions on the basis of realistic financial information.
The PR to eliminating the subsidies should allow the freight business to offer more attractive rates, but regaining market confidence may be more difficult.
The new container train services connecting Karachi and the Punjab are a start but they have yet to offer guaranteed delivery times, which may be critical to regaining the market, especially for export traffic. To provide guaranteed delivery times, the freight business has not only to have reliable motive power but also guaranteed train paths and an equal priority to passenger services, so that locomotives are not switched from freight to passenger services, if passenger locomotives fail.
It is very difficult to see how the freight service will re-establish such credibility if the present organisational structure continues. Operational and commercial autonomy, together with effective control over its assets, appear to be basic conditions.