Privatisation. It is a word that is contentious across the political divide, and is usually one of those things that the government is criticised for by the opposition. Ideally, there should be no privatisation. Governments privatize things when they are unable to run them efficiently and are incurring losses too heavy to sustain. They need cash and that means they sell things off to make a quick buck.
The problem? A lot of government owned entities (not all but some like public transport and hospitals) exist to make a loss. They are a service being provided for people and are thus not supposed to be turning any profit since they are benefitting taxpayers. The issue on hand is that the government seems to be on a trajectory where privatisation is their only option – a need exacerbated by Covid-19. Take, for example, the Pakistan Railways.
According to a recent report by Pakistan Railways, the railways have incurred a total loss of over RS 119 billion in the last two years and in these two years, the number of trains has dropped from 120 to 84. In 2018-19, the railways had incurred a deficit of RS 32.76 billion and in 2019-20, the department had incurred a deficit of more than RS 50.15 billion. This does not yet include losses incurred from the closure of trains because of Covid-19.
Even before this current situation arose, two years ago, then minister for railways Sheikh Rasheedd Ahmad had said that in order to increase the revenue of the department and reduce the deficit, it was imperative to build commercial plazas on the valuable lands of the railways and all hospitals would be privatized in future. Now, with Azam Swati in Rasheed’s old portfolio, the process is finally underway.
And while the merits and demerits of privatisation continue to be debated, this government has found it hard to even do that efficiently. Last Thursday, the Privatisation Commission auctioned the Services International Hotel in Lahore at the highest bid of Rs1.951 billion against the reserved price of Rs1.949bn with the small difference between the two prices raising some eyebrows. Only two bidders participated in the auction and a renowned real estate developer of Lahore, Faisal Town Pvt Ltd, emerged successful, according to an official announcement.
The auction took place in less than transparent circumstances. Within departments, the process is much the same. At other times, the government simply fails to build interest or find buyers. In its report on the economic performance of the PTI at the three year mark of their government, The News pointed out that Entities such as PIA, Pakistan Railways, Pakistan Steel and others have deteriorated in terms of performance while losses and liabilities have piled up significantly. Even worse, the government has been unable to undertake a single privatisation transaction over the last three years, which have seen no reform, no restructuring and no privatisation.
What will become of this latest attempt at privatisation? Profit takes a look.
The Pakistan Railways
A document prepared by the Railways revealed that up and down 36 trains were closed due to increase in deficit, and operation losses were increased due to Covid-19. The number of trains was reduced due to running deficit and for better commercial benefits, 15 passenger trains were offered on contract.
On the other hand, according to the same report, the situation was that the federal, provincial departments and private institutions were also in default of RS 9.89 billion of Pakistan Railways. Federal departments owed Rs 1.17 billion and provincial departments were defaulters of RS 2.44 billion.
Similarly, the National Highways Authority (NHA) owes RS 55.4 million and Pakistan Post owes RS 37.5 million. The Postmaster General was defaulter of RS 64.8 million, State Bank of Pakistan RS 38.2 million, Provincial Food Departments were defaulter of RS 759.1 million and the railways owes RS 1.49 billion to the provincial highways. PSO was a defaulter of RS 2 billion and RS 2.45 billion was owed to privately run trains and WAPDA owes RS 530 million to Pakistan Railways.
Services being provided in a country depict how developed a country is. They tell us what taxpayers are worth to the government, and whether it is willing to spend money on its people and make their lives better. When it comes to infrastructure in particular, the services of transportation being provided are a looming example. In the sub-continent, railways have been existing and functional since before the existence of Pakistan itself. Sir Henry Edward Frere was appointed Commissioner of Sind after its annexation with Bombay in 1847. Seeing the potential of Karachi as a seaport, he conceived the idea of a railway line to the country and recommended Karachi to be a seaport in 1855. The survey for construction of a railway line from Karachi was started in 1858. Initially a railway line was proposed from Karachi City to Kotri, then steam navigation through rivers Indus/Chenab up to Multan and from there on a Railway line to Lahore and beyond.
