Daily Times

It has become quite fashionable in Pakistan to compare every sector of the country with its respective Indian counterpart and start lamenting that every state institution in Pakistan is woefully deficient in terms of service delivery, profitability, efficiency, customer satisfaction etc., while everything is far better in every institution of India. Presently, Pakistan Railways is one such institution under spotlight. Everyone is comparing its performance with that of the Indian Railways without understanding that any comparison between these two institutions is a meaningless exercise because of their different colonial legacies, different historical evolution, different market environments and the extremely different governance structures under which they respectively operate.

Before proceeding further, let me first dispel the myth about the huge profits being earned by the Indian Railways. No railway in the world is in profit; it is never meant to be. They are not built for purely commercial purposes; they have multiple objectives in which profitability no doubt plays a key role but not a very significant one. That is why, even after privatisation in major European countries, not only the infrastructural development of the railway networks lies with the state, huge subsidies are being paid to the private sector operating those trains which are unable to earn profits.

Indian Railways is no exception. After the amalgamation of separate budget of the Indian Railways with the Union Budget in 2016 (Pakistan did it in 1992), Indian Railways have not published its operating ratio- the amount it spends to earn each dollar/pound/rupee. However, it used to be around 95. In other words, it earns 100 rupees for every 95 rupees spent. Pretty profitable? Unfortunately, no. If you deduct the Indian Rupees 30,000 crores of Public Service Obligations payments made by the Indian government to the Indian Railways to operate those services which are commercially not profitable but had to be kept operational due to their strategic or social welfare objectives, this ratio will be above 100. After the merger of the Indian Railways Budget with the Union Budget, they are debating whether to call these payments-subsidy or PSO payments!

On the other hand, Pakistan railways do not enjoy facility of Public Service Obligations payments. Profitable or not, it must run a train which used to run in 1947.When restructuring the Pakistan Railways in 1990s, it was recommended that if the state was interested to continue running of strategically or politically important loss-making trains, then it should compensate the Pakistan Railways for the loss incurred on its operation. These PSO payments were made to the Pakistan Railways for two years but were discontinued due to lack of funds. Instead it pays subsidy to the Pakistan Railways

Now coming to the main question- Can we make a meaningful comparison between Pakistan Railways and its Indian counterpart? Simple answer is no; complex answer is it depends. Let me explain

British Imperialism, like any other imperialism before, was an exploitative one for which they developed an extensive infrastructure to achieve their strategic and commercial interests. As luck would have been, India which inherited more than 80% of their vast rail network got the best of the British Indian Railways, not only commercially viable rail services but also its vast manufacturing capability and huge pool of trained workforce. As only their branch lines were cut off because of the creation of Pakistan, Indian Railways could keep bulk of their train operational in the rest of the country

On the other hand, Pakistan, which was carved out of the provinces situated in the outer periphery of the vast British Indian Empire, got the bulk of the railway built by the British to achieve their strategic and geopolitical objectives in these outlying areas. They were meant for easy and rapid movement of troops and their families and transportation of war material to these areas, not for general passenger travel.

Being branch lines and built for strategic purposes, all the rail network with the sole exception of Lahore to Karachi route inherited by Pakistan was commercially non-profitable from the start. Severance of these branch-line connections from their main arteries in the wake of the partition of the Subcontinent, made them totally non-profitable. Pakistan Railways kept these lines operational mainly by utilising its profits from the few profit-making routs for operating loss -making trains. This cross subsidization helped it to provide facilities to the public for transportation of goods and commutation of passengers in the absence of roads in the far-flung areas of the country.

However, this cross -subsidization soon ran out of steam. While all the profit earned from commercially viable train operations was eaten up in running the loss-making trains, the profit-making rail services started losing their profitability in the face of tough competition from fast improving road network and transport discussed below.

After independence, India and Pakistan both embarked on planned development in which infrastructural development, with special emphasis on expanding the communication network, was the key priority Here both the countries opted for different policies. In the absence of a comprehensive transport policy which would have given the direction to the transport sector and had also encouraged private sector to come forward, in a mutually consistent and competitively neutral way, Pakistan preferred roads which got more funding than other three modes of transport i.e. rail, aviation and marine.

