Pakistan’s logistic sector is in turmoil and requires massive undertakings if it is to compete in global supply chains and not have to deal with severe environmental threats it faces.
Pakistan’s transport sector constitutes around 10 percent of its gross domestic product (GDP) and is responsible for 6 percent of the employment in the country. Although functional, the sector is plagued with inefficiencies including long waiting and travelling times, inflated costs, and poor reliability, especially in the case of railway, which hinders the countries internal trade and global competitiveness. It is estimated that 30 percent of agricultural produce goes to waste due to inefficient farm-to-market channels. According to the World Bank, low productivity of the sector is costing the economy 4–6 percent of GDP per year. The country’s logistic ranking for 2018 is the lowest in the region at 122 out of 160 countries, only above Afghanistan, on Logistic Performance Index — a benchmarking tool developed by the World Bank and measured every two years. In 2007, Pakistan was among the most hazardous countries in the world in terms of road safety, with 41,494 fatalities, which implies a rate of 25.3 deaths per 100,000 inhabitants, however, after much effort it has improved with a rate of 14.3 death per 100,000 inhabitants in 2016. Pakistan’s logistic sector is in turmoil and requires massive undertakings if it is to compete in global supply chains and not have to deal with severe environmental threats it faces. This article concern itself with the failure of Pakistan Railway and how it has resulted in the country relying solely on road transportation, for passenger and freight transportation, which has resulted in high number of environmental issues.
Story of Pakistan Railway
Railways used to be the pre-dominant mode of transportation. At its peak, between 1955 and 1960, railways handled 73 percent of freight traffic; currently, it handles less than 4 percent. While the dynamic road sector was emerging, railway did little to improve its quality of service owing to governmental priority to roads over rail, poor governance, and lack of customer focus, despite having a competitive advantage over road for long haul and possessing massive infrastructure network which due to poor maintenance is becoming obsolete. Moreover, only one-third of the total rail network is used for core-commercial purposes. Between 1990–91 and 2010–11, total rail track length decreased by 11 percent from 8,775 to 7,791 kilometres. Total freight and passengers carried decreased from 7.7 to 4.6 million tons (40 percent) and from 84.9 to 58.9 million (31 percent), respectively. Despite losing market share, railway has not been able to reduce its fixed cost and is surviving on the back of public funds. Most of its wagons, technology and equipment are also obsolete which causes significant delays and safety hazards. Giving higher priority to freight services would make business sense for railway, as average freight revenue is higher than unit passenger revenue. However, as most of the funding for railway comes from the public sector, the priority is given to passenger rail services over freight rail, which is impeding Pakistan’s regional competitiveness. As a result of such policies coupled with lack of investment in locomotives, wagons, and improving track capacity and quality, freight volumes have declined continuously in both tons and ton-kilometers and are unreliable and costly. Railway earnings are also exceptionally low and are barely enough to cover the cost of salaries (Rs 27 billion per year) and pensions (Rs 38 billion per year). New Railway Minister, Azam Sawati recently revealed that railway has suffered accumulated losses of Rs. 1.2 trillion in the last 50 years and the average loss is about Rs. 35–40 billion each year. Freight sector inefficiencies are costing the economy about Rs 150 billion per year, and low-quality service is impeding Pakistan’s regional competitiveness. According to The World bank report, The Rail Freight Challenge for Emerging Economies, Countries that score high on logistics performance index also have higher income per capita. Therefore, improvement in logistics — including reorienting the role of railway — is an important development issue. Looking at the existing planning approaches, such as road allocation being three times that of railway, makes it clear that priorities are determined for reasons other than economic efficiency.
The trucking sector carries 96 percent of the total freight traffic. While there are 216,119 registered trucks, the government estimates that 200,500 of these (93 percent) operate on roads. The trucking sector is highly competitive owing to little barriers of entry in an unregulated market with low rates. It is characterized by the presence of a small fleet of owners who possess fewer than five vehicles. To maintain high revenues, trucks are overloaded, which damages road quality and increases the need for road maintenance. Few regulations exist related to truck modification, crew hours and safe operations which increase the risk of accidents. According to the Government’s Trucking Policy, by 2007, inefficiencies of the trucking sector were estimated at US$2.62 billion per year, consisting of US$1.04–US$1.57 billion per year in extra fuel costs and diesel subsidies, US$0.52–US$0.61 billion per year in additional road-user costs, and US$0.44 billion per year contribution to the infrastructure deficit. The trucking fleet is out dated and runs on underpowered engines. This is in part due to the high import tariffs on high capacity multiaxle trucks, which are meant to protect the local manufacturers. This prevents the trucking sector to improve its fleet. Many trucks operate long hours and carry excessive loads while traveling at low speeds, ranging between 20 and 25 kilometres per hour which increases their journey time and decreases competitiveness of the sector. Transport time is also often lost by trucks needing repairs due to overloading.