After partition, as with everything else, the railway system was divided as well on the basis of region. The Pakistan railway emerged as a department named ‘Pakistan Western Railway’. The current Pakistan Railways (PR) system is a mode of commute and transportation. People travel and the goods are transferred from one place to another. Along with the passage of time and development in other things, Railways systems as well improved from steam engines to coal engines to modern efficient engines. After that, more time passed and development remained on paper and the deficit of railways increased.
If we compare Pakistan Railways and India, the difference between earth and sky can be seen. The railway tracks laid in the Sub-Continent before the formation of Pakistan, which had become part of the railway infrastructure in Pakistan after the partition, were not expanded. India not only expanded its railway system but also extended the railway tracks to more areas but many railway tracks in Pakistan were completely destroyed. Many railway route tracks still exist today as evidence of archeology, showing that trains once ran here.
Then when the PTI government came to power in 2018 and Awami Muslim League Chief Sheikh Rasheed Ahmad took over the ministry of railways again after 12 years, so for the betterment of the situation, the people had again pinned their hopes on the Railway Minister for a new setup and major changes. In the face of constant challenges, the railways have been facing financial deficits for decades.
Addressing a meeting after taking over the ministry post, Rasheed had announced that in order to increase the revenue of the department and reduce the deficit, it was imperative to build commercial plazas on the valuable lands of the railways and all hospitals would be privatized in future. However, two years later, the portfolio of railways was withdrawn from Rasheed and the ministry was handed over to Azam Khan Swati. Now Swati has decided to privatize the hospitals of Railways to reduce the deficit and the bidding of which will be held on September 25.
It is a bit of a no-choice situation. A document prepared by the Railways revealed that up and down 36 trains were closed due to increase in deficit, and operation losses were increased due to Covid-19. The number of trains was reduced due to running deficit and for better commercial benefits, 15 passenger trains were offered on contract.
On the other hand, according to the same report, the situation was that the federal, provincial departments and private institutions were also in default of RS 9.89 billion of Pakistan Railways. Federal departments owed Rs 1.17 billion and provincial departments were defaulters of RS 2.44 billion.
Similarly, the National Highways Authority (NHA) owes RS 55.4 million and Pakistan Post owes RS 37.5 million. The Postmaster General was defaulter of RS 64.8 million, State Bank of Pakistan RS 38.2 million, Provincial Food Departments were defaulter of RS 759.1 million and the railways owes RS 1.49 billion to the provincial highways. PSO was a defaulter of RS 2 billion and RS 2.45 billion was owed to privately run trains and WAPDA owes RS 530 million to Pakistan Railways.
What will bidding look like?
This is where things usually get murky – particularly when people aren’t told who is bidding and only a couple of bidders (or in some cases one) show up and snag these prized properties.
“It will be outsourced under BOT (Build Operate Transfer) basis under Public Private Partnership. In this regard, the advertisement has invited applications from nationally and internationally renowned companies through a competitive bidding process,” says Sameenullah Khan Gandapur, General Manager Welfare and Special Initiatives, Pakistan Railways. According to him, the railways had issued an advertisement to outsource railway hospitals across the country, including the establishment of four medical colleges.
“Outsourcing includes Railway Karen Hospital Lahore, Railway Hospital Mughalpura, Railway Hospital Multan, Railway Hospital Karachi, Railway Hospital Sukkur, Railway Hospital Quetta and Railway Hospital Peshawar. We are inviting people from all public sectors to finance, innovate, expand, maintain and upgrade these hospitals under the Public Private Partnership Amended Act 2021 and in addition, they can run these hospitals, renovate them and share revenue with Pakistan Railways,” Gandapur added.
When Gandapur was asked how long these hospitals were being outsourced, he replied that these hospitals would be leased for thirty years. “Some conditions have been laid down in the proposals sought from national and international companies for outsourcing of these hospitals. For example, firms/bidders, joint ventures / consortia must be registered with the Securities and Exchange Commission of Pakistan (SECP).”
