ISLAMABAD: Amid strong objections from the ministries of finance and planning, Pakistan Railways (PR) is seeking a 130 per cent increase in the procurement cost of around 1,050 bogies to Rs71 billion mainly because of currency depreciation and change of specifications.

The Pakistan Railway’s case for an increase in the procurement cost for 820 freight wagons and 230 passenger coaches from Rs31bn in 2017 to Rs70.97bn now was presented to the Central Development Working Party (CDWP) a few days back but was deferred at the last moment.

Once the proposal is cleared on technical grounds by the CDWP, the Executive Committee of the National Economic Council (Ecnec) may consider its formal approval.

About 292 freight wagons out of 820 and 78 passenger coaches out of 230 have already been procured as of June 30 through two separate Chinese contractors, and the remaining bogies will be delivered by June 30, 2026.

Railway’s ‘unrealistic time frames’ blamed for pushing cost to Rs71bn

The PR attributed the cost escalation to the exchange rate increasing from Rs104 in 2017 to Rs285 to a US dollar and repeated cancellation of bidding results for various reasons, including the project reassessment under the upgradation of ML-1 (Karachi to Peshawar line) under the China-Pakistan Economic Corridor (CPEC).

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The Ministry of Finance has challenged the exchange rate and demanded that cost estimates be based on Rs278 per dollar.

The contract for 820 freight wagons was finally awarded to M/S Baotou Beifing Chuangye, China, on March 30, 2022, for $41.64 million while that of 230 passenger bogies was given to CRRC Tangshan Co, China, on Oct 29, 2021, for $148.89m.

The PR has also attributed some cost escalations to a spike in the import trade price of the freight on board component, taxes, freight charges and other local charges by 15pc over the five years.

The 820 freight wagon portion of the project was initiated to transport coal from the port to the power plants, particularly the Sahiwal coal power project, which was being developed at that time. The time frame of the subject project was designed in such a way that after completion, the power plants would synchronise with the railway project.

The planning ministry expressed concerns that the power plant had been up and running for years, but the railway project was still incomplete and hence should be re-examined “otherwise it will become a huge liability”.

The Planning Commission also pointed out that Pakistan Railways seldom worked out realistic time frames and project costs. It was observed that the procurement process took almost three years, and after the finalisation of the bidding process, another year was required to place the order with the manufacturing firm.

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“During this period, PR also faces funding issues since after bidding approval, it needs 15pc advanced money to move forward. As per the release mechanism of funds on a quarterly basis this money is available after two quarters. All these factors are responsible for the delay in the completion of the project”, the Planning Commission said, and lamented that Pakistan Railways had the potential to increase revenues, but no serious efforts have been made so far to fund its procurement and manufacturing projects.

The commission has called for serious efforts to curtail PR’s losses and to utilise manpower to increase its revenue earnings effectively. Such projects should be undertaken through those funds. The government has made only Rs6.16bn in Public Sector Development Programme for FY25.

The finance ministry has also noted with concern that only 20pc of total passenger traffic and 4pc of freight transportation from Karachi to upcountry was taking place through the railway system while the remaining 80pc of passenger and 96pc of freight traffic was taking place through roads due to poor performance of Pakistan Railways which faced Rs55bn loss in FY23.

The ministry demanded that the PR prepare a business plan to increase its national passenger and freight traffic share to recover the new investments.

The PR said the major reason for its performance was the challenge it faced due to ageing freight rolling stock, which negatively impacted its efficiency of freight train services and hence was procuring high-capacity wagons and powerful locomotives to improve service delivery.

Published in Dawn, October 29th, 2024