Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 3818-PAK

STAFF APPRAISAL REPORT

PAKISTAN

ELEVENTH RAILWAY PROJECT

May 25, 1982

Transportation DivisionSouth Asia Projects Department

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

Currency Unit = Rupees (Rs)US$1.0 = Rs 10.5US$0.0952 = Rs 1.00 (= Paisa 100)

US$95,238 = Rs 1.0 million

WEIGHTS AND MEASURES

Metric British/US System

1 meter (m) = 3.281 feet

1 square meter (m2) = 10.760 square feet1 ton kilometer (km) = 0.621 ton-mile1 passenger-km (pass-km) = 0.621 pass-mile

ACRONYMS AND ABBREVIATIONS

AC - Alternating CurrentBG - Broad Gauge

CDLW - Central Diesel Locomotive WorksCIDA - Canadian International Development AgencyCIF - Cost, Insurance, FreightDF - Development FundDRF - Depreciation Reserve FundGOP - Government of Pakistan

KPT - Karachi Port TrustLDP - Lahore Dry Port

MG - Meter Gauge

MIS - Management Information SystemMOR - Ministry of RailwaysMTDP - Pakistan Railways' Medium Term Development PlanNG - Narrow GaugeNLC - National Logistics Cell

PER - Pakistan Eastern RailwaysPOH - Periodic OverhaulPOL - Petroleum, Oil and LubricantsPR - Pakistan Railways

PWR - Pakistan Western RailwaysTEU - Twenty-Foot Equivalent UnitUEMS - Unit Exchange Maintenance SystemUEP - Unit Exchange Pool

GOVERNMENT OF PAKISTANFiscal Year

July 1 - June 30

FOR OFFICIAL USE ONLY

PAKISTAN

APPRAISAL OF AN ELEVENTH RAILWAY PROJECT

STAFF APPRAISAL REPORT

Table of Contents

Page No.

I. THE TRANSPORT SECTOR ...... .............. 1A. Background .................... 1................... B. The Transport Sector ............................. IC. Transport Policy and Investment ............. 5

II. PAKISTAN RAILWAYS ....... ............... 7A. Organization, Management and Staff .... ........... 7B. Railway Infrastructure ........................... 8C. Motive Power and Rolling Stock. 9D. Operations. 9E. PR's Role and Prospects .10F. Railway Investment Plan .11G. Performance Under Previous Projects .14

III. THE PROJECT ..................... ..................... 15A. Background ................... .................... 16B. Objectives ................... .................... 16C. Description ................... ................... 16D. Cost Estimates ................................. 24E . Financing ........................................ 26F. Implementation ................. .................. 26G. Procurement ................... ................... 27H. Disbursements .................. .................. 27

IV. ECONOMIC EVALUATION ................ ................. 28A. General .......................................... 28B. Locomotive Maintenance Improvements .... .......... 28C. Rail Container Operation ......................... 31D. Management Information System, Technical

Assistance and Training ...................... 33E. Economic Justification and Sensitivity Analysis 33F. Risks ......... ...................... . 34

This report was prepared by Messrs. M. Melrose (Railway Engineer), E. Pogson(Financial Analyst), M. Pulgar-Vidal (Economist) and A. Sabeti (RailwaySpecialist).

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

Table of Contents (Cont'd)

Page No.

V. FINANCE AND EARNINGS ................................. 34A. Introduction ....... .............................. 34

B. Recent Changes in Financial Policies .......... ... 34

C. Past Performance ............... 35D. The Next Few Years ....... ........................ 38

E. Financing Plan .. .40

VI. AGREEMENTS REACHED AND RECOMMENDATIONS ............. . 42

ANNEXES

1. Documents Available in Project File .... .............. 43

2. Plan of Action for Improving the Operational andFinancial Performance of Pakistan Railways .... ..... 44

3. Terms of Reference for a Study of the Future Roleof Railway Transport in Pakistan .... ............... 47

4. The Basis for Financial Forecasts ..... ............... 50

TABLES

1. PR's Freight Traffic by Main Commoditiesfrom 1969/70 to 1980/81 ...... ...................... 53

2. PR's Passenger Traffic from 1959/60 to 1980/81 ....... 54

3. PR's Staff by Department and Category as ofJuly 1, 1981 ......... .............................. 55

4. Inventory of PR Track ................................ 56

5. Inventory of Motive Power and Rolling Stock(Actual Numbers) for Broad Gauge, Meter Gaugeand Narrow Gauge ................................... 57

6. Diesel Locomotive Fleet - Age, Class andManufacturer ....................................... 60

7. Selected Operating Statistics (1975/76-1980/81) 61

8. Medium-Term Plan 1981/82-1983/84 and the Project 62

9. Maintenance Modernization - Cost Estimate Details . 6410. Unit Exchange Pool: List of Components and

Cost Estimates ..................................... 65

11. Cost Estimates for Containerization Component ........ 66

12. Summary of Project Cost Estimates ..... ............... 67

13. Estimated Schedule of Disbursements .... .............. 68

14. Economic Evaluation: Unit Exchange System,Management Information System, TechnicalAssistance and Training ............................ 69

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Table of Contents (Cont'd)

15. Economic Evaluation: Container Rail Operation .. 7016. Revenue and Expenditure for Financial Year to

30 June for 1976/77-1980/81 ................ . ........ 7117. Changes in Relationship of Revenues and Costs

1972-1982 .......................................... 7218. Passenger Fares and Costs 1972-1981 ................ . 7319. Forecasts of Revenue and Expenditure:

1980/81-1985/86 .................. . 7420. Forecasts of Source and Application of Funds:

1980/81-1984/85 .................. .................. 75

CHARTS

Chart 1 - Pakistan Railways Organization, February 1982 76Attach. 1 - Pakistan Railways Organization,

May 1982 .77Chart 2 - Expansion of Dry Port at Moghalpura, Lahore

(Key Plan) ..................................... 78Chart 3 - Proposed Layout of Remanufacturing Shops

in Central Diesel Workshops (Rawalpindi) ....... 79Chart 4 - Project Implementation Schedule .... .............. 80

Maps

IBRD 16207R - Pakistan - Eleventh Railway Project

This report is based on information provided by the Government of Pakistanand on the findings of project preparation and appraisal missions in 1980,1981 and 1982 which consisted of Messrs. D. Bickers (Economist), N. Holcer(Telecommunications Engineer), M. Melrose (Railway Engineer), E. Pogson(Financial Analyst), M. Pulgar-Vidal (Economist), A. Sabeti (RailwaySpecialist), T. Shima (Railway Engineer), and A. Soto (Economist); andconsultants W. Anderson (Container Specialist), D. Burns (MechanicalEngineer) and W. Thompson (Operations and Management Specialist). The mainreports and data used are listed in Annex 1.

I

PAKISTAN

ELEVENTH RAILWAY PROJECT

STAFF APPRAISAL REPORT

I. THE TRANSPORT SECTOR

A. Background

1.01 Pakistan covers a land area of about 800,000 square kilometers.It consists mainly of a flat plain stretching from the foothills of theHimalayas in the northeast to the Arabian Sea in the southwest. It iscrossed by five great rivers, the Indus, Jhelum, Chenab, Ravi and Sutlej,which, after their confluence, flow as the Indus towards the sea. Theserivers frequently overflow their banks, causing serious interruptions totransport. The country's population, which is growing at about 3% p.a., isestimated at 83 million and is concentrated in the fertile Indus basin.Karachi, the largest city and port, is also Pakistan's main commercial,financial and industrial center.

1.02 Pakistan's gross national product (at market prices) was estimatedin 1980/81 at US$30 billion, and per capita GNP in 1980 at about US$300.1/The largest sector in the economy is agriculture, which generates about 31%of GNP; other important sectors are manufacturing (16%), commerce (14%) andtransport, including communications (7%). The balance-of-payments situationhas been characterized by persistent current account deficits during the pastfour years.

B. The Transport Sector

1.03 Pakistan's transport system and traffic densities reflect theconcentration of population and economic activity in the Indus basin; thelocation of the ports of Karachi and Qasim; and the long distances betweenthe location of the few mineral resources currently exploited (gas, coal,oil) and the consumption centers. Because the border with Afghanistan wasclosed in 1979, and trade with India and Iran is insignificant, practicallyall imports and exports move through Karachi. Over half the internationaltraffic originates in or is bound to Karachi and its environs; most of thebalance goes to or comes from the Punjab, whose capital, Lahore, is 1,200kilometers north of Karachi. Hence, fairly long transport distances areinvolved for many traffic flows, especially imports and exports. Because ofthis and the generally flat terrain along most of the densely traffickedcorridors, Pakistan is a country well suited for rail freight transport. Asthe main railway lines are in the northeast-southwest direction, PakistanRailways (PR) is in an advantageous position to carry such traffic.

1.04 Freight traffic growth in Pakistan has been faster than GNP growth.While real GNP grew at about 4.5% p.a. in the 1970's, total freight traffic

1/ "Pakistan: Economic Developments and Prospects", Report No. 3802-PAK,April 14, 1982.