Being geographically smaller in size, Pakistan could extend its road network substantially. Over a period, a robust private transport sector emerged which could ply buses, trucks on these improved roads. Consequently, in the overall national transport perspective, instead of a national multi-modal transport network, there was an unnecessary competition between these two modes of transportation. As railways got a step motherly treatment in the allocation of funds for their operations, maintenance and improvement and construction of new networks, it was an unequal fight.

India, on the other hand, opted for improvement and expansion of rail network, a priority dictated by the political and strategic imperatives of keeping a continent-size country together than any profit motive. Indian Railways, therefore, got generous funding from the government as compared with the road which is still far from satisfactory in India. Indian Railways is lucky in another sense-four of their ministers later became the prime ministers of the country and always had a patronising attitude towards railway.  Even in the latest budget the present Indian leadership has tried to strengthen this institution and announced an initiative of us $137 billion investment in Indian railways.

Thus, comparing a strategic railway with a commercial one based on profitability is as inappropriate as comparing Pakistan road transport with Indian counterpart; both have evolved over a period under different sets of policies and priorities. That’s why running of trains in remote regions of India is still a viable option; doing the same in Pakistan is a recipe for disaster for the balance sheet of Pakistan Railways

Thirdly, it is the operational autonomy and financial independence of the Indian Railways which makes it possible to rationalise its operational policies and priorities in accordance with the changing economic conditions. Terminating loss making trains aside, Pakistan Railways cannot increase the railway fares even when the price of fuel skyrockets. Similarly, the degree of political interference in the operations of Pakistan Railways is far more than it is in case of Indian Railways. For example, while the Indian Railways can afford to disallow uneconomical train stoppages howsoever strong the political pressure may be, in Pakistan, having train stoppages, whether economically justified or not, is considered to be a prerogative of a political leader in his constituency.

Finally, it is the economies of scale which play a decisive role in determining the profitability or loss of a commercial venture. The bigger the size, the greater savings on fixed costs-simple and straight forward.  Indian Railways is one of the world’s largest railway networks comprising 115,000 km of track over a route of 65,808 km and 7,112 stations. Employing more than 1.3 million persons and operating in twenty-nine states and seven union territories, it carries around 9 billion passengers annually or more than 23 million passengers a day and more than 1000 million tons of freight per year. Running more than 12,600 passengers and around 7400 freight trains daily, Indian Railways earns approximately US$25 billion every year. In the presence of above mentioned facts and figures, any comparison between Indian Railways with that of Pakistan Railways is meaningless

So, what has happened to Pakistan Railways? Simple answer? Underfunding. It is the same old business principle-you earn if you invest and you earn more if you invest more. Noam Chomsky has rightly remarked “If you want to privatise something for pittance, first reduce its state funding, it will go in loss, and then sell it for a pittance”. That’s precisely what has happened to Pakistan Railways.

Since 1990s, every government, civilian or military, has been trying to privatise the Pakistan Railways and considered investing in an entity meant for privatisation as a sheer wastage of resources. This underinvestment has taken a heavy toll of the commercial viability of Pakistan Railways. No doubt they are running into losses, a perfect justification for their privatisation!

The honourable Chief Justice of Pakistan credited Lalu Parsad, former Minister for Indian Railways presently serving jail term for corruption, with “marvellous turnaround of Indian Railways despite not being a highly educated person”. (He is an LLB). Well, the truth is that it was Lalu Parsad’s sheer good luck that he became the minister for Indian Railways at a time when the two decades of consistent and massive investment made by his four illustrious predecessors in the Indian Railways had started bearing fruit. Even then, he fudged the figures by showing employee’s provident fund as an asset instead of liability. Just read the latest report of Indian Auditor General to know how he did the window dressing to show Indian Railways’ Profit & Loss Statement in black.

The writer is a retired Federal Secretary. He can be reached at shahidraja@hotmail.com