pakistanrailways challengesandresponse 150510160014 lva1 app6892

7/23/2019 Pakistanrailways Challengesandresponse 150510160014 Lva1 App6892

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Shahid Hussain RajaIndependent Consultant-Public Policy

May 10,2015


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Introduction Iportance o! Rail"ays S#$% &nalysis

#hat ails the Pa'istan Rail"ays Causes o! decline Ho" to () it * Conclusion


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Pa'istan Rail"ays is one o! the ost discussed state

o"ned enterprises+S$s in the country, blaed !orincurrin. hu.e annual losses and unsatis!actoryper!orance

/eepin. in ie" its social and political si.ni(cance and itsbein. the ost enironental !riendly transportationode necessitates necessary easures to iproe itseciency

#hat "ent "ron. and "hy * #hat easures can be ta'ento arrest its !urther decay are soe o! the 3uestions "e

are .oin. to discuss in this presentation

Its article ersion is aailable at y "ebsite"""shahidhussainrajaco
http://www.shahidhussainraja.com/http://www.shahidhussainraja.com/


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Pa'istan Rail"ays has been playin. a ery crucial role

in social, econoic and political deelopent o!Pa'istan !or the last 150 years

ployin. ore than 45,000 persons and proidin.eployent indirectly to al least ten ties ore, itcontributes si.ni(cantly to the 6P o! the country

7ein. the cheapest ode o! transportation o! .oodsand coutin. passen.ers, it has been the piot o!Pa'istan8s industrial and coercial deelopent

#ith ore than 90 illion passen.ers eery year !roone corner o! the country to other, it is not only asybol o! unity o! the country but also a ehicle o!social and political inte.ration


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Rail transport consues only one si)th o! the ener.y

per unit "ei.ht-' as copared to road transport, it isless pollutin. source o! trac-eissions per %/M

6espite coon perception, rail !atalities are uchlo"er than road ie ore than 10,000 per year onroads as copared to less than 100 in rail"ay syste

6urin. any disaster or eer.ency Pa'istan Rail"ayshas been the ost pre!erred eans o! transportin.relie! .oods in the shortest possible tie

:astly, 'eepin. in ie" the .eo.raphical contours o!Pa'istan, it is an e)cellent and ost econoical odeo! transportation !or lon. distance .oods haula.e


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;ro strate.ic asset to coercial entity

;ro onopolistic to copetitie

;ro public "el!are to coercial

;ro purely state ana.ed to priate

;ro all haul to lon. haul


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Continuous losses

Consuer dissatis!action

6epletin. assets

6eorali


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Constant !all in earnin.s o! the Pa'istan Rail"ays has beenthe prie reason !or the continuous losses it is su=erin. %hisin turn is due to three ajor reasons

1 Reduction in its train operations either because o! shorta.eo! locooties and .oods "a.ons and passen.er bo.ies orthe d"indlin. nuber o! passen.ers "ho are optin. to traelby road because o! iproed road net"or'

2 Sta.nant tari= structure o! Pa'istan Rail"ays due to social"el!are and political considerations

> :ea'a.es and "asta.es in reenue collection due tostructural or ana.erial inade3uacies are the third ajorreason !or the reenues !allin. sort o! the tar.ets ()edannually


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In 2005 Pa'istan Rail"ays passen.er serices coered 95 percent o! their train-runnin. costs Since then, passen.erreenue per passen.er-' has increased by 50 per cent"hile costs hae ore than trebled due to !ollo"in. reasons

1 In?ation-in?ationary pressures are erodin. the purchasin.

po"er o! rail"ay to buy .oods and serices !or runnin.,aintainin. and deelopin. the rail"ays operationalnet"or'

2 Ineciency-underinestent has no" started yieldin. resultsin the !or o! lo" eciency threshold o! alost eery rail"ay

actiity

> Corruption-lac' o! proper chec's and balances createloopholes !or corruption een in the presence o! best le.al!rae"or' and institutional echanis


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Before condemning Pakistan Railways for incurring huge losses ,we mustknow the magnitude of the of loss, its composition ,context and reasons toarrive at appropriate decisions.

While calculating the loss suered by the railways, it is assumed that thedierence between revenue and costs is prot and loss. !t is true forcommercial entity, not for an organisation run as a government departmentas is the case now with Pakistan railways. "ome #uestions$

%."alaries and allowances&is it a loss ' (.Pension payments&really loss ' )."ecurituy expenses& *.+tilities&ination -.loan repayments ./xternal factors responsible for loss&

a. burning of railway stations during riots0loss of revenue1b. oods 0stopping of trains, speed restrictions1c. security0less passengers, more expenses1

2ll the above are public expenditure. !f all above are losses then treat otherdepartments as you would like to treat railways


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&lthou.h Pa'istan Rail"ays has been success!ul in

aintainin. its passen.er trac ainly due to itscheap !are policy, nuber o! coplaints hae beenountin. about its less than satis!actory per!orance

Most o! the coplaints are about e)treely lo"3uality o! serices proided, lac' o! punctuality,disrespect!ul attitudes o! the eployees to"ards thepassen.ers, unnecessary secrecy and outri.ht?eecin.