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(in ton-kilometers) grew approximately at 7.0% p.a. As shown below, rail

freight traffic remained roughly constant between 1971/72 and 1980/81, but

the rail share of freight traffic decreased from 48% to 26%. During the same

period, rail passenger traffic grew by about 70%. but its share declined from

20% to 15%.

1971/72 1980/81

billion billion billion billionton-kms pass-kms ton-kms pass-kms

Rail 7.8 (48%) 9.5 (20%) 7.9 (26%) 16.3 (15%)Road 8.2 (51%) 36.5 (77%) 22.0 (73%) 86A9 (79%)Air 0.1 (1%) 1.6 (3%) 0.3 (1%) 6.2 (6%)

Total 16.1 (100%) 47.6 (100%) 30.2 (100%) 109.4 (100%)

Despite the increasing importance of the road subsector, the railways still

play and will continue to play a major role in Pakistan's economy (para

1.05).

1.05 In recent years (since 1976/77), the volume of revenue-earning

traffic carried by the railways has oscillated between 6.8 and 8.5 billion

ton-kms, with an average haul in the range of 720 to 930 kms (Table 1). In

1980/81, the railways carried more ton-kms than a decade earlier, and theaverage haul of revenue earning traffic was significantly longer, which

indicates an overall improvement in the use of PR's limited effective carry-ing capacity. However, various recent studies dealing with public sector

commodities, which comprise 75% of PR's present freight traffic, togetherwith an analysis of the sensitivity of rail traffic to major changes in

origin-destination flows of these commodities, confirm that it is PR's owninefficient operation, not the lack of rail-suitable traffic, that hasresulted in the recent stagnation of rail traffic volumes. This is clearlyseen in the fact that the actual rail traffic has consistently been bulk

commodities with much longer hauls than what is normally considered to be thethreshold of the rail's economic advantage over road transport. The abovestudies indicate substantial growth in the next ten years in the productionand trade of many of the commodities for which the railways would normally be

the chosen carrier. The main factors affecting PR's ability to carry are thefollowing: (a) GOP's continued policy that PR should give preference to

passenger over freight traffic; (b) the effect of the trucking operation runby the National Logistic Cell (NLC), as detailed in para 1.08; (c) deficien-

cies in institutional and managerial aspects of PR; (d) the fact that about75% of PR's traffic is currently public sector traffic; (e) changes in the

pattern and composition of the demand for freight transport, mainly reflect-ing the reduced long-distance movements of POL; and (f) shifts in modal

comparative advantages as perceived by shippers. The future growth of rail

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traffic depends on whether the physical and institutional improvements dis-

cussed in Chapters II and III can be achieved. While the proposed project isdesigned to address these problems and assist PR to improve its ability tocope with present and potential traffic demand, prudence in the light of pastperformance dictates a very conservative approach to traffic forecasting forthe purposes of using such forecasts for calculating estimated projectbenefits. Therefore, PR's total ton-kilometers have been estimated to remainat about their present level during the project period. Any additionaltraffic which PR is able to carry will further enhance the project benefitsand is clearly worth striving for.

1.06 Passenger traffic carried by the railways (Table 2) in the late

1970's hovered around 145 million passengers, reaching an all-time high of149 million in 1977/78; in 1980/81 ridership declined to 123 million. Interms of passenger kilometers, traffic grew from 13.0 billion in 1975/76 to17.3 billion in 1979/80 and then dropped to 16.3 billion in 1980/81. Therecent decline in passenger traffic probably reflects the cumulative effectof fare increases in 1979 and 1980. 1/ The bulk of ridership on the railwayssystem consists of second class passengers, who account for over 95% of thetotal volume of passengers and for about 88% of passenger kms. Abouttwo-thirds of second class passengers travelled less than 100 kms, and aboutone-fifth made trips of less than 15 kms on commuter services in the Karachiand Lahore areas. The average travel distance for all passengers, however,has increased steadily in recent years, from 93 kms in 1976/77 to 132 kns in1980/81.

1.07 Pakistan's road system comprises about 40,000 kms of federal andprovincial all-weather roads (of which nearly 24,000 have bituminous surfac-ing), and some 55,000 kms of fair-weather roads. The quality of the networkis deficient, much of the paved system is narrow, with a paved width averag-ing only about three meters, and the structural strength of the pavement isoften insufficient, leading to failures on major roads under heavy trafficconditions. The present condition of the road system stems from: (a) originalhighway designs not suitable for current traffic volumes; (b) lack

of adequate road maintenance; (c) preference at various levels of Governmentfor building new roads rather than repairing or improving existing ones, atendency fortunately curtailed in recent years, and (d) considerable over-loading of the country's roads by a relatively free and highly competitiveroad transport industry. A study is being carried out by GOP under theon-going Third Highway Project to determine the extent of vehicle overloadingin the country. Preliminary results indicate that about 60% of trucks onmain highways are overloaded, i.e., have axle loads greater than 18,000pounds. Once the study is completed in end-1982, GOP is expected to devise a

1/ However, in 1980/81 the effective fares collected per pas-senger-kilometer (Rs 0.120 in first class and Rs 0.051 in second class)were not sufficient to cover the costs of providing the service.

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strategy to control truck overloading. The range of steps to be taken islikely to include the following: (a) the establishment of roadside weighingstations (not deemed to be very effective in practice); (b) the introductionof suitable changes in GOP's truck import policies; (c) the adoption ofadditional standards during annual truck inspection to identify thosevehicles that have been modified by their owners to carry excessive loads;(d) the revision of the schedule of road user charges to make vehicles pay asum proportional to the wear and tear they inflict on roads; and (e) therevision of the specifications under which the national highway system is tobe constructed or rehabilitated.

1.08 Private trucks operate in a fairly competitive environment, wherethere is little regulatory control, small firms abound, and a large number ofvehicles are owner-operated. Tne role of the private trucking industry, aswell as that of PR, has been affected by GOP's creation of the NationalLogistics Cell (NLC) in 1978. In that year, faced with an emergency need toimport and distribute substantial volumes of wheat and fertilizer, GOP estab-lished the NLC within the Army, entrusting it with a fleet of 500 new 20-tontrucks and making it responsible for most of the day-to-day operation of theport of Karachi. NLC efficiently handled the crisis situation and, when thecrisis subsided, GOP decided that NLC should remain in existence. In1979/80, NLC acquired additional trucks and tankers, and its current carryingcapacity is estimated to be about 820-1,080 million ton kilometers per year.As a result, NLC has become a major competitor to the railways and its effectis mainly felt upon the highly imbalanced north-south freight traffic.According to PR's own assessment, in 1979/80 the railways lost to NLC about0.6 million tons of fertilizer, 0.2 million tons of cotton and 0.2 milliontons of rice. Allocation of traffic to NLC has not always been consistentwith economic considerations in that it was assigned public-sector long-haultraffic whose economic cost would have been lower by rail; meanwhile, PR wasoften required to transport less profitable and operationally more complexcargoes on routes that included mountainous terrain. Since end 1981,however, NLC has modified its traffic allocation policies, and PR has beencarrying larger volumes of long-haul traffic. During negotiations, agreementwas reached with GOP, that the allocation of public sector freight trafficwill be done with due consideration to the relative advantages and capacitiesof the various modes of transport.

1.09 The bulk of road passenger transport services, i.e., urban andintercity bus services are provided by small firms and owner-operators. Thereare four large provincial bus corporations which operate urban and intercityservices. Registration figures indicate that, from 1969 to 1979, the busfleet grew more rapidly (9% p.a.) than the automobile (8% p.a.) and truckfleets (6% p.a.). Inter-city bus transport is largely unregulated. Thesafety record of the bus operation is very poor probably because of, amongother things, the absence of periodical mechanical inspection and thegenerally unruly behavior of bus drivers. The bus safety record and the factthat bus fares, at Rs 0.085 per passenger-kilometer, are about 60% higher

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than second class rail fares, may largely explain why passengers normally

prefer rail over bus when both services are available.

1.10 Karachi is Pakistan's major port and handles most of its foreign

trade. A second one, Port Qasim, has been recently opened but so far hasonly handled inbound traffic for a new steel mill which is in the commission-ing stage. Since 1978, when many aspects of the operations of Karachi PortTrust (KPT) were put under NLC supervision, the traditional congestion at theport, formerly one of the most costly bottlenecks in Pakistan's transportsector, has been removed. Daily throughput has increased from 6,800 to 9,000tons for general cargo, and from 7,500 to 12,000 tons for bulk commodities.Average ship waiting time at the outer anchorage has decreased from about 20days to under 2 days.

1.11 After the promulgation of the Pakistan Maritime Shipping Act of1974, the Government took over the management of various shipping companies.Services are provided by the National Shipping Corporation (NSC) and therecently de-nationalized Pan Islamic Steamship Company. Only a small frac-tion of foreign trade is currently carried by Pakistani vessels, and GOPhopes to increase it. At end-1980, Pakistan's merchant fleet consisted of 48vessels with a total carrying capacity of about 560,000 DWT. Over half thesevessels were more than 15 years old. Inland water transport has not beendeveloped, since most rivers are seasonal or are interrupted by numerousirrigation barrages.

