The Sindh High Court (SHC) has granted a stay against Pakistan Railways for abandoning a multi-billion rupees project with a private firm under the Public Private Partnership (PPP) program for which the ministry of finance had estimated an income of Rs196 generated after the agreement.
The company Fast Track Silverlink was granted a Track Access Project agreement in May 2013. The project was launched on the basis of Finance, Own, Operate and Maintain (FOOM) basis.
Due to CPEC and other development projects, freight volume of the country has increased, however, the country’s huge freight market Pakistan Railways’ (PR) share is less than 2 per cent while the rest of the 98 per cent is being moved by trucks in the country. Ministry of railway with the cooperation of ministry of finance, were to encourage the private sector through private projects to come forward and invest in locomotives and rolling stock.
“The red-tapism prevails in the Pakistan railways, which has resulted in an unfortunate climax of our project” said Mirza Saad Baig GM Marketing Fast Track Silverlink.
The track access agreement could have been benefited to Chinese oriented projects and logistics support and cargo movements, said Mirza, who is also the complainant in the petition in the Sindh High Court. “This could be the first ever jolt to the most ambitious project of CPEC.”
The project did not require any investment by the railways. As per agreement, the company was responsible to invest in its locomotives, freight wagons and run its own freight trains on the tracks of Pakistan Railways on a Public Private Partnership (PPP) basis.
Through this and other contracts of Track Access, Pakistan Railways can earn billions of rupees in yearly revenues. According to estimates developed by the ministry of finance, the project would generate Rs 196 billion for PR.
Due to increased activity in the freight market, the private sector is interested in railway freight. In fact, PR itself is unable to grab the share in freight market as it is short on equipment, skilled workers or efficient management along with ailments like obsolete rolling stock, lack of commercial and operational management. Therefore, the role of the private sector becomes imperative in this situation.
The private sector can help PR to get share in the freight market without investment of millions of dollars into locomotives and freight wagons procurement.
These private projects will pay the government track access charges on gross per tonne basis. All the costs, including oil, maintenance and human resources will be the responsibility of the private parties.
They will also invest in the development of loading and unloading terminals at the designated places and railways can earn a good amount by providing the land at suitable places to them for the purpose.
From the private freight project, PR could earn Rs 198 billion. The biggest cost element for PR is fuel cost, which is the responsibility of the private project according to the agreement.
PR will not be liable for maintenance and human resource costs in these projects and the idle capacity of railways’ tracks will be used, which will result in employment opportunities for Pakistani youth.
Functional railways will also help with road freight by reducing road congestion, wear and tear of the road segment.
The project not only comprises benefits for PR, but will also reduce transport costs for trading.
Regarding these benefits, they signed an agreement in May 2013 as per which Railways had to form a Project Management Office (PMO) as the first step to start executing and governing the project in which the company made extensive investments in locomotives and other rolling stocks, feasibility studies, financial institutions involvement for the financing of the project and many others, said Mirza Saad Baig.
PR completely failed to form a PMO to start the project, while on the other hand the private party kept on following up with PR to fulfill its obligations and execute the project, he added.
After not receiving any response from PR for the execution of the Track Access Project, the private party Fast Track Silverlink filed a petition in Sindh High Court, asking for its interference to ask PR to implement the project and save the valid Track Access Contract from any possible cancellation by the PR.
The petition will come up for hearing, as SHC has instructed the PR to submit its reply.