Logistics & Connectivity

Pakistan Economic Forum III

Talking Points (Salim Raza)
Logistical infrastructure covers the assets, installations and
processes involving the whole supply chain of flow,
stocking and distribution of goods and services, from
origin to consumption

Transport and Communication is the backbone of logistical

efficiency thus road, air, rail, ports and shipping,
pipelines, tele-communication and e-connectivity etc. are
all integral to effective logistical systems.

2
Talking Points (Salim Raza)
Our Group decided to limit our focus to Railways for the reason that,
of all the different aspects of logistics in the country, Railways stands
out as:

1. The least utilized, against capacity and potential, of any other

core aspect of domestic logistics

2. The most neglected and mismanaged, leading to consistent

deterioration in assets and financial results, so that it is
performing far below key indicators compared to 50 years ago

3. Having the least private sector involvement in its functions and

operations, of all logistical sectors; and

4. Presenting the greatest upside to logistical efficiency in Pakistan,

with commensurately moderate investment.
3
Talking Points (Babar Badat)
Pakistan is probably one of the least connected countries in the
world, with regional trade making up hardly 5% of the countrys
overall trade.

Pakistan is one of the few countries in the world that does not
have a Transport & Logistics Ministry. The logistics industry is
spread over seven ministries; resultantly, there is no cohesive
policy to develop logistics & transport capacity which is a
prerequisite for the growth of regional trade.

Trade is delivered by the seven main modes of transport.

Pakistans capability is wanting in each of the seven modes: Sea,
Air, Road, Rail, Inland waterways, Pipe lines, Transmission lines.

Chinas internal dynamics and the CPEC.

4
Sections
I. Pakistan Railways Today

II. Comparison with Other Railways

III. The Potential of Railways in Pakistan

IV. Issues and Analysis

V. The Way Forward

5
 Section I
Pakistan Railways Today
Financial Year 2014-15

Revenues Rs 31.9 billion

Expenses Rs 59.2 billion

Loss Rs 27.3 billion

Last 5-Years accumulated losses Rs 150 billion +

7
Financial Year 2014-15 (cont.)

State Bank overdraft Rs 36 billion

PSDP portfolio Rs 39.6 billion

Value of foreign loans Rs 18.1 billion

Outstanding loans to be paid by

Rs 11.7 billion
GoP 8
Expenditure (2013-14)
Rs 2 billion
Rs 2.3 billion (3.5%)
(4.1%)
Rs 3.6 billion
Salary
(6.4%)

Pension

Rs 21.8 billion
(39%)
Fuel
Rs 11 billion
(19.4%)

Repair and
maintenance
Rs14.9 billion Electricity
(26.7%)

Misc
9
Train Operations 2013-14
Passenger Trains (Daily) 90

Freight Trains (Daily) 6

Tonnage of Freight Carried (Daily) 4410

Passengers Carried (Millions) 47.7

Operating Ratio 174.5

Employees per Train per Day 1008

10
Train Operations Passenger Sector July
2015
Mail/Express/Intercity Trains Daily 37

Passenger/Mixed/Shuttle/Int. Trains Daily 16

TOTAL 53 = 106

Passengers Kilometers, Billion 19.8

Revenue from Passengers (PKR Billions) 15.8

% of Total Revenue 69.3%

11
Train Operations Freight Sector July 2015
Revenue from Freight (PKR Billions) 3.6

% of Total Revenue 15.6%

Ton Kilometers, Billion 1.1

12
Infrastructure
Description Status Condition
Route Kilometers 7,791 67% overage

Track Kilometers 11,778 75% overage

Railway Stations 527

Bridges 14,570 Need repair

Level Crossings 3,724 65% unmanned

Land (acres) 167,690 Encroachments?