“The international company must be registered with the relevant regulatory body of its country. Similarly, the bidder must possess a valid registration certificate with the Federal Board of Revenue (FBR) or relevant tax authority of the foreign country. The bidder (lead and all members of the consortium) should not be blacklisted by Pakistan Railways or other regulatory bodies inside or outside Pakistan, including any bilateral agreements, government or non-government bodies,” he said. Gandapur further said that a pre-bid conference in this regard will be held on August 27, 2021, the place and time of which will be formally invited to the registered depositors before August 25.
“Pre-Bid Meeting will be held on September 1 at 11:00 AM at Railway Headquarters Lahore and for companies interested in this bid, it will also be necessary to send separate technical and financial proposals for each package to the relevant address by September 25, 2021. Later the technical proposals will be opened on the same day and at the same place and time in the presence of the participating bidders / representatives.”
Gandapur believed that outsourcing would be a mechanism that would not only facilitate the restructuring of these hospitals but would also give PR a share of the revenue generated from these hospitals. According to the data obtained from Pakistan Railways, in Lahore Cairn and Mughalpura hospitals are currently functional under the PR and the number of available beds is 226 and the annual expenditure of these two hospitals is Rs 2.2 billion whereas total traffic of patients is 0.21 million.
There is also a medical college along with these two hospitals which is included in the PPP scheme. The data also mentioned that these hospitals can support up to 500 beds for patients and the total area of these hospitals and medical colleges is 7.1 acres whereas only 3.4 acres of land is covered. The annual contract payment for these hospitals include (1) annual minimum guaranteed payment which is set to be Rs 1.5 billion annually and (2) annual revenue share.
Similarly, Multan hospital which operates under the Pakistan Railways has only 84 beds currently, even though it has a capacity of 500 beds. The traffic of patients is only 55 thousands per annum here and this hospital consists of a medical hospital and college. The annual budget of these facilities is RS 49 million approx. The area of hospital and medical college is 3.68 acres and 4.84 acres respectively out of which only 0.69 Acre is covered. The annual minimum guaranteed payment from these facility centers is set at 1.5 billion annually with share in annual revenue. It is thus being vastly underutilized and needs to be restructured and handed over to the new administration to be fully operational and serve the people.
Cases such as this can be found all over the country. In Karachi, there is a hospital named Karachi Hassan Hospital where the current number of beds for patients is 68 but it is proposed that the hospital can support 500 beds. Annual budget of this hospital is Rs 66 million approx. whereas the traffic of patients is 0.17 million per annum. Total area of this hospital is 3.7 Acres out of which only 1.3 acre of area is covered. The annual minimum guaranteed payment set for this hospital is Rs 60 million along with share in annual revenue.
Sukkur Hospital is also operational with 46 beds for patients only but like other facilities, the number of proposed beds in this facility centre is also 500. This facility includes a hospital and medical college. The budget of this facility is 41 million approx. The traffic of patients in this facility is very low which is 19 thousand only. The area of hospital and medical college is 2.03 acres and 10 acres respectively. For this facility, the annual minimum guaranteed payment under contract is set at 80 million annually along with share in annual revenue.
Quetta hospital is operational with 52 beds for patients. The addition in the number of beds is proposed to be 500. This facility centre consists of 1.5 acres and some vacant land allocated for this facility. Budget of this facility is 27 million. The traffic of patients is 26 thousand per annum. For this facility, the minimum guaranteed payment is set to be 80 million annually along with share in annual revenue.
Peshawar hospital is operating with 30 beds only but the addition in the number of beds is proposed to be 250. This facility consists of a hospital only. The budget of this hospital is 35 million per annum. Whereas the traffic of patients is 20 thousand. The area of this hospital is 1.5 acre. For this hospital, the minimum guaranteed payment is set to be 40 million annually along with a share in annual revenue.
Should these hospitals really outsource?
Profit approached various private hospitals in this regard and tried to find out whether investing in these hospitals would be really beneficial and whether it should be. In this regard, the Chief Executive of National Hospital & Medical Centre, DHA Lahore speaking to Profit said that the government should not outsource this hospital as it would harm the interest of the common man.