1.12 Air transport accounts for about 1% of domestic passenger-kilometers. Its volume grew rapidly in the years before 1978 but has sinceremained fairly constant, probably because of increased fare levels. PakistanInternational Airlines (PIA) operates domestic and international services.In 1979, domestic passenger traffic carried by PIA amounted to about 1.5million passengers and 1.1 billion passenger-kilometers; domestic air freighttraffic was 14,000 tons and 14.5 million ton-kilometers.

C. Transport Policy and Investment

1.13 When the Fifth Five-Year Plan (FY79-83) was formulated, aboutRs 4.5 billion, or 23% of total planned investment, were allocated to thetransport sector. Actual expenditures, however, have been lower thananticipated, and stood at only 19% of total development outlays in FY81.Investment priorities have been recently altered by GOP to emphasize agricul-ture, water, energy and the social sectors. It is estimated that the tran-sport sector will account for 21% of expenditures in FY84. There are noindications that subsectoral allocations have been modified; these wereoriginally planned as 27% for highways and road transport, 20% for the rail-ways, 14% for ports and shipping, 33% for airports and civil aviation and 6%for pipelines. The large size of the civil aviation component reflects PIA's

ongoing aircraft modernization and fleet expansion program. A major andwelcome feature of the Plan was the exclusion from it of construction of new

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railway lines and the Indus Super Highway. Any proposal to revise subsec-toral allocations should take into account the need for improved road main-tenance throughout the country; and should perhaps reflect a critical reviewof the aviation component.

1.14 Pricing in the road subsector is acceptable since road passenger

and freight transport services are largely unregulated and there is con-siderable competition in the provision of these services. A revision of thetariff structure at Karachi Port on the basis of replacement cost accountingis under way. The main tariff policy issue in the transport sector is thecross-subsidization of rail passenger services by the rail freight operation.Corrective measures in this regard will be taken under the project (para5.10).

1.15 The consumption of petroleum products in the transport sector hasaccelerated since 1972, reflecting a substantial increase in the motorvehicle fleet and road transport services. In 1979, the sector accounted for57% of all petroleum products consumed in Pakistan. Price increases in 1979and 1980 set the domestic prices of gasoline and diesel fuel considerablyover import parity levels, and a sizeable price differential is maintainedbetween diesel and gasoline to discourage gasoline consumption. Pakistanrelies heavily on imports of crude oil for its domestic needs; the rate ofdomestic crude oil production was disappointingly low in FY81, but someimprovement is expected by the end of FY82.

1.16 In the transport sector, the Bank Group's lending aims at assistingPakistan to better utilize existing capacity by improving the efficiency ofoperations and strengthening the institutions responsible for these services,while fostering the rehabilitation and improvement of existing facilities.In pursuit of these objectives, the Bank Group has lent a total of US$460million, net of cancellations, for assistance to Pakistan's transport sector.Beginning in 1952, the Bank Group has financed three highway projects, four

port projects, five gas line operations and seven railway projects.l/ It hasalso extended two technical assistance credits (for highways and ports) andan import credit to assist the commercial road operation. In the railwaysubsector, the Bank has financed a total of US$187.2 million (net of cancel-lation) in projects designed mainly to assist PR and its predecessor, theformer Pakistan Western Railways, to rehabilitate railway facilities andequipment. These projects have also increasingly focused on improving PR'splanning capabilities, accounting practices, management and operations (paras2.23-2.26).

1/ The number of railway loans/credits exceeds the number of projectsfinanced in Pakistan because the loans/credits include railway operationsin the former East Pakistan.

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II. PAKISTAN RAILWAYS

A. Organization, Management and Staff

2.01 Pakistan Railways (PR) is owned and managed by the Government ofPakistan (GOP). Its operations are controlled from Lahore by a GeneralManager that performs the functions of Chief Executive and exercises hispower through six zonal divisions which are responsible for day-to-day fieldoperations. Until April 1982 the operating functions of PR were performed bya five-member Railway Board located at Lahore, while the policy and monitor-ing controls were exercised by Ministry of Railways (MOR), headed by aSecretary, Ministry of Railways, established at Islamabad in 1974. EffectiveApril 4, 1982, the Railway Board and MOR have been merged and the Board hasbeen moved to Islamabad. The Chairman, Railway Board is now the ex-officioSecretary, Ministry of Railways and the other members of the Board have beendesignated as Additional Secretaries, Ministry of Railways. PR's organiza-tion prior to April 1982 is shown in IBRD Chart 23804 and the changes effec-tive April 1982 to the senior management structure are shown in attachment tothe Chart.

2.02 For decades, the members of the Board and other senior officersof PR have been senior railwaymen with a deep attachment to tradition andunable to adapt to changing circumstances. Although PR possesses competentand skilled managers, the organization, with its rigid departmentalizationhas not been conducive to efficient management. The vast gaps betweendepartments and the lack of communication among them makes them act andconduct business as completely separate organizations, with only the Chairmanof the Board having authority over them. This type of organization wasconsidered to be not too conducive to good management and has since beenchanged. PR operations have now been placed under a single authority (theGeneral Manager) which would be accountable to the Railway Board for allaspects of day-to-day operation. In addition, the marketing and costingfunctions of the railways need to be merged into one single departmentseparate from the transport function. Steps are also needed to completelyoverhaul PR's purchasing and stores, and establish them as a unified stream-lined department. During negotiations GOP has agreed to continue theimplementation of measures aimed at improving PR's organization and manage-ment.

2.03 Pakistan Railways, with about 130,000 employees, is the largest

public sector employer in Pakistan (Table 3). However, since PR's trafficgrowth has been slow, and since staff productivity has increased very little,less than full benefits have been obtained from modernization measures suchas dieselization. There is need for reductions in staff strength throughattrition and improvement in efficiency. Under the ongoing Tenth Railway

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Project (para 2.25), GOP agreed that PR would reduce its staff by about 500per annum in 1977/78 and 1978/79, and by about 1,200 per annum in 1979/80 and1980/81. PR also agreed to undertake, by December 1977, a study of thepossibility of further staff reductions through attrition. PR is in com-pliance with these agreements and during the negotiations it was agreed thatPR will, through attrition, continue to reduce nonprofessional and unskilledstaff.

2.04 The wage and salary structure prevailing in PR is the same as thatfor Government employees, involving a grade system reviewed and adjustedperiodically by the Federal Wage Commission. In addition, from time to timethe Federal Government grants special national wage increases. Fringebenefits, grading of jobs and crafts, work rules and craft lines are nego-tiated between PR's two labor unions and the Board. For some years now,skilled and semi-skilled staff at all levels have been attracted to morehighly paid work in the Middle East.

2.05 The training of PR staff is carried out at either PR's trainingschools or Government training institutes. Staff training is carried out bythe Personnel Department. Many long-service officers are expected to retirefrom PR in the near future. The problem this will cause will be partly easedby staff training carried out under the ongoing loan/credit in such importantareas as locomotive and track maintenance, freight train operations andaccounting modernization. This training program is further augmented byvarious bilateral arrangements.

B. Railway Infrastructure

2.06 The railway network consists of about 8,800 route-kilometers.Details of the track inventory are given in Table 4. Currently overage trackstructure on the Karachi-Lahore main line has required the imposition ofspeed restrictions at many locations. Track maintenance procedures wereexamined by PR, with assistance from SOFRERAIL (France) financed under Loan621-PAK, and new maintenance procedures have been introduced. There havebeen shortages of ballast and sleepers; although., PR will soon have the

installed capacity to increase the supply of ballast and concrete sleepers,wooden sleepers will have to be imported for some time to come. Some bridgeswith speed restrictions on broad gauge lines still have to be renewed orstrengthened. A new bridge over the Kotri river was completed in February1980. This provides a second track over the Indus River, thus removing amajor bottleneck on the main line. Modernization of telecommunicationsfacilities and signaling is being undertaken under the ongoing Tenth RailwayProject (para 3.18). A new marshalling yard at Pipri, designed to remove

congestion in the Karachi area, was completed in February 1980, with partialfinancing under Loan 621-PAK (para 2.26) and has ample capacity for anydemands which may be made on it.

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C. Motive Power and Rolling Stock

2.07 PR's motive power and rolling stock position at the end of 1980/81is shown in Table 5. Diesel electric locomotive fleet of 474, however,constitutes PR's primary mode of traction. In 1970/71 a fleet of 29 electriclocomotives were introduced to PR working the electrified section ofLahore-Khanewal. PR still has about 400 steam locomotives, of which 90% areover 40 years old. About 32% of coaching vehicles are over 30 years old andin poor condition; their partial replacement is now being made. About 18% offour-wheeler wagons and about 8% of bogie wagons are over 40 years old.Since PR has more than sufficient wagons, not all will be replaced whenscrapped. PR manufactures most of its passenger vehicle and freight wagons.

