Pakistan railway crisis sets in deep

A shortage of locomotives has compelled Pakistan Railways (PR) to suspend more of its passenger trains.

The number of daily suspensions is alarmingly high.

Railways is finding it an increasing challenge to clear arrears of Pakistan State Oil for its fuel supply and pay staff salaries and pensions.

It maybe recalled that the recent failure to pay salaries and pensions of PR staff led to countrywide protests with the train service throughout the country suspended.
President Zardari was compelled to hold an emergent meeting and direct a cash-strapped Ministry of Finance to release one billion rupees to enable PR to make payment to staff.

The PR staff reserves the right to resort to going on strike if all past dues are not cleared.
The cause of the current state of affairs of PR is a continuous decline in income: during July-September 2011 PR income declined to 351.5 million rupees from 427.6 million rupees during the comparable period last year.

This decline is premised on a range of factors that include outright theft of locomotives and expensive equipment from Railways workshops, mismanagement associated with heavier reliance on bailout packages from the government that the cash-strapped treasury finds increasingly difficult to extend and sustained failure to restructure and modernise PR operations.
Reports that a deal to purchase locomotives from a foreign country was compromised due to allegations of commission being sought, is symptomatic of the malaise that currently besets all our national institutions.

A way out is for the cabinet and all ministries to meticulously adhere to the public procurement rules and not seek a way out by invoking the national interest clause contained therein.
The latest proposal by the PR to resolve its financial woes is to seek an Expression of Interest (EoI) from the private sector to run its freight operations.

Public-private partnership has been the strategy enunciated several times by President Zardari.

However, the government has failed to provide an enabling environment.

At present, the federal government is heavily reliant on domestic borrowing to meet the needs of its burgeoning budget deficit, a need that has been exacerbated by the decision of our economic team to abandon the stalled International Monetary Fund programme and not seek another – a fact that has automatically led other bilaterals and multilaterals to suspend assistance for programme lending (budgetary support).

Thus an enhanced borrowing from the private commercial sector, instead of from the State Bank of Pakistan (IMF condition for the stalled programme), has led to crowding out of private sector borrowing.
There is thus little likelihood that an EoI would be forthcoming anytime soon.

If one adds the ingredient of government’s continued engagement in pricing of the service provided by PR to this state-owned entity’s profile then it is a foregone conclusion that no one would be tempted to enter this arena.

The blueprint for PR reforms and restructuring like other badly managed loss-making state-owned entities is available.

The question is one of implementation.