KARACHI, Jan 7: The State Bank has suggested restructuring of the Pakistan Railways Board by inducting directors from the private sector instead of keep pumping cash injections as stopgap measure.
The State Bank in its latest report said that according to the cabinet committee decision Rs6.1 billion would be provided through a banking consortium for rehabilitation of locomotives; Rs4 billion would be provided through re-prioritisation of PSDP of FY12 for improvement of tracks and rolling stock and line of credit from Pakistan State Oil (PSO) to PR would be increased to Rs2 billion to ensure smooth supply of oil to Pakistan Railways.
The government has announced to provide Rs10 billion to Pakistan Railways in the first quarter of 2012.
In overall terms, the ways and means advances to railways cannot exceed Rs40 billion. However, on account of the financial exigencies facing railways, ways and means advances hovered closed to this maximum limit throughout the FY11.
The report said a comparison of Pakistan Railways with Indian Railways provides a striking contrast.
In the case of Pakistan, 82 per cent of PR revenues are used for salaries and staff benefits. By contrast, staff expenditures comprise 57 per cent of the revenue base in Indian Railways.
In terms of operating performance, the number of passengers handled per employee is also considerably lower in PR than its Indian counterpart.
The company’s operational performance has been badly affected by a critical dearth of running locomotives during the past few years, said the SBP report.
To meet the demand for passenger services, the PR has drastically curtailed its high yielding freight operations over the time, resulting in sharp fall in freight revenues since FY10.
“During FY10 and FY11 alone, the government has provided funding to cover PR losses to the extent of 0.2 per cent of GDP,” said the report.
This amount does not include the substantial overdraft facility additionally granted to PR by SBP, which carries a penal interest rate.
To help PR recover from the crisis it is mired in, the government has agreed to provide additional financial support amounting to around Rs10 billion during Q1-FY12.
However, in place of these temporary stopgap measures, the government must focus on restructuring this loss-making public sector entity on a fast-track basis by introducing the wide-scale reforms necessary at this point, said the SBP.
Most important among these are restructuring of Railways Board which should include members from private sector, engaging a globally reputed audit firm to prepare credible financials, increasing focus on rolling stock management and engaging private investors willing to work as partners with PR either in management, operations and marketing ofservices.
“In the absence of reforms there is a vast probability of misappropriation of the financial resources provided to this entity,” said the SBP report. This belief is also strengthened by a large number of monetary irregularities identified in the Auditor General of Pakistan’s report on the accounts of PR for FY10, it added.
The report said the grant provided to this entity during FY11 also exceeded the annual budget target by 49.5 per cent.