Outsourcing trains in tough conditions

Pakistan Railways (PR) is looking to outsource the commercial operation of 22 more trains. However, previous experiences, such as a leading firm’s failure to run the Business Express due to financial constraints, raise concerns about the possibility of the plan’s success.

Additionally, another firm stopped operating the Bahauddin Zakaria Express (Multan-Karachi-Multan) for administrative, financial and technical reasons.

In the latest development, PR has decided to readvertise tenders to outsource trains. This decision was made as only three companies participated and showed interest, offering less than the benchmarked amount.

The department found it impossible to proceed with these three firms under the Public Procurement Regulatory Authority (PPRA) rules and regulations. As a result, the tenders will be floated again soon.

Currently, PR is operating 49 passenger trains, with 12 of them already being operated by private parties under the Public-Private Partnership (PPP) mode. These include the Sir Syed Express, Karakoram Express, Karachi Express, Awam Express, Green Line, and Pak Business Express.

PR to re-float tender after poor response; parties blame apathy on high benchmark

“The conditions are very tough. And in such circumstances, running a train has become an uphill and thankless job. On the other hand, the profit/margin is squeezing due to increasing cost incurring on facilities,” says a senior official of a private firm presently running a train in Punjab.

“This is why we have not participated in the ongoing bidding since the benchmark is very high, and we are not in a position to participate,” he adds.

Under the plan, the trains’ total earning benchmark has been calculated based on three-year average ticket sales, considering the year witnessing the highest sales. This means that if the total earnings of a train is Rs2 billion in three years, the benchmark is considerably higher than this. The benchmark also includes a 10 per cent possible increase in train fare subject to providing more facilities such as Wi-Fi, complaint resolution management, quality and others.

Those offering more than the benchmark price can take and run the trains commercially. Besides this, the contractor is liable to sell tickets through PR’s official Rabta application available at 86 locations, including several stations. Moreover, the contractor must also submit its tax returns, financial statements, and other documents to PR for onward sharing with the Federal Board of Revenue (FBR).

The contractor must also provide high-quality catering services, including hygienic food, fully trained staff, branded foodstuff, improved dining car facilities, raw materials, water dispensers, bedding, etc.

Similarly, they will also be liable to provide quality janitorial services such as a clean & hygienic environment, uniformed janitorial staff, cleanliness, soap dispensers, tissue papers, hand dryers, and aesthetics of the trains’ interior.

Moreover, they will also provide state-of-the-art infotainment (LCD screens in AC compartments) and security-related services during the journey.

On the other hand, PR would be liable to provide good-condition passenger coaches, locomotives, experienced drivers and assistant drivers and other technical staff required for the smooth operation of the train during the journey and at railway stations. PR is also required to allow contractors to adjust the departure/arrival timing of the train (up to a couple of hours only).

“Three firms, which have reportedly submitted their technical and financial proposals to the PR, have offered less than the benchmark. On this, PR has decided to readvertise the trains,” said another PR contractor.

According to him, the problem most parties feel is the high benchmark and ticket sales through the Rabta application. This has badly affected the interest of businesspersons, who neither want to share data of passengers’ numbers through the Rabta application nor desire to accept the high benchmark.

“Problems such as giving one week’s payment in advance to PR and others on the part of railway officials also exist. He said the earning benchmark for major express trains had been fixed as an 80 per cent passenger occupancy ratio. In contrast, the benchmark for trains with fewer carriages ranges between 60 to 90pc occupancy ratio.

On the other hand, PR Chief Executive Officer Amir Ali Baloch looks optimistic about implementing the train outsourcing plan. He says he would better prefer PR to keep running trains on its own if the contractors/parties fail to come up to the expectations of passengers.

“Our committee has observed that firms participating in the bidding submitted very low technical and financial proposals. Therefore, there will be no competitiveness if we go with these companies. That is why we will readvertise to attract more and more firms,” he said.

Mr Baloch said the benchmark is not on the higher side. “There is no problem if the bidding is delayed for some time, as the trains we are going to readvertise are running smoothly at the moment,” he maintained.

Published in Dawn, August 7th, 2024