2.08 Low motive power availability and reliability have been a veryimportant factor in PR's lackluster traffic and financial performance (paras1.05 and 5.04). As mentioned above, PR's diesel electric locomotive fleet isthe mainstay of operations and consists of 474 diesel electric units producedby seven manufacturers in five different countries (Table 6). The problemassociated with the motive power proliferation is further aggravated by PR'sinadequate maintenance facilities and chronic shortages of critical spareparts. The project will provide assistance in improving PR's maintenanceorganization and facilities.

D. Operations

2.09 The improvement of PR's operations has been a major objective underprevious Bank-assisted railway projects in Pakistan. The most recent one,the current Tenth Railways Project, aimed at increasing motive poweravailability and improving the quality of railway services. To this end,provisions were made under the project for the procurement of urgently neededspare parts for motive power; the improvement of workshops, sheds and depots;and the completion of a backbone microwave network from Karachi toRawalpindi, including related communications and signalling equipment.Physical progress under the Tenth Railways Project has been generally satis-factory, except for the delayed completion of the telecommunications com-ponent. Although a number of large investments included in the five-yearplan and assisted by the project have now been completed, PR's operatingindicators (Table 7) are not yet in line with the targets envisaged atappraisal. The main areas where progress has fallen short of expectations arethose of motive power availability and use, and average wagon turnaroundtime. At appraisal, it was expected that by 1979/80 available locomotiveswould produce 576 locomotive-kms per day on passenger trains, and 288 locomo-tive-kms per day on freight trains; the actual results, however, were 459 and197, respectively. In a similar vein, system-wide turnaround time forwagons, which was expected to be reduced from 16.7 to 12.5 days, was onlybrought down to 15.3 days in 1979/80, whereas it should not have been morethan 13.8 just taking into account the increased length of haul.

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2.10 A major factor contributing to the unsatisfactory operation of therailways is the policy of GOP and PR to give passenger traffic higherpriority than freight for the allocation of available motive power and linecapacity. This policy has important operational, economic and financialconsequences. It prevents PR from carrying the traffic it is best suited tocarry, and which would significantly benefit the country's economy. This isa major reason for PR's current financial distress. Some steps were takenunder the Tenth Railways Project to increase freight carrying capacitythrough the implementation of a battery system, which involves the groupingof passenger trains in batches so as to leave more train paths for slowerfreight trains. This system, however, has now been abandoned by the railwaysas a result of political pressures to add more passenger train stops.

2.11 Analysis of PR's operational performance reveals that there is muchroom for improvement in the passenger-train operations. This will be crucialto the release of much-needed train paths and motive power for additionalfreight-train runs which will enable PR to handle the projected freighttraffic. To achieve this objective, poorly patronized trains will be discon-tinued, unnecessary stoppages will be eliminated, and coach and locomotiveutilization should be increased by diverting equipment to more remunerativeoperations.

2.12 PR's freight services are also in need of improvement, as regardsboth transit time and terminal operations, and transport of major bulk com-modities. The through-freight train commercial speed should be increasedto achieve improved line-capacity utilization. PR will also have to intro-duce more unit and block trains for the movement of wheat, rice, cement,fertilizer (raw material and finished products). PR will continue discussingwith various agencies and provincial Governments ways of implementingspecific measures to improve bulk-commodity transport, with a view to limit-ing destinations and loading points and ensuring adequate loading and unload-ing facilities.

2.13 During negotiations, agreement was reached on specific measures torationalize further passenger-train operations, to increase the speed offreight trains and to increase unit and block trains for movement of bulkcommodities. Specific targets and measures are described in Annex 2.

E. PR's Role and Prospects

2.14 Given the type of terrain, the distances involved and the largeamounts of bulk products that make up the majority of transport flows inPakistan, the railways undoubtedly have an important role to play in thecountry (para 1.05). Its slow recovery, despite heavy investments in thepast five years, has accentuated a feeling of frustration with the railwaysat various levels in the Government. Nevertheless, the railways remain thebackbone of the country's main transport corridor and its most important

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import-export carrier. PR is also an important passenger carrier movingalmost about one-sixth of all passenger kilometers in the country.

2.15 The overall future possible role of PR in Pakistan has been dis-cussed at length by Emmay Associates (Pakistan) in a recent study preparedfor the Bank (Terms of Reference are found in Annex 3.) In the medium term,the future of the railways depends on its management's ability to completepromptly and efficiently the ongoing five-year plan, including the TenthRailway Project, and to improve operations substantially. The arrival ofspare parts and the completion of the telecommunications and signallingcomponents will do a great deal in this direction. But, more than physicalitems, it is competent management and appropriate organization that arerequired to improve operations (para 2.02).

2.16 The future size and role of the railways are closely linked to:

(a) PR's ability to adapt to the overall changes in the demandfor rail freight transport resulting from inevitablelosses of freight to other modes (e.g., increasingamounts of POL, which is PR's main revenue earner,will be carried by pipeline, although there will be some offsettingmovement of refined products), increasing competition fromthe road subsector (NLC and private truckers), and shiftsin the total demand and patterns for transport in the country(as Pakistan approaches the point where it will cease to bea net foodgrain importer); and

(b) PR's ability to make a case before GOP for an efficientallocation of available motive power and line capacitybetween freight and passenger services (para 2.11).

2.17 After many years of concentrating on long distance import/exporttraffic in the public sector, PR finds itself in a situation where itsmarketing, planning and costing functions are inadequate to meet the currentchallenges. Paramount to PR's future role is the improvement of itsorganization and management (para 2.02).

F. Railway Investment Plan

2.18 Under the ongoing Tenth Railway Project, an investment plan for1976/77-1980/81 was developed and its implementation was agreed upon. Thebasic objective of the Investment Plan was to improve PR's operational per-formance on the main line by eliminating various physical bottlenecks. Sub-sequently, the severe floods of 1976 and political unrest resulted inimplementation delays and the Investment Plan, almost in its entirety, wasincluded in Pakistan's Fifth Five-Year Plan (1978-1983). Track rehabilita-tion, line capacity work, rolling stock and motive power rehabilitation andinstallation of a backbone microwave telecommunication system were the major

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components of the Plan (for details see Table 12, Report No. 1283a-PAK). Theeconomic rate of return of the plan as a whole was estimated at about 24%.

2.19 GOP's internal procedure for techno-economic analysis of develop-ment projects involves the preparation of PC-1 proformas, which are projectappraisal documents used as the basis for project selection at the outset andfor re-evaluation during project execution. There is also provision, underthe on-going Tenth Railway Project agreement, for annual monitoring of theInvestment Plan and its implementation. During the implementation of theon-going project and the preparation of the proposed project, some parts ofthe agreed upon Plan and various newly proposed schemes were dropped, post-poned, or slowed down in the light of traffic and operational developments.The most notable of these schemes was a plan for electrification of 117 kmsection (Khanewal-Samasata) of the Karachi-Lahore main line for whichbilateral financing was under active discussions, the conversion of about3,700 four-wheeler wagons into bogie wagons, the construction of KarachiCantonment Terminal, new line construction and line conversion, and therehabilitation of air conditioned coaches. The pace of motive poweracquisiton was also slowed down.

2.20 The most recent review of Pakistan's Fifth Five-Year Plan (1978-83)and PR's operational and financial requirements have resulted in the Rail-ways' Medium Term Development Plan (MTDP), covering FY81/82-FY83/84. Thebasic objectives of the MTDP are:

(a) to improve PR's operations and reduce costs given the presentlyavailable and some additional plant and equipment; and

(b) to provide PR with the opportunity to explore potential for carry-ing new and additional traffic where it should represent the mosteconomic transport solution compared with alternative modes.

The first objective, improved operational efficiency and reduced costs, hasbecome increasingly important. Its effect on PR's investment requirementswas taken into account by restricting the near future investment in addi-tional capacity to the containerization scheme.

2.21 PR's Medium Term Development Plan (MTDP) has been reduced to aminimum need base and revised to include the allocations required for thisproject. It is detailed in Table 8 and a summary is provided below:

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Item Rs Million %

Gauge Conversion 5Track Rehabilitation 1,008 21.0Bridge Works 75 1.5Line Capacity and Pipri Yard 117 2.5Telecommunications and Signalling 668 14.0Motive Power and Rolling Stock 2,268 47.5Plant and Machinery 443 9.5MIS 85 2.0Technical Assistance, Brake

Improvement and Electrical Projects 95 2.0

TOTAL 4,764 /a 100.0

/a Includes Rs 264 million over and above the original MTDPallocation, as required for the full implementation ofproject components.

The Plan consists of high priority items and the major ones fall in thefollowing categories:

(a) continued implementation of ongoing schemes (about 26%) of theTenth Railway Project whose implementation was slowed or delayed;the major items are track rehabilitation on the main line andinstallation of the telecommunication network, rehabilitation(re-engining) of overaged diesel electric locomotives, and con-struction of concrete sleeper factories;

(b) purchase and rehabilitation of motive power and rolling stock(about 42%) for replacement; the main items in this category areacquisition of up to 68 diesel electric locomotives 1/(orders for 38 were placed in October 1980 and orders for the other30 will await the results of the electrification study under theproposed project), rehabilitation of about 42 overaged diesel

1/ PR's motive power requirement (without further electrification) was the

subject of a study under the Tenth Railway Project which was completedin 1979 with assistance from Bank Group consultants.