Signaling & Telecommunication 90% obsolete

13
Rolling Stock
Description Status Condition

75% overage
Locomotives 421
(63 added)

Passenger Coaches 1,732 2% overage

Freight/Goods Wagons 15,883 60% overage

14
Manufacturing Units / Organizations
Core
Description Status

Locomotive Factory, Risalpur 25 per annum

Carriage Factory, Islamabad 150 per annum

Mughalpura Workshop/C

Sleeper Factories 3

15
Service Organizations
Non-Core
Description Status

Hospitals 38

Dispensaries 23

Colleges/schools 24

16
 Section II
Comparison with Other Railways
Pakistan Railways (2009-10) - medium
sized railway by global standards
Train-km/track-km
(000)
14.0
Traffic units
12.0
Poland (passenger-km plus
India
10.0
net tonne-km) is a
Spain
Indonesia common measure
8.0 of traffic density.
6.0
Romania
Turkey
4.0
Pakistan
Train km/track-km
2.0 Bangladesh measures train
frequency p.a.
0.0
0.0 5.0 10.0 15.0 20.0 25.0
Traffic units/route-km (mill) 18
Pakistan Railways (2009-10) - medium
sized railway by global standards
Passengers/
train
1400
India
Pakistan Railways
1200 carries more traffic
in both passenger
1000
and freight trains
800 than many
Poland Turkey Pakistan
Bangladesh European railways -
600
Indonesia operational
Rumania
400 efficiency in this
Spain
200
regard is good.

0
0 200 400 600 800 1000 1200 1400
Net tonnes/train (freight) 19
Labor productivity - mid-range of developing countries
in 2008 now at the bottom end

1200
The productivity achieved by Indonesia, a system
Productivity (000 units/staff)

with a similar mix but only operating a 1067mm

1000 system, shows the potential for PR to be operated
with far fewer staff, improving its efficiency and
financial situation.
800 Any serious industry restructuring must address the
need to restructure the workforce to a more efficient
level.
600

400

200

20
Most railways have seen an increase in or steady goods
traffic in the last decade
10000

1000

100

10

0.1
2006 2007 2008 2009 2010 2011 2012

China India Pakistan Poland Bangladesh Data

21 Unavailable
 Section III
The Potential of Railways
in Pakistan
Rail Network
ML-1 - Karachi-Rohri -Khanewal-Lahore-
Rawalpindi-Peshawar (1681 Kms)
ML-2 - Karachi-Dadu-Jacobabad- DG Khan- Peshawar
Attock Peshawar (1519 Kms) Rawalpindi
Kundian
ML-3 - Rohri-Sukkur-Sibi-Quetta-
Dalbandin-Taftan (967 Kms)
Lahore
ML-2
ML-3
Quetta
ML-1
Taftan
Multan

Dalbandin Dadu
Rohri ML-1
ML-2
ML-3
Other Tracks
Transport and Logistic (PakistanKarachi
Railways) Kotri
Potential of Railways
National Trade Corridor (1600 km) ports of Karachi
and Gawadar to the hinterland

Transit Potential China (CPEC), Central Asia,

Afghanistan, Iran, India

Safe, efficient, economical and environment

friendly

Bulk transportation of passenger and goods

24
Potential of Railways (cont.)
Demand for long haul - passenger and freight

Capital intensive but longer life span

No more a monopoly or utility service

Capable of competing on market dynamics

Reasonable assets: Infrastructure, rolling stock and

human resource

25
 China
China-Pak Economic Gilgit
Khunjrab

Corridor (CPEC) Besham Occupied

Peshawar Havelian Kashmir
Rawalpindi
ML-2

Lahore
Kot Adu
Quetta
Taftan
Multan ML-1
Jacobabad
Khuzdar
Rohri

Gwadar
Existing Network
Karachi
New Links
Transport and Logistic (Pakistan Railways)
 Section IV
Issues and Analysis
Analysis of Train Operations
1000

2013-14

1974-75
165 155
118
100
69 64
50

30

20 19.2
16

10

1
Passenger revenue as % of Freight revenue as % of Locomotives in freight Locomotives in passenger Average speed of goods
total total pool daily pool daily trains kmph
28
Analysis of Train Operations
Description 2013-14 1974-75

