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ISLAMABAD: With the strength of Pakistan Railways operational locomotive fleet falling to just 17 per cent, overdraft exceeding Rs40 billion, debt liability rising to Rs26 billion and operation losses at Rs6 billion, Prime Minister Yousaf Raza Gilani has put an indefinite moratorium on repayment of the organisation's interest.
Sources told Dawn on Friday that the decision was taken at a recent meeting also attended by Finance Minister Abdul Hafeez Shaikh, and the deputy chairman of the planning commission.According to the minutes of the meeting, “the finance division would instruct the State Bank of Pakistan to withhold at source deductions till such time as it is agreed that PR's financial position permits interest repayments.” Because of severe liquidity and cash problems, the PR wants immediate disposal of its lands to raise funds to upgrade operations for survival and long-term sustainability.
The railways secretary conceded at the meeting that rent was not being received for land leased out to various public and private parties. Besides, there was land “under unauthorised occupation due to law and order considerations, influential encroachers and encroachments by state institutions”.
A presentation to the prime minister revealed that one of the country's most important strategic assets was on its last legs.
“Due to financial difficulties and non-availability of full fleet of locomotives, only profitable routes were presently in operation. About 86 trains operated in Nov 2011 as compared to 204 in Nov 2010 and 234 in Nov 2009,” the secretary said.
He said: “345 locomotives are under, or awaiting repairs, including 94 that are nonviable of which 22 fit for condemnation; 121 locomotives have gone out of service during last 18 months”.
On top of that, the punctuality of locomotives has declined to only 12 per cent. About 100 hours were lost on Dec 14 because of four locomotive failures and other technical issues. On the freight side, only the oil train and Wagah freight train were in operation.
“Out of 494 locomotives, just 149 were available on Dec 15 of which 84 were being used for passenger trains and four for freight, whereas 152 locomotives are required for full passenger operations. Moreover, barely 40 per cent of these locomotives are reliable,” the secretary said.
In addition, 68 per cent of rail track required replacement or rehabilitation.
The prime minister was also informed that no guarantees could be given at this stage for repayment over the long run because of huge debt liability as well as the burden of commercial loans for procurement and rehabilitation of locomotives.
On Dec 14, revenue from freight was just Rs1.2 million while it was Rs21.5 million on the same day the previous year and 713 loaded wagons were awaiting dispatch.
The five-month earnings last year stood at Rs5.7 billion as compared to Rs7.5 billion during the same period in the previous year.
The secretary said the PR had a debt liability of Rs26 billion, overdraft of Rs40 billion with the SBP and uncovered operational losses of Rs6 billion.
The prime minister was informed that there was no possibility in the immediate future to retire the overdraft and the railways would not be able to make payment of penal interest and, therefore, there should be an immediate moratorium on at source deductions by the SBP.
As the SBP deducted Rs1.355 billion in November on account of interest and penal interest without notice and there was a ban on payments, the PR failed to maintain a consistent cash balance. As a result a cheque issued to the Pakistan State Oil bounced.
As such, PR's efforts to rehabilitate 46 locomotives through the revenue budget would suffer a severe setback.
Officials said the deputy chairman of the planning commission “expressed concerns over PR's partnership with the National Logistic Cell and said all such ventures must have a framework that is foolproof and transparent”.
He insisted on hiring a professional to oversee the process of change of management that could not bear fruit unless the company was corporatised and run efficiently to meet market conditions.
The finance minister expressed disappointment over the delay in finalising the locomotive rehabilitation plan.
The prime minister decided to disinvest non-core functions of the railways at full speed through an asset management company for disposal of surplus railway land.