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electric locomotives, and manufacture of about 410 passenger

coaches; and

(c) items included in the proposed project (about 20%).

2.22 With one major exception, the economic justification of all itemsin MTDP has been established by GOP (PC-is for all major items are availablein Project File listed in Annex 1). Under bilateral financing, considerationhas been given to the establishment of a plant to progressively assemble andthen manufacture diesel electric locomotives; the economic justification ofthis investment, however, is not evident and, since PR's management isalready thinly spread over many concerns, it would be unwise to furtherdivert managerial resources onto additional activities. GOP has recentlydecided that the proposed locomotive factory will not be undertaken by PR.Understanding was reached with GOP during negotiations on the content of theMTDP.

G. Performance Under Previous Projects

2.23 The first loan to PR, formerly Pakistan Western Railway (PWR), wasmade in 1952. Since then six other loans and credits have been made, andthis project would be the Bank Group's eighth operation. 1/ Up to 1959/60,three loans were made with the main objective of rehabilitating railwayfacilities and equipment. The implementation of the projects under theseloans was satisfactory. Operational efficiency was good; PR's financialposition appeared sound; passenger-kms increased by 5% and freight ton-kms by6% per annum during 1955/56-1959/60. The inadequacy of PR's accountingsystem was recognized and consultants were engaged to help in modernizing theaccounting system. During the next five years, from 1960/61 to 1964/65, PRwas still catching up with increasing traffic demand and a loan and a creditwere made with substantially the same objectives as before. During thisperiod, a significant change in the administrative arrangement took place inthat the control of the Railways was transferred from the Central Governmentto the Province of West Pakistan. This change affected the Railways' perfor-mance, particularly in planning. Operational performance also deteriorated.Although improvement in PR's accounting system was still an objective, therecommendations of the previous studies had not been implemented and new

consultants were appointed to assist in the establishment of a commercialaccounting system.

2.24 Two other loans (Loan 496-PAK and Loan 621-PAK) were made between1965/66 and 1975/76. Over this period, there was a significant decline in

1/ The numbering of railway projects in Pakistan also includes the Bank

Group operations with former East Pakistan Railway (PER), now BangladeshRailways.

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PR's overall performance. The separation of Bangladesh, hostilities withIndia in 1971 and severe flood damage in 1973 and 1976 all contributed tosuch decline. Although consultants were engaged under Loan 621-PAK to assistin carrying out operational improvements, progress was slow; and PR continuedto give operational priority to passenger over freight services and PR'sfinancial position deteriorated.

2.25 The Tenth Railway Project (Credit 684/Loan 1372-PAK) was approvedin March 1977. The physical execution of the project has made satisfactoryprogress. PR has made considerable efforts to meet the covenants and under-takings with the principal exception of financial targets which were mainlydependent on GOP's actions on rates and fare increases (paras 5.04). TheRailway operations and financial results have not however, as discussedabove, been satisfactory.

2.26 A Project Completion Report (PCR) for the Ninth Railway Project(Loan 621-PAK) was prepared in 1979 and a draft Project Performance AuditReport (PPAR) has been recently circulated. Both the PCR and the draft PPARgive the impression of a rather disappointing project. The protracted dis-bursement period, about 10 years instead of three, an eventful politicalperiod in Pakistan during the project implementation, and PR's managerialshortcomings contributed to this situation. The main findings and recommen-dations of the PCR and PPAR pertain to subjects which have been eitheraddressed under the ongoing Tenth Railway Project or are the main objectivesof the proposed project.

III. THE PROJECT

A. Background

3.01 The main objective of the Bank Group assistance to PR through thefirst six operations (excluding Credit 684/Loan 1372-PAK) consisted of therehabilitation of existing railway infrastructure and, to a limited degree,modernization of motive power, rolling stock and maintenance facilities.These loans and credits were based on about two-year slices of PR's invest-ment programs and mainly covered the foreign exchange requirement for theacquisition of material and machinery for improvement works.

3.02 With a growing number of diesel electric locomotives in need ofmajor overhaul, recently introduced electric traction and modern designrolling stock in need of modern maintenance methods, and stagnation of opera-tional efficiency, PR has acknowledged the need for a shift in investment

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priorities in order to remove major bottlenecks and to modernize the main-tenance facilities and procedures. In support of PR's move in this direc-tion, the Bank Group approved the Tenth Railway Project (Credit 684/Loan1372-PAK) in March 1977 for US$60 million.

3.03 Under the Tenth Railway Project, PR began tackling the followingissues: (i) long overdue investments to improve telecommunication and sig-naling; (ii) the re-engineering of the older mainline diesel electric locomo-tives; (iii) the completion of the Kotri bridge and the Pipri marshallingyard complex; and (iv) the setting up of three concrete sleeper factories.In monitoring the progress of the ongoing project, the Association has alsobeen involved in the work required to ensure the optimum utilization andbenefit from completed and ongoing investments. The Bank Group's missionshave been supplemented by consultants in such fields as motive power technol-ogy and maintenance, telecommunications, management information systems, andintermodal transport. Also, arrangements were made at various times for PRofficers to visit railway and industrial organizations outside Pakistan. Thefindings of Bank staff, consultants and PR officials on the various subjectshave been extensively discussed with GOP/PR and form the basis for the for-mulation of the proposed project. All parties agree that the IDA Creditshould be directed to a limited number of high priority items, instead ofbeing used as a general support of PR's Medium Term Development Plan.

B. Objectives

3.04 The objectives of the proposed project are:

(a) modernization of maintenance facilities and improvedreliability of diesel electric locomotives;

(b) improvement of PR's operational and financial performancethrough the introduction of a real-time managementinformation system; and

(c) establishment of a regular export/import container servicebetween Karachi and an inland terminal at Lahore.

C. Description

3.05 The project includes:

(a) improvements to locomotive maintenance, consisting of(paras. 3.06-3.17):

(i) expansion and equipping of the Rawalpindi CentralDiesel Locomotive Works (CDLW) to remanufacture anumber of critical components and assemblies(paras 3.11-3.12);

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(ii) provision of critical machinery and layoutchanges at Karachi Locomotive Shedto enable this shed to change over tothe unit exchange maintenance system(UEMS) (para 3.13);

(iii) provision of components and assemblies as aninitial stock to introduce a unit exchange pool (UEP)(paras 3.15-3.17).

(b) acquisition and installation of a data network andhardware, development of software, and implementationof a management information system (paras 3.18-3.20);

(c) expansion of Lahore Dry Port (LDP), construction oftracks and storage, acquisition of rolling stock andhandling equipment for the operation of internationalcontainer services (paras 3.21-3.22);

(d) provision of test equipment, technical advisoryservices and staff training in support of and to achievethe project objectives (paras 3.23-3.27); and

(e) provision of maintenance spares (revenue spares) forlocomotives (paras 3.28-3.31).

Locomotive Maintenance Improvements

3.06 The economic first life of a diesel electric locomotive isgenerally considered to be 15 to 20 years. At this age, the mechanicalcomponents - bogies, engine, pumps, controls, etc. - are either in need ofmajor overhaul or are obsolete. The electric traction and control systemalso deteriorates with age and service. Both of these conditions result incostly in-train failures which inflict a heavy toll on the railway's operat-ing efficiency. Generally, one of two schemes for heavy maintenance to dealwith these problems is used - one is triggered by failure of major com-ponents, or by the condition of major components as judged by inspection; theother is characterized by a predetermined schedule of repairs and periodicoverhauls (POH). Pakistan Railways practices the latter.

3.07 In either maintenance approach, some basic requirements must bemet. High standards of workmanship and materials must be maintained, anadequate supply of spare parts is necessary, and additional work must beperformed at the third (Class I) cycle repair (15 to 20 years) if the unit isexpected to perform satisfactorily beyond that point.

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3.08 The work done over and above replacement and repair of parts at POHis usually referred to as "remanufacturing" and involves renewal of movingparts and those components which deteriorate with age, heat, oil or othercontamination. The application of latest technological developments as apart of the remanufacturing provides additional efficiency and reliability.Remanufacture of diesel electric locomotives is feasible and in many casescan be an economical alternative to purchasing new ones.

3.09 In PR's case, POH work (the three-year Class II and six-yearClass I) is for the most part carried out at the Central Diesel LocomotiveWorkshop (CDLW) at Rawalpindi with overflow and odd brands of locomotivesbeing assigned to the Karachi shed. In addition, re-engining of a limitednumber of units has been assigned to the Moghalpura Workshop in Lahore.Inspections and running repairs are carried out at the base sheds - Karachi,Rohri, Lahore and Kundian and at the advanced sheds at Quetta, Sibi, Samasataand Rawalpindi.