“The government should never privatize its property because it can never generate the revenue it is planning. On the contrary, if Pakistan Railways manages its own hospitals and runs them well, it can be more beneficial. The other thing to consider is that whether it is a railway hospital or other government hospital, the facility is available to an under-privileged citizen, and such a facility cannot be availed by a common man even from a cheap private hospital because he can’t afford it. I am personally against the privatisation of government land as it is an asset of the state. Whether the PR leases it for two years or for fifty years, once the land is out of hand, it does not come back,” she said.
“Some time ago some foreigners were interested in buying some of the big hospitals in Lahore. I had protested then that these hospitals should not be privatized and I would still protest today that the railways should not outsource their hospitals. Now if we talk about the railways trying to privatize these hospitals under the guise of its deficit, then not much money is spent on restructuring the hospitals. All that is needed is proper planning. The deficit in these hospitals is also due to poor planning. Recruiting more people on recommendation has increased the load of salaries and pensions, while if people are placed on merit who give good results, the confidence of the common man in these hospitals can be restored and the government can benefit. Many ideas can be worked on to improve here, the condition of labs can be improved, ICUs can be made state of the art but leasing is not the answer. If only the HR of these hospitals is managed, the deficit can be eliminated automatically,” she suggested.
The CEO of another well-known private hospital in Lahore believed that investing in these hospitals could not be of much benefit anyway. “There is already a lot of corruption in the railway system. You cannot run a hospital with other things on your plate and you shouldn’t – there are lives at stake here just like there are lives at stake with the running of trains on time and safely. If a canteen is leased from the railways, the extortion mafia will not give up and these are hospitals, think for yourself that in addition to revenue sharing, bribes will also have to be paid for the approval of anything,” they said.
The general opinion about these hospitals is that the employees of the railways get free treatment from here and in such a situation they will either pay for the treatment or pay to the railways. They will have to bear the cost of medical treatment. Otherwise, if the Railways itself bears the cost of medical treatment of its own employees, then instead of leasing these hospitals, it should improve their condition. The area of these hospitals is undoubtedly large, but people spend more than going to the Mughalpura area, especially such people who have to spend money on medical treatment. However, if these hospitals are converted into specialized hospitals, then perhaps a good revenue can be generated.”
On the other hand, the central president of Railways Prem Union, Sheikh Anwaar, speaking to Profit said that “it is a common initiation of every government to privatize the railway instead of raising the voice that this institute (railways) of state can work. Same is with Imran Khan’s government. The PTI government kept claiming that we can bring this institute back on track, restore and operationalize it but now the situation is in front of everyone. A project of privatisation has been proposed which is not acceptable. Since the day of this (PTI) government, they have been announcing the privatisation of state institutions and department’s i.e PSMs (Pakistan Steel Mills) and now PK (Pakistan Railways). But it is to be told to the government that this time things are not going to be any easy for them. We (Union) will resist, protest and will not support this privatisation. We will approach courts against this initiative if necessary.”
“On 2nd September, we are going to organize a protest at Peshawar station. Senator Mushtaq Khan and the head of Peshawar union are expected to participate in the upcoming protest. We held a protest at Rawalpindi station on August 7 and in that protest Liaqat Baloach participated along with the core union team of Karachi. On 8th September, a protest is going to be held at Multan station. All these protests are recorded against the privatisation of the Railway. The Government is going to have a surprise before the bidding of this outsourcing.”
Moreover, Sheikh shared his concerns and reservations, pointing out that the importance of Carin hospital Lahore needs to be understood as that hospital is spread over 48 Kanals but the facilities and situation in that hospital is dire. “The government should enhance the facilities of this hospital. This hospital is enormous, the government should associate a medical college with it. This will bring advancement and development in college. Name compared a private hospital and mentioned that the private hospital is not big enough but still a medical college is associated with it.”
Nazia Jabeen, Director Public Relations, Pakistan Railways, informed Profit that this outsourcing would be better for the railways in every way. “Pakistan Railways is facing a constant deficit and there are many projects on which the railways do not want to spend money. When these hospitals are outsourced, not only will their condition improve but the public will also benefit. This is a great project and private companies can not only make good profits by investing here but will also share revenue with the railways,” she maintained.