Passenger Trains Daily 90 452

Passenger carried daily 130,657 399,205

Freight Trains Daily 6 179

Freight carried Daily (Tons) 4,410 36,622

Employees per train per day 1,008 217

Operating Ratio 29
174.5 78
Analysis of Train Operations (cont.)
Description 2013-14 1974-75

Passenger revenue as % of total 69 30

Freight revenue as % of total 15.6 64

Locomotives in freight pool daily 50 165

Locomotives in passenger pool

118 155
daily
Average speed of goods trains
19.7 19.2
kmph
30
Locomotives Freight Train Revenue Loss
Analysis Train Operations
Demand for long distance bulk goods not being met

Demand for long distance passenger not being met

Freight sector functioning much below market

demand

Line capacity from Karachi to up-country under

utilized

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Analysis Financial Non-Viability
Amount allocated for operations has been
drastically reduced over the years

Deferred maintenance of existing infrastructure,

including signaling, track, bridges, level crossings

Deferred maintenance of rolling stock specially

locomotives

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Analysis Financial Non-Viability (cont.)
90% of revenue goes for salary payment

61.3 % of revenue consumed for pension payment

Salary and pension are 150% of revenue

Average annual loss for last 5 years is more than

revenue

GOP subsidy for fuel, repair & maintenance,

electricity, TA/DA, Debt servicing, etc.
Operating Budget from 2005-6 to 2010-11
Analysis General
Fare and freight structure controlled by government

Costs ignored and non productive expenditure

incurred in the past

Low labor productivity in spite of change in traffic

patterns and technology changes

Customers, both in passenger and goods, out of

focus

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 Section V
The Way Forward
Way Forward
Initiate organizational, institutional and operational
restructuring of PR for enhancing labor productivity,
optimal use of assets and cater for existing and future work
loads

GOP is paying for PRs losses in the form of subsidies. Public

and national interest necessitates elimination of these
perpetual losses through financially efficient train
operations.

PR to function as a commercial organization in the public

sector, improve service delivery and eliminate losses within
three years
38
Way Forward
Rationalize train operations - Divert resources from loss
making passenger sector to revenue generating freight
sectors

Rationalization of fare and freight according to market

dynamics

Link investments to revenues and develop a strong costing

unit for facilitating commercial decisions

GOP to pay PR for upkeep of strategic lines and for running

loss making trains as Public Service Obligations
Way Forward
Introduce private investment in train operations under Open
Access Policy /PPP

Encourage Provincial Governments to run their own sub urban and

inter city trains on PR s infrastructure by paying a Track Access Charge

Corporatize Risalpur Locomotive Factory and Islamabad Carriage

Factory

Delink hospitals, schools and real estate development from PR by

establishing an independent company for providing these services
through PPP mode

Establish and independent organization for preservation of railway

heritage
40
Way Forward
PR has been a federal government department and its
GOPs duty to put it back on track by initial one time
obligations:

Compensate PR for deferred maintenance of
infrastructure (Rs 5 bill)

Compensate PR for deferred maintenance of rolling
stock (Rs. 8 billion)

Uncap State Bank overdraft for two years to facilitate
expenditure on train operations

Pay PR Rs 3 billion for clearing its existing liabilities

Continue paying for PRs debt servicing

Pick up its pension payments as has been done for
defense and other federal government departments
41
Way Forward
PR to establish an independent organization to liaise and
monitor the potential projects envisaged under the China
Pakistan Economic Corridor (CPEC)

Engage professionals from the market for CPEC on
market salaries

Up-gradation of Karachi-Peshawar (ML-1)

Up-gradation of track and provision of modern
signaling on ML-2

Establishing Quetta Peshawar Link via Zhob Dera
Ismail Khan

Up-gradation of Quetta-Taftan (ML-3)

Establishing Peshawar Jalalabad link

Connecting Havelian Khunjrab
42