3.10 The locomotive fleet of 474 units is a mixture of types from sevenmanufacturers from five countries and yet another type is being added fromJapan this year. Table 6 lists the number of locomotives by type, manufac-turer and age. The variety of manufacturers in itself creates a cumbersomemaintenance situation. In view of the fleet's age and problems associatedwith importing spare parts, the maintenance plans must be comprehensive andwell laid and remanufacture becomes more attractive if the fleet of locomo-tives is expected to perform reliably. No such provision has been adopted byPR up to now, with resultant high on line failure rates, poor availability

and reduced tractive effort. Unless this is changed, low availability andreliability will continue and early replacement of a large number of units

will be required. This project will provide facilities for remanufacturewhich can be expected to improve reliability and increase locomotive life.

3.11 A keystone of this plan is the centralization of much of the heavymaintenance and locomotive remanufacture at one workshop, along with theremanufacture of critical components. When the requirement for skilledmanpower, specialized facilities and quality control are coupled with theneed to run locomotives over the entire system as opposed to local assign-ment, the decision to centralize heavy maintenance is clear. Under theproject, the Central Diesel Locomotive Works (CDLW) at Rawalpindi will beequipped to accommodate the remanufacture and heavy overhaul of locomotivesfor the entire railway. Because of the late start in setting up suchfacilities and supply systems, it will be necessary to maintain and evenimprove some of the existing outlying sheds. These include some heavy repairat Karachi shed and the remanufacture of some electric components atMoghalpura Workshop where the necessary facility is almost completed. Oncethe fleet has been brought up to acceptable standards of reliability, theseactivities could be moved to CDLW. For this reason, modernization invest-ments at Karachi and Moghalpura have been limited to the minimum requirement

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to take advantage of the unit exchange maintenance system and to supplementCDLW in the catch-up period.

3.12 CDLW modernization will include addition of buildings to house anelectric traction shop, machine shop, central components shop, a crankshaftshop, and a cylinder liner chrome plating and reconditioning shop. In addi-tion to the new buildings, the existing works will be refitted to providethese specialized remanufacturing activities:

(a) engine block shop;

(b) air compressor shop;

(c) lube oil cooler, radiator, after cooler and exhaustmanifold shop;

(d) turbo supercharger shop;

(e) fuel injector and governor room; and

(f) Power assembly reconditioning line.

The main shop buildings will also be expanded so that the additional spacefor locomotive remanufacture (especially engine assembly) can be accom-modated.

3.13 The proposed improvements at Karachi shed consist of completion ofthe already planned expansion of the roof over the main track and changes inmachinery and layout to take advantage of the unit exchange maintenancesystem. This shed will be the key point for heavy running repair for manyyears to come, thus the investments will not be lost after catch-up is com-plete.

3.14 This project component (including CDLW, Karachi shed, qualitycontrol equipment and component transport equipment) is estimated to costabout Rs 344.6 million (US$32.8 million equivalent) with a foreign exchangecomponent of Rs 151.4 million (US$14.4 million equivalent). A summary ofcosts is shown in Table 9.

3.15 In addition to a capacity to remanufacture, any good heavy main-tenance scheme (especially for an older fleet) must include a unit exchangecomponents supply system. The components can be supplied as new orremanufactured by the railway in its workshops. PR made an attempt at unitexchange maintenance several years ago but allowed it to collapse whenmake-up spares were not imported in adequate quantities and no remanufactur-ing capability existed. The proposed project would provide the needed poolof spare parts for a unit exchange system of maintenance.

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3.16 The unit exchange maintenance system (UEMS) has importantadvantages over the remove-repair-replace approach now practiced by PR. Someof them are:

(a) parts can be salvaged which would otherwise be scrapped;

(b) a smaller inventory of parts is required because theremanufacture and assembly process is centralized;

(c) the reliability and longevity of parts (and ultimatelyof locomotives) are improved because high quality ismaintainable at a central workshop where manpower andmachines are specialized,

(d) technical improvements can be incorporated uniformly bythe centralized work program; and

(e) locomotive utilization is greatly enhanced becauseworn out components are quickly replaced with onesfrom the unit exchange pool.

3.17 A list of critical components for the unit exchange pool is shownin Table 10. This project component is estimated to cost about Rs 198.9million (US$18.9 million equivalent) with a foreign exchange component of Rs142 million (US$13.5 million equivalent). It is important that as the poolof components is scrapped (as worn or damaged beyond repair), it be main-tained and expanded as fleet size increases or other changes take place.During negotiations, assurances were obtained from GOP that PR will maintain,and expand as necessary, the unit exchange pool of components as required bymaintenance needs and as agreed from time to time with the Association.

Management Information System

3.18 As described in paras 2.08-2.18 above, PR has been experiencinggrowing problems in rolling stock and motive power utilization and main-tenance, adjustment to changing freight traffic patterns and control overday-to-day operations and costs as shown by disappointing operational andfinancial results of recent years. Recognizing PR's difficulty in control-ling an increasingly complex transport system, provision was made under theongoing Tenth Railway Project for installation of a modern telecommunicationnetwork on PR. Implementation of this component began in late 1980 andcompletion is expected before mid-1983. The completion of the telecommunica-tion network will provide PR with the opportunity to overcome the lack ofmanagement tools to exploit the potential for operational and financialimprovements.

3.19 Under the project, support will be provided for PR to acquire andinstall a data network, acquire hardware and software, technical assistance

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and staff training, and for development and implementation of a modern real-time management information system (MIS). This project component isestimated to cost Rs 129.8 million (US$12.3 million equivalent) with a for-eign exchange component of Rs 63.4 million (US$6.0 million equivalent).

3.20 There is no doubt that completion of the telecommunication networkand introduction of the MIS will bring about great potential for improvementsin PR's operating, and consequently, financial performance. However, theimplementation of this management tool will need to be supported by changesin the management structure and operations, described in Chapter II-above, inorder to realize full benefits of GOP's investments in PR and to enable theRailways to play an efficient economic role.

Containerization

3.21 There has been a sharp increase in international container trafficto Pakistan in recent years. Until recently containers were broken at theKarachi Port. The establishment of a regular container service betweenKarachi and Lahore, with custom formalities performed at Lahore Dry Port(LDP), which is owned and operated by PR, would facilitate internationaltraffic including exports; generate important savings in cargo handling time,pilferage and spoilage; and reduce transport costs. This project componentwill assist PR and the Pakistan transport system to properly move theexpected and promising container traffic.

3.22 This component will include the procurement of mobile cranes,forklifts, the modification of 60 existing rail flat wagons, and the procure-ment of 100 additional ones especially designed for container handling.Ancillary facilities at LDP required to handle of unit container trains willalso be provided. In addition, assistance will be given to Karachi PortTrust the development of a container information system and the design of anew tariff structure. As shown in Table 11, this project component isestimated to cost about Rs 149.0 million (US$14.2 million equivalent) with aforeign exchange component of about Rs 47.6 million (US$4.6 million equiv-alent).

Technical Assistance and Training

3.23 Technical advisory service for CDLW under the project will includeassistance during the preparation of specifications, construction, commis-sioning and start up, amounting to an estimated 12 man-months at aboutUS$11,000 per man-month, including transportation and subsistence. In addi-tion, training of CDLW staff and work force in respect of specialized tech-nologies required for operation and maintenance of the facility, would becarried out by the machinery suppliers and foreign railways with similarfacilities. The training requirement is estimated at 42 man months of over-seas training and 800 man months of local training.

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3.24 Under the ongoing Tenth Railway Project, PR carried out a com-prehensive traffic costing exercise with the assistance of consultantsSOFRERAIL (France). The intent of this study was to provide PR with thebasis for its fares and tariff structure and to strengthen its marketingactivity. Under this project, it is envisaged that additional technicaladvisory services and training will be provided for improving and strengthen-ing of the Costing Cell. The scope and composition of this project componentwas agreed upon during the negotiations.

3.25 A part of PR's mainline (the 288-km Lahore-Khanewal section) waselectrified a decade ago. The original intention was to continue elec-trification of the mainline to Karachi, another 925 kms from Khanewal.Because of resource constraints and investment priorities, electrificationhas not been extended past Khanewal. The limited electrified section has notbrought the potential benefits associated with electrification since it hascreated additional operating and maintenance burdens on the system. There isa theoretical advantage in completing electrification, particularly as thecost of imported oil increases and PR has to make decisions concerning thereplacement of its Diesel Electric and steam locomotives. Operatingproblems, replacement needs and staggering increases in imported fuel andinvestment needs for maintenance facilities related to replacement of steamtraction, have warranted a study to determine the feasibility of furtherextension of electrification. Under the project, support will be providedfor a feasibility study of electrification of mainline Khanewal-Karachi.This study is estimated to cost Rs 10.5 million (US$1.0 million equivalent).

3.26 In order to assist PR in detailing plans of actior for removingbottlenecks in train operation, mechanical maintenance and optimal utiliza-tion of carrying capacity, the mission suggested, and PR agreed to, theprovision under the project for employment of 15 man months of appropriateexperts. This project component is estimated to cost about Rs 2.7 millionwith (US$0.25 million equivalent) at about US$11,000 per man month includingsubsistence and transportation.