Environmental effects due to heavy reliance on Road transportation
Pakistan’s greenhouse gas (GHG) emissions have been growing by just under 3 percent from 1990–2012, however they are anticipated to increase at high rates over the coming years. In 2007–08, the transport sector contributed 21 percent of the energy sector’s emissions as compared to 27 percent in 2011–2012. Most of the sector emissions are a result of road transportation, which consumed about half of the country’s total petroleum products during 1997–98 to 2006–07. Road transport emits an average 0.17 TgCO2eq per billion ton-kilometres, compared with railway transport’s emissions of 0.02 TgCO2eq per billion ton-kilometres. As demand for freight is expected to increase steadily in the upcoming years, GHG emissions are also expected to increase. GHG emissions from railways were only 0.17 percent of total transport carbon emissions in 2006–07 which indicates that road sector is and will generate the lion’s share of emissions in upcoming years. For example, in 2030–31, total TgCO2eq emissions for road transport are anticipated to be 90.17, compared with 3.05 for rail. It is also evident that shifting to rail transportation of goods will decrease the GHG emissions which are causing serious health and economic problems.
Ambient Air Pollution
A 2006 World Bank report found that more than 22,600 deaths per year are directly or indirectly attributable to ambient air pollution at the national level. An analysis of Sindh in 2009 concluded that outdoor air pollution had a cost equivalent to 0.9–2.2 percent of the province’s GDP and was responsible for more than 10,000 premature deaths, with 80 percent of them happening in Karachi. Analytical work by the World Bank provides evidence that particulate matter, especially fine and ultrafine particulate matter, is the most important ambient air contamination problem that should be addressed quickly. It is surprisingly that while trucks represent a minor percentage of total vehicles in Pakistan, they emit pollutants of local and global concern. Road transportation vehicles, such as two- and three-wheel vehicles, cars, trucks, and buses run on fuels that have a high sulphur content which is the main ingredient in formation of fine and ultrafine particles. Fuel in Pakistan has a sulphur level of 5,000 to 10,000 parts per million, a level much higher than Euro II, Euro III, or Euro IV emission standards.
In 2007, with 41,493 deaths in road accidents, Pakistan was among the most hazardous countries in the world for road safety. A study conducted under SEPSA estimated that, in 2009 in Sindh, road accidents caused 1,800–2,200 deaths, 5,400–6,600 cases of permanent disabilities, 59,000–105,000 other serious injuries, and 423,000–474,000 minor injuries. The cost of these accidents was estimated to be Rs. 50 billion or 1.4 percent of Sindh’s GDP. The bulk of costs are related to permanent disability (Rs 23.4 billion), fatalities (Rs 9 billion), and serious injuries (Rs 7.7 billion). The limited information that is available on Pakistan suggests that a significant share of road accidents and fatalities in Pakistan involved a truck, even though they comprise only around 3 percent of the vehicle fleet.
Adopting a multi-modal freight transportation system
Pakistan needs to have a freight system which utilizes both rail and road transportation. Rail has a competitive edge over long haul, while road transportation is economical for shorter distances. The adoption of a multimodal system — one that uses rail for long and road for shorter distances — can enhance the sustainability of freight transport and reduce environmental externalities caused by the trucking sector. Adopting such a system will allow the country to reduce road congestion, improve air quality, reduce GHG emissions, reduce noise pollution, and decrease the probability of road accidents. Pakistan should also accelerate its implementation of national trucking policy to modernize its trucking sector with fleet that meets minimum European emissions standards, which will further increase the efficiency of the sector.
Split Pakistan Railway
To increase focus and urgency of increasing railway share of freight, Pakistan Railway can be split into two different organizations, one that focuses on providing high-quality freight services and the other that handles passenger services. This will allow the company to better manage and operate its assets and over time separate its core and non-core activities.
Strengthen Railway with Public-Private Partnerships
Due to federal budget constraints, new investment in railway can be made through public-private partnerships. This will allow risk sharing and adoption of highest economic, financial, and social environmental standards. To ensure a level playing field, the government should develop a regulatory framework that includes responsibilities on issues such as environment, contracts, monitoring and evaluation.
The writer is senior year student at Forman Christian College University and studying Operations Management.