ISLAMABAD: Pakistan Railways has decided to lease out its Risalpur factory to private sector to convert it into a modern, state-of-the-art locomotive manufacturing facility.

The main objective of the move is to manufacture 25 locomotives yearly for the Railways and to unitise any excess capacity for potential export opportunities, according to a project document made available to Dawn.

The private sector consortium would make an upfront payment of Rs1 billion to the Railways after signing of the concession agreement.

The private party would make investment through its own resources without any financial assistance from the locomotive factory or PR to make the plant a successful and self-sufficient unit. The private party would have no access to locomotive factory’s assets for securing financing for the project.

The locomotive factory in Risalpur was commissioned in 1993 at a cost of Rs2.28bn with the Japanese assistance. Spreading over 100 acres and with production capacity of 25 locomotives in single shift basis, the factory has so far manufactured 97 locomotives and rehabilitated another 26.

The factory has been running into losses with only 97 locomotives manufactured in 21 years instead of estimated 235 locomotives since January 1993.

The Railways has offered the factory to a private sector consortium through the Infrastructure Project Development Facility (IPDF) of the Ministry of Finance.

The factory will partner with the private sector by contributing land and its existing facilities as a form of equity, while the private party will be responsible for upgrading the factory and its operations.

The project would have a possible capacity to export products while still retaining the functions of fulfilling the local railway transportation demand and achieving high delegation levels for the industry.

The concession to private consortium would be for 25 years subject to a manufacturing capacity of at least 25 locomotives a year.

Official statistics showed that the Railways currently has 300 locomotives which are out of service, waiting major repairs. The government is arranging funding of Rs6.1 billion through a consortium of commercial banks for the rehabilitation of 66 held-up locomotives through PRACS.

Rehabilitation of 27 locomotives is being arranged through PSDP at a cost of Rs5.108bn for which an agreement has been signed with a US locomotive manufacturing enterprise.

Special repair of 150 locomotives to improve their reliability and performance was also being carried out through PSDP at a cost of Rs5.005bn. Under this initiative, 20 locomotives would be repaired in 2012-13 and 65 locomotives each in the next two years.

The Executive Committee of National Economic Council (Ecnec) has already approved the procurement of 275 locomotives, and the delivery of first 50 locomotives will start from March 2014. PR has also submitted a proposal to Planning Commission for another 100 locomotives for approval by Ecnec.

The Railways has a total of 515 locomotives, out of which more than 300 are off-track for want of service. Since 2011, the number of locomotives available for use has reduced by an average of 10 locomotives a month. By June 2012, only eight locomotives were available for freight and 92 for passengers. As a result, PR revenue earnings have drastically fallen by 25 per cent.

The worst crisis of the Railways is evident from the fact that the passenger traffic which was 230 trains a day has been reduced to 92 trains daily, while the number of freight trains has dropped from 96 to merely one per day.