3.27 Under the project, support will be provided for PR to acquiresoftware expertise for developing of adapting and modifying and implementinga management information system. In addition the project will support stafftraining required for developing or modifying and implementing the MIS. Alsounder the project, support will be provided to Karachi Port Trust (KPT) toacquire the software needed for proper handling of containers at Karachi.This project component is estimated to cost Rs 16.8 million equivalent(US$1.6 million equivalent).

Revenue Spares

3.28 The unit exchange maintenance system, in addition to components andsubassemblies described above (so-called capital spares), requires otherparts and spares, many of which are not reclaimable (revenue spares), which

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are as critical for proper maintenance. PR has had extreme difficulty inparts acquisition, which for some time was considered purely a problem causedby shortage of foreign exchange, and this difficulty became more severe asthe size, age and variety of the fleet increased. Under the ongoing TenthRailway Project, the Bank Group provided US$5.0 million to help purchasecritical spares for three years, and GOP actually allocated more than theagreed amount in counterpart funds. The result, however, was disappointing.After almost three years of research and review, it became evident that thecomplexity of spare parts requirement, the procurement and usage cycle, andthe extent to which it is affected by various factors, had not been fullyrecognized.

3.29 Low amounts and, more importantly, erratic allocation of foreignexchange by GOP was found to be one of the major factors contributing to theproblem of spare parts on PR. In addition, the Railways and the Bank Group'sclose review of the spare parts problem indicated a number of other equallyimportant bottlenecks among which are:

(a) complicated and sometimes impractical procurement procedures notconducive to ever changing needs of the users and inflexibleproduction and supply sources;

(b) slowness of banking procedures for the processing of financialdocuments in both Pakistan and the supplying countries;

(c) frequent price changes, which increase the difficulty of control-ling and processing such large number of transactions; and last butnot least

(d) lack of attention and follow-up at the appropriate levels of PR'smanagement.

3.30 As part of preparation of the proposed project, an in depth studyof the spare parts problem was made by PR. The findings and the recommenda-tions of the study have been reviewed by GOP and IDA. In addition toimprovements to be effected in PR's purchasing and stores (para 2.02) forimproving the spare parts situation, a number of other steps have been iden-tified for implementation such as:

(a) foreign exchange should be lined up well before the beginning offinancial year so that the placement of orders and opening of theletters of credit could be done in an orderly and timely fashion;

(b) untied or cash foreign exchange should be provided for the procure-ment of locomotive spares; if financing is arranged through aids,credits, loans, etc., the operating conditions of such funds shouldbe carefully studied to ensure they meet the needs of the intendedpurpose;

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(c) a simplified procedure should be adopted by the banks in Pakistanand the suppliers' banks to ensure prompt and accurate processingof the commercial papers;

(d) arrangements to be made for a forwarding agent;

(e) utilization of published price books; and

(f) close monitoring of the spare parts inventory requirements andprocurement.

3.31 The proposed project includes PR's locomotive spares needs for thenext three years. This component is estimated to cost Rs 445 million(US$42.4 million equivalent) with a foreign exchange component of Rs 318million (US$30 million equivalent). During the negotiations, agreements werereached aimed at removing the remaining institutional and financial obstaclesfor a smooth functioning of the spare parts system. To ensure coverage ofimmediate needs and make a timely start in implementing the agreed uponprogram, under the project a provision of US$5.0 million equivalent will bemade to assist GOP/PR in a program to eliminate bottlenecks in spare partsacquisition.

D. Cost Estimates

3.32 Items included in the project were chosen from PR's Medium TermDevelopment Plan. Details of the principal items included in the project areshown in Table 12. In addition, the project includes estimated provision fora three-year slice of PR's motive power spare parts requirement. The projectis estimated to cost Rs 1,393.0 million (US$ 132.7 million equivalent with aforeign exchange component of Rs 799.0 million (US$76.1 million equivalent).

3.33 The cost estimates are based on prices of April 1982. They arebased on ex-factory prices for similar items manufactured in Pakistan and onrecent prices of imported equipment. A physical contingency allowance of 10%has been incorporated in the cost of civil works for CDLW and LDP. This issatisfactory, since very little earthwork is required; architectural designsare for relatively simple buildings; and industrial engineering is complete.A physical contingency of 7.5% for limited items of machinery and equipment

is included for CDLW, which is reasonable. Price contingencies for allproject items have been included to cover expected price increases untilcontracts are awarded as well as price escalation during implementation andcommissioning of CDLW and LDP. The price contingencies for all items in theproject are based on expected local cost increase of 12% in 1982, 12% in 1983and 11% in 1984; and foreign cost increases of 8.0% in 1982, 8.0% in 1983 and

7.5% in 1984. The foreign exchange rate was assumed to be US$1.00 = Rs 10.5.During negotiations, the cost estimates were discussed and confirmed. Thecost estimates are summarized below:

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US$ MillionRs Million US$ Million Proposed

Project Item Local Foreign Total Local Foreign Total Credit

a. MaintenanceImprovements(i) Central Diesel

and other Shops 193.4 150.6 344.0 18.4 14.4 32.8 14.4(ii) Unit Exchange

Components 56.9 142.0 198.9 5.4 13.5 18.9 13.5250.3 292.6 542.9 23.8 27.9 51.7 27.9

b. Management InformationSystem(i) Data Network 12.1 12.5 24.6 1.2 1.2 2.4 1.2(ii) Hardware 41.8 39.6 81.4 3.9 3.7 7.6 3.7(iii) Software 12.5 11.3 23.8 1.2 1.1 2.3 1.1

66.4 63.4 129.8 6.3 6.0 12.3 6.0

c. Containerization 101.4 47.6 149.0 9.6 4.6 14.2 4.6

d. Technical Assistanceand Staff Training 1/(i) Technical Advisory

and Training 8.4 16.8 25.2 0.8 1.6 2.4 2.2(ii) Electrification

Study 7.3 3.2 10.5 0.7 0.3 1.0 1.015.7 20.0 35.7 1.5 1.9 3.4 3.2

Base Cost Estimate 2/ 433.8 423.6 857.4 41.2 40.4 81.6 41.7

Contingencies(i) Physical 13.2 - 13.2 1.3 - 1.3 -

(ii) Price 20.0 57.3 77.3 1.9 5.4 7.3 3.333.2 57.3 90.5 3.2 5.4 8.6 3.3

e. Revenue Spares 127.3 318.2 445.5 12.2 30.3 42.5 5.0

GRAND TOTAL 3/ 594.3 799.1 1,393.4 56.6 76.1 132.7 50.0

1/ Includes all technical assistance and training to be provided underthe project.

2/ Includes Rs 187 million in taxes and duties.3/ Includes Rs 314 million in taxes and duties.

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E. Financing

3.34 Total foreign exchange component of the project amounts to US$76.1million equivalent. The Association will finance the foreign exchange com-ponent of all items except the cost of revenue spare parts, of which US$5.0million (about 15%) is to be provided. The credit of US$50 million equiv-alent represents about 49% of the project costs excluding taxes and duties.During negotiations, GOP agreed to finance the remaining US$82.7 millionequivalent including US$25.0 foreign exchange for revenue spares and a com-mitment to release funds in a timely manner and in accordance with theimplementation schedule. An amount of up to US$1.25 million is to beretroactively financed under the Credit for expenditure afterFebruary 1, 1982 to meet the foreign exchange costs of data network andsoftware selection for the PR's MIS and KPT's container marshalling program.

F. Implementation

3.35 PR will be responsible for the implementation of the project aspart of its ongoing works program, except for the port container yard infor-mation system which will be handled by KPT. It has the necessary capabilityand competence to carry out the project. A time-phased implementationschedule is shown in Chart IBRD 23803. This schedule, as well as progressreporting arrangements (including the preparation of a final report uponcompletion of the project) was discussed and agreed to during negotiations.

3.36 CDLW. Detailed engineering and design of the project is completed.Construction of the shop expansion is to start by October 1982 and be com-pleted by December 1984. Tendering of plant and machinery for CDLW willbegin by January 1983 and will be completed by July 1983. During the nego-tiations, assurance was obtained that PR will receive such budget alloca-tions as will be sufficient to allow employment of consultant services as andwhen required, including technical support services from suppliers of planttechnology to assist in installation of equipment, start-up and monitoring ofoperations.

3.37 Also, PR will prepare by December 1982 and forward to the Associa-tion for review a comprehensive training program for the CDLW. At the timeof negotiations assurance was obtained from PR that CDLW will be adequatelystaffed at all times with competent managerial and technical personnel andthat changes in management staff will be nominal and not detrimental toimplementation and operation.

3.38 Management Information System. PR will complete the study forchoice of software and timetable for implementation of the MIS by endDecember 1982. During the negotiations the schedule worked out at appraisalfor implementation of this component was confirmed.

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3.39 LDP. Plans for paving, construction of unit train tracks andwarehouses have been completed. Construction began in January 1982 andtendering for container handling equipment will start no later than October1982. This timetable was confirmed during the negotiations.

3.40 Technical Assistance and Training. During negotiations, the tech-nical advisory services need for CDLW, details of the training program, thetimetable for feasibility study of electrification of Khanewal-Karachi, andthe technical advisory services to assist PR management in operating improve-ments as worked out during the appraisal, were discussed and confirmed.

G. Procurement

3.41 Items financed by the Association will be procured under interna-tional competitive bidding in accordance with Bank/IDA guidelines except for:(a) proprietary items which PR procures from particular sources because ofthe need for procurement under license or for continued standardization ofequipment; and (b) contracts of US$50,000 equivalent or less, where theadvantage of ICB would be clearly outweighed by the administrative burdenthereof. The proprietary items to be financed under the project areestimated to cost about US$5 million equivalent or about 10% of the proposedcredit. These items will be used for a unit exchange maintenance system forexisting locomotives. During negotiations, the final list of proprietaryitems to be financed under the project was discussed and agreed to with PR.The total amount of contracts less than US$50,000 equivalent not covered byICB is estimated to represent a very small portion (less than US$1 millionequivalent) of the proposed credit.

H. Disbursements

3.42 Subject to review and agreement with the Association, savings inany category of the proceeds will be available to cover increases in anyother category except proprietary items. Disbursements are expected to becompleted by December 31, 1985. Disbursements under the project would bemade against: (a) 100% of the foreign exchange cost of imported items;(b) 100% of foreign exchange cost of training, technical advisory servicesand installation and inspection of equipment; and (c) 70% of local costs oftechnical advisory services. The estimated disbursement schedule (Table 13)is based on Bank-wide disbursement profiles in the transport sector, on ourexperience under the on-going Tenth Railways Project in Pakistan (Credit684/Loan 1372-PAK), and on the nature of the items proposed for financingunder this credit. The disbursement period for this project is estimated tobe shorter than the Bank-wide transport sector average because: (a) about72% of the credit funds will finance the Locomotive Maintenance Improvementcomponent, which consists largely of machinery and spare parts; (b) the civilworks involved are already past the planning stage and are, anyway, a rela-tively small part of the credit (19%); (c) the Containerization component ismainly equipment and rolling stock for which no abnormal delays are expected;

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and (d) the remainder of the project, i.e. management information system,technical assistance and training, will not have a great impact on the dis-bursement schedule. During negotiations, the disbursement schedule wasdiscussed and agreed with GOP and PR.

IV. ECONOMIC EVALUATION

A. General

4.01 In broad terms, the justification of this project is predicated onthe fuller utilization of PR's existing assets, which will be possible by:

(a) the introduction of locomotive maintenance improvements, includingthe establishment and operation of a Unit Exchange MaintenanceSystem (UEMS) that will increase the availability of motive powerby reducing the amount of locomotive downtime required for repairand maintenance; under the proposed system, locomotives will nothave to remain idle while their worn-out components are repaired;instead they will be able to leave the workshops and sheds asquickly as the worn-out components are removed and new orremanufactured ones are installed and tested; in addition, qualitycontrol and testing equipment to be provided under the project willresult in improved quality of remanufactured components, which willincrease locomotive reliability;

(b) the creation of a Management Information System that will utilizethe telecommunications infrastructure financed under the TenthRailway Project; and

(c) the development of container rail services between Karachi andLahore, which will attract to the railways a significant share ofinland container traffic between these cities.

B. Locomotive Maintenance Improvements

4.02 The main benefits of this component (paras 3.06-3.17 and Table 14)will be the following:

(a) a reduction in locomotive downtime during scheduled heavy and lightrepairs; this reduction would be equivalent to an increase in the

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fleet size by about five "additional" locomotives; 1/

(b) an increase in the availability of remanufactured components,which will be reflected in a 2 % increase in locomotiveavailability or 9.5 "additional" locomotives;

(c) a reduction in the number of locomotives currently out ofservice for want of spares from about 20 to about 10; thisreduction would result from the transfusion of new spares andthe continued supply of remanufactured components; onthese grounds, about 10 "additional" locomotives may beattributed to the project; and

(d) the currently low tractive effort of the diesel loco-motive fleet (about 10% of the electric motors aboardlocomotives are not working) will be increased byreplacing unserviceable motors with new or remanufac-tured ones; 2/ since the 10% increase in tractiveeffort is not likely to be fully utilized, it isestimated that the actual benefit associated with thisitem will be equivalent to only a 5% increase in fleetsize, say 23.5 "additional" locomotives.

The combined impact of (a), (b) and (c) would result in improved availabilityof the diesel locomotive fleet, which is currently estimated at 83% and isexpected to grow to 88% at the end of the project implementation period.

4.03 As described above, the total benefits to be derived from the UnitExchange Maintenance System, once fully operational, will be equivalent to afleet size "increase" of 48 locomotives. These benefits, which are supportedby conservative assumptions and yet per se provide grounds for economic

1/ The diesel locomotive fleet, which consists of 474 locomotives, under-goes two types of scheduled heavy repairs: Class I repairs are carriedout every six years (their duration will be reduced by seven days) andClass II repairs every three years (their duration will be reduced byfour days). In addition, light scheduled repairs are performed annuallyon all locomotives (their current duration of seven days will be reducedby about 20%).

2/ The diesel locomotive fl~eet is operated by 2,542 electric motors, ofwhich about 250 are not worhing; PR also has 65 unserviceable electricmotors not currently aboard iccomotives. Under the project, it isexpected that 66 electric motors will be imported, which will act as anemergency input and will become the basis of improved maintenance of theelectrical systems.

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justification, will be supplemented by the following additional benefits,which have not been included in the economic evaluation:

(a) the reliability 1/ of train services will improve, thus reducingt-affic disruptions and increasing the carrying capacity of therailways; and

(b) the Unit Exchange Maintenance System will result in a longer lifeof diesel locomotives and remanufactured components 2/ which willreduce PR's import requirements.

4.04 The "additional" motive power generated by the Unit Exchange Main-tenance System will be used to carry freight traffic, which would otherwisebe carried by truck 3/ at a higher economic cost. It is reasonable to assumethat PR will use its increased motive power to carry freight (instead ofpassengers) because:

(a) in compliance with covenants agreed under the Tenth Railway Projectand under the proposed project (para 6.01), PR will give greaterpriority to freight traffic in the allocation of motive power;

1/ As opposed to "availability", which reflects the proportion of locomo-tives in working condition at a given point in time, the concept of?Ireliability" indicates the locomotive's ability to perform adequatelyover a period of time according to a planned assignment, i.e., to do thejob it was intended to do.

2/ The expected life of diesel locomotives (costing about US$1 millionapiece) will be doubled from 18 to 36 years. The life of major com-ponents to be remanufactured under the project (now being imported ata rate of about US$15,000 per locomotive per year) will be increased byabout 25%.

3/ As of December 1981, the average long-run economic cost (fixed andvariable) of rail transport for a typical haul (such as the 1200 kmKarachi-Lahore stretch) was estimated at Rs 0.15 per ton-km. Theaverage economic cost (including investment in vehicle and operatingcosts but excluding investment in right-of-way) of road transport wasestimated at Rs 0.23 per ton-km. Because the above road transport costexcludes road construction and maintenance, project benefits are beingunderestimated and the economic rate of return will be conservative.The above costs have been computed on the basis of data provided byconsultants Sofrerail (Annex 1).

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(b) macroeconomic analyses suggest that long-haul, rail-suitablefreight traffic in Pakistan is significantly greater than theamounts currently carried by PR, and this traffic is likely to growin the future;

(c) while in recent years, PR's poor performance was a major reason forthe stagnation of rail freight traffic, it is expected that itsimproved performance under the project will put PR in a betterposition to attract freight traffic; and

(d) GOP and NLC are aware that long-haul freight traffic should,ceteris paribus, be allocated to the railways.

C. Rail Container Operation

4.05 The introduction and continued operation of efficient and reliablecontainer rail services between Karachi and Lahore are likely to have asignificant long-term impact on the composition and volume of Pakistan'simport and export trade. On the export side, the country will particularlybenefit from accelerated growth of containerizeable goods such as bagged riceand light manufactures (including carpets, cotton, yarn, cloth and sportinggoods), which already account for about 40% of total exports. The growthrate of rail container traffic will not be constrained by total demand butrather by PR's own ability to attract cargo away from the trucking industry.As an indication of potential traffic, it is estimated that about 40,000 TEUswill be handled at the Port of Karachi in 1981/82, of which 30% containfreight coming from or going to Lahore and points north of Lahore. IfPakistan's international trade follows worldwide container growth patterns,it would not be unreasonable to forecast, as does Karachi Port Trust, thatthe number of TEUs to be handled at the port will reach the 80,000 mark in1985/86. The economic justification of the rail container operations ispredicated on rail container traffic gradually building up to 30% of con-tainers handled at the port (Table 15). Critical to the success of thiscomponent is PR's ability to:

(a) increase the frequency of its container service from one train aweek at project start-up to one train a day by 1988/89; 1/

(b) provide a service that competes favorably with the truckingindustry, i.e., