Tuesday November 30, 2021

Freighting with restructuring

August 05, 2021
Freighting with restructuring

LAHORE: Restructured loss-making public enterprises often end up in failure because of the deliberations of those with vested interests, who fear losing their opportunities to mint money from the reformed entities.

Currently, those vested interests are dragging their feet on restructuring Pakistan Railways Freight Transportation Company (PRFTC).

Pakistan Railways has a formidable rail network spreading over 1,800km. It also has a huge stock of passenger and freight wagons. The passenger operations in Railways the world over are less lucrative commercially, but rail transportation earns huge profits on freight trains.

In Pakistan, where bulk of the imports come into the country via the sea route to Karachi and other ports, there is need for at least 50 freight trains per day to haul goods upcountry. The freight cost upcountry and back to Karachi port would reduce by at least one-third.

Pakistan Railways is currently operating at an annual loss of Rs40 billion with

114 passenger trains and only 11 freight trains. The usually loss-making passenger trains operate under a schedule, while

the freight trains have an uncertain schedule that discourages traders and manufacturers from using the rail-road freight facility.

Still the 11 freight trains generate 35 percent of the Railways revenue and 114 passenger trains generate 65 percent.

The Institutional Reform Cell (Cabinet division) recommended through a report in January 2019 to bring in strategic reforms in Pakistan Railways.

The report suggested changes in governance, organisational restructuring and management and outsourcing of PR trains to the private sector.

The report strongly emphasised on freight sector reforms and asked the Pakistan Railways to shift its focus from passenger trains to freight trains with a simple logic that freight trains are normally commercially viable and generate profits in contrast to passenger trains, which require high occupancy of around 85 percent just to reach the breakeven point.

In the current situation, over 30 percent of the passengers travel either free (current and former Railways employees) on concessions ranging from 25 percent to 50 percent.

This means that only a few passenger trains exempted from giving concessions could operate at break even. The report emphasised that PRFTC should handle all freight business of Pakistan Railways.

Later it was decided to use the experience and expertise of the private sector to make this restructuring project sustainable. The vested interests that had been sabotaging such restructuring plans in the past have started malicious campaigns against the initiative on one pretext or the other.

The truck mafia is perturbed. They have been fleecing traders with high freight charges.

The freight cost of a 20 feet or 40 feet container from Karachi to Lahore for instance is higher than the freight of the same container from Shanghai to Karachi.

Then there are others that were vying for commanding positions in PRFTC. We must understand that the experienced and competent human resource from the private sector will come from the players already operative in this field in the private sector.

In March 2021, through an advertisement in the newspapers, applications were invited for the post of CEO for the PRFTC, in response to which approximately 15 candidates expressed interest with extensive experience and expertise in the relevant fields including logistics and transportation.

In a transparent process that lasted four months and never disputed, 14 shortlisted candidates were interviewed by the constituted committee, out of which three of the candidates were chosen on the basis of experience and expertise.

The three, namely Jawaid Ahmad Siddiqui, Shamshad Ali Khan and Nisar Ahmad Memon were active in the relevant field in the private sector.

The selection board recommended Jawaid Siddiqui, a US graduate with 25 years of experience in the fields of freight, cargo, road and rail logistics.

He possesses the unique blend of freight business exposure in the private sector as well as many years of experience dealing with Pakistan Railway’s freight business activities.

He was chosen to head the company with his paramount freight and commercial expertise. His appointment has been approved by the federal cabinet.

Apart from the post of CEO, the posts of the Head of HR, Head of Finance and Head of Marketing of Pakistan Railways have also been filled by qualified and

experienced professionals from the private sector.

According to a World Bank study, a single freight train can replace 100 trucks, if operated with good efficiency. Transferring freight to trains will not only help reduce the pressure on highways and traffic jams in cities, but also limit the impact on the environment.

The freight business of Pakistan Railways is only 6 percent of the country's total freight volume, logically it should be over 40 percent based on current Railways capacity.

Some circles are objecting that the new CEO has conflict of interest as he was working with a company already dealing with Railways.

Well this objection would have been raised if any of the other two shortlisted candidates were selected. He joined PRFTC after resigning from the private sector, like Razzak Dawood who resigned as chairman Descon after joining the federal cabinet. Let us move on. Maybe it is time to move on, as we have already wasted time on restructuring.