%his across the board consuer dissatis!action hascreated a crises o! con(dence aon. the ery loyalpassen.er base o! Pa'istan Rail"ays


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&lthou.h not peculiar to Pa'istan rail"ays only, there

is a "idespread deorali


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ery asset o! Pa'istan Rail"ays is !ast deterioratin. as ost o!the hae outlied their productie lies- in!rastructure as "ell

as its rollin. stoc's

It is adersely ipactin. upon its operational eciency, as itcould not be up.raded as per technolo.ical deelopents inother countries

Conse3uently e)tensie speed restrictions, en.ine !ailures, lac'o! proper !acilities in trains, rail"ay stations, and en.ine"or'shops "hich hae not been up.raded as per technolo.icaldeelopents

& cursory loo' at its physical structures and rollin. stoc's painta .looy picture o! an elaborate structure crublin., (nancesare collapsin., "ith serices bein. suspended, assetsdeterioratin. and debt spiral


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1@nderinestent

2Institutional dichotoy

>oernance issues


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&!ter 1A4> Pa'istan Rail"aysB bud.et "asaal.aated "ith the national bud.et "ith the resultthat the pro(t they earned "as dierted to otherheads, leain. less and less !or its aintenance,e)pansion and iproeent

$n the other hand, the oernent spent three ties

ore on road sector It "as this cobination o! ne.lectto rail"ays and pre!erence to roads, "hich is the rootcause o! the present alady o! Pa'istan Rail"ays

Ministry o! Rail"ays ,"hich is responsible !or proidin.!unds !or the aintenance and deelopent o! theproision o! the rail"ay net"or' has no lon.-ter!rae"or' !or capital support to per!or these roles


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$n the contrary India inested heaily inrail"ays and less on roads "ith the result that ourroad sector is better than Indian one

Indian rail"ays are !ar better than their Pa'istani

counterparts in ters o! pro(tability andcustoer satis!action because India inested inrail net"or'

#e hae not been able to !orulate any ational

%ransport Policy "hich could at least sho" "hererail"ays stand is a is other odes o!transportation


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$erall (nancial crises o! the country hae reduced the

aailability o! the resources !or routine operations not to spea'o! replaceent and up .radation ot up to date, een thenpresent rollin. stoc' can earn pro(t i! cash is injected

#ron. priority o! inestent in the rail"ay is another bi.

anoaly %here "as no justi(cation !or the duali


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7esides aal.aatin. the t"o bud.ets, the .oernent

also ade Pa'istan Rail"ays a .oernent departentunder the ne"ly created Ministry o! Rail"ays

Conse3uently, instead o! a coercial or.ani


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Siilarly, it cannot terinate those serices, "hich are

no ore needed as better road net"or', and .oodbusDtruc' serices are aailable in the priate sectorbecause o! political iperaties

In India, i! the .oernent needs to continue a lossa'in. train serice due to strate.ic reasons, it has to

pay to the rail"ays !or the loss but you can not do it inPa'istan en train stops are no" decided on politicalbasis

Ministry is e=ectiely rule-a'er, ana.er, player andupire o! Pa'istan8s Erail"ay8 tea Such a cobination

o! con?ict in roles "ith concentration o! po"ers isiniical both to .ood public policy-a'in. and toe=ectie coercial ana.eent o! state-o"nedenterprises


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Runnin. a coercial or.anisation "ith politicalconsiderations cannot yield pro(ts, just losses

%ari= rationalisation, operational decisions anddeelopental bud.et allocation need coercial

considerations not political inter!erence Postin.D trans!ers ade on political e)pediency

adersely a=ects the operational eciency andeployees orale

Corruption is "idespread because those cau.ht haelon. hands reachin. the corridors o! po"er


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6espite dissatis!action passen.er trac is constant

)perienced "ell trained sta= "ho are still otiatedand serious about iproin. its per!orance

Pro(table lon. haul passen.er and !rei.ht corridor"ith .ood peranent "ay despite aintenancebac'lo.

#ell e3uipped and "ell sta=ed loco and rollin. stoc'

aintenance !acilities

&ailability o! a odern container terinal


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Rapidly depletin. assets Grollin. stoc',telecounications and si.nalin. net"or's

6espite bein. a coercial or.ani


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)tensie net"or', to aintain "hich cannot becoercially iable in the !ace o! tou.hcopetition !ro road

$erstan. in certain cate.ories, "hileunderstan. in critical areas

Poor MIS and (nancial reportin. syste needed!or a odern, coercial or.ani


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Increasin. passen.er and !rei.ht trac due toincreasin. population and prosperity

Increased deand !or cross border re.ionallin'a.es

lobal pre!erence !or ulti-odal transport in"hich rail is becoin. doinant

ro"in. concernsDa"areness about

enironental issues can !orce policy a'ers to.ie ore iportance to rail"ays


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reater cost e=ectieness o! rail"ays as coparedto other odes o! transport

Iproed road net"or' in reote areas-a blessin. indis.uise !or stoppin. uneconoical train operations

"ithout uch inconenience !or the public

6eelopent and coerciali


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Continued eciency iproeents in road sectoralon. "ith iproed road net"or' can .ie tou.hcopetition to rail"ays

Iproed serice by road transport (rs can be a

challen.e

Preature and ill planned priati


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1ho" to increase the pro(tability o! Pa'istanRail"ays by iproin. its operational eciency andreducin. its costs

2ho" to .ain consuer loyalty by o=erin. 3uality

serices at a=ordable prices "ithout aderselya=ectin. its pro(tability

>ho" to oderni


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3aking Pakistan Railways the preferredmeans of passenger travel and goodsmovement for ma4ority of Pakistani

population by providing them a safe,e5cient, reliable, comfortable and aordablemeans of transportation by moderni6ing itsservices, rationali6ing its operations and

e5ciently managing its resources


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1nhancin. sa!ety and security o! the trains bytrainin. the sta= and deelopin. ne" technolo.ies

2Prootin. technolo.ical innoations by increasin.inestent in research and deelopent

>@ni!y social bene(ts and econoic bene(ts byputtin. conenience o! the public (rst and reducin.operational cost

Stren.then ener.y conseration andenironental protection by deelopin. eco-!riendlytechnolo.ies


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Helpin. directly to increase Pa'istanBs .ro"th ratethrou.h increased and better rail serices as "ell aseployent opportunities

Helpin. indirectly to increase Pa'istanBs .ro"th rate byproidin. support serices to other sectors o! the

econoy

Proidin. sa!e, odern, conenient and co!ortableode o! transport !or the public at a=ordable prices

7ecoin. hub o! transport connectiity "ith rail as piotaround "hich other odes are ali.ned

ational inte.ration by proidin. the nation a sybol anda ehicle o! national unity


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Pa'istan Rail"ays is not the only one in troubleG all oer the "orldrail"ay systes are !acin. the sae issues-hu.e losses and consuerdissatis!action

Main causes are also the sae-underinestent, copetition !roroadDair, risin. e)pectations o! the sta'eholders

Siilarly road to recoery consists o! ta'in. the !ollo"in. steps

1runnin. it as coercial or.anisation

2brin.in. pro!essional ana.eent

>concentration on core actiities

disinestent o! peripheral business

5separation o! trac' o"nershipDaintenance !ro trainoperations

outsourcin. o! a)iu core actiities

4Induction o! priate sector een in trac' aintenance

9creation o! independent re.ulatory authority


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1Institutional Restructurin.

2$utsourcin. o! operations

>Corporati


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;inali


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&!ter the (nali


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:et the Ministry be responsible only !or policy!orulation, assisted by a hi.h-po"ered rail"ayadisory board

Chie! )ecutie $cer +C$, assisted by a

technical coittee consistin. o! senior rail"ayocers, "ill loo' a!ter the operational aspects

Corporati


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Resole the issue o! social obli.ations o! the state s coercial

e)pectations !ro PR

I! the state "ants to run certain loss a'in. train serices !orstrate.icDsocial considerations, let her copensate the PR !or theloss thus incurred as it used to do in early 1AA0s

In !act the bul' o! Indian Rail"ays pro(t coprises thecopensation paid to it by the .oernent !or operatin. lossa'in. trains

I! Pa'istan Rail"ays hae to be run as a .oernent departentthen it should be treated as such in ters o! reenues it earns ande)penditures it incurs

Salaries, pension, operational ,aintenance and deelopentale)penditure should be considered as public e)penditure and not asloss "hich is "hat in noral discourse is bein. stated Siilarly itsloan liabilities be paid by the state and not be treated as loss


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Pa'istan rail"ays needs to be run on purely coercialconsiderations "ith due re.ard !or social "el!are aspects

&cross the board subsidy needs to be replaced "ithtar.eted relie! to passen.ers "ith liited eans

$perational rationalisation- retainin. ost pro(table

rail"ay trains and "eedin. out the uneconoical ones

Huan resource rationalisation-"eed out theunnecessary sta=, retain the essential and recruit theones cortically needed a!ter carryin. out detailed needassessent in the "a'e o! ne" operational re3uireents

;unctional rationalisation-concentrate on core actiitiesand outsource peripheral actiities, ie education,health, sports etc


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%his is an area "hich can yield 3uic' results because

bul' o! the anpo"er is ery technically 3uali(ed andproud o! their institution

en the present le.al !rae"or' and institutionalechanis is robust enou.h to iproe the

.oernance i! applied "ith coitent and dedication

&uthority "ith responsibility and proper incenties andre"ards alon. "ith strict accountability re.ie isessential !or e=ectie and ecient serice deliery

&dd transparency in procureent and sale,coputerisation o! incoe, e)penditure and assets


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Pa'istan rail"ays needs assie inestents just to arrest the

!ast depletion o! its rollin. stoc's and ()ed installation as "ell as

up .radation o! its si.nalin. and other electronics

%he ;ederal cabinet in its eetin. held on 2Ath6eceber, 2010

approed, a bailout pac'a.e o! Rs 111 billion !or rehabilitation o!

locooties, trac' aintenance, re!urbishent o! coaches etc

&lost (e years hae passed since the Cabinet8s approal o!

the aboe (nancial pac'a.e, but no relie! has so !ar been

proided

%he situation has .one !ro bad to "orse and train operations

are !re3uently disrupted due to de!erred aintenance o! rollin.

stoc' and in!rastructure


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#e need this inestent !unds een i! "e intend topriatise it Priatisation doesn8t ean sellin. o!rail"ays trac'sDstations "hich hae to be aintainedby the state to ensure hi.h security standards

Soe o! the critical areas "hich need inestent arepurchase o! locooties, replaceent o! oera.etrac's and repairs o! brid.es, capacity buildin. o! theeployees and odernisation o! its si.nalin.

&ll these !unds are not necessarily to be proided bythe stateG priate sector and !orei.n inestors are"illin. to inest i! proided "ith proper le.al!rae"or' and ade3uate .uarantees


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$ne o! the 3uic'est and easiest "ays to put the Pa'istan Rail"aysbac' on trac' is to outsource a)iu nuber o! its operations

%here is no need to reinent the "heel as Pa'istan rail"ays haebeen doin. it in the past and is doin. in soe areas een no"

;or this purpose it should (nali


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Pa'istan Rail"ays hae a do:ocooties anu!acturin. unit Railcop 5PR&CS %rac' Maintenance Corporation

%hese need to be corporatised and incorporated asindependent coercial or.anisation be!ore theirpriatisation


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eryone is a!ter the land o"ned by the Pa'istan

rail"ays and su..ests its outri.ht sale to .enerate!unds !or its reapin. "ithout reali


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$nly those lands should be disposed o! throu.h leasin.and not outri.ht sale "hich ,a!ter thorou.h analysis ,arein e)cess o! short ter needs o! Pa'istan rail"ays

;or this purpose the ne"ly created special purposeehicle needs to be .ien proper directions and

a)iu autonoy

%his SPK should iediately carry out the surey o! thelands rail"ays o"n, its proper record 'eepin. andcoputerisation and ta'e steps !or the reoal o! anyencroachents

It should also scrutinise the contracts a"ardedD dinin.cars auctioned and reo'e all contracts and auctionsdone ille.ally by obserin. all the le.al !oralities


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Pa'istan8s priate sector in the anu!acturin. and serices isrobust enou.h to cater to ost o! the aintenance andoperational needs o! the Pa'istan Rail"ays Induct the priatesector startin. "ith .radual anu!acturin. o! spare parts,oerhaulin. and (nally coplete anu!acturin.

In!rastructure aintenance should be up.raded, "ith .reater useo! echani


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/eepin. in ie" the strate.ic and coercial iportance o! aneciently run rail"ays as "ell as social obli.ations o! the state toproide a=ordable and cost e=ectie ode o! transportation to thepublic, Pa'istan rail"ays should be .ien due iportance

ational transportation policy should be (nali


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%han' you !or .oin. throu.h the presentation

I! you li'ed it, 'indly do e)press your li'in. byclic'in. the li'e icon

I! you hae any obseration, please !eel !ree tolet e 'no" by coentin.

Lou do not need any perission to use theaterial presented here !or your assi.nent

Ho"eer, i! you ay li'e to ac'no"led.e it byentionin. it "hile subittin. your paper


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pakistanrailways challengesandresponse 150510160014 lva1 app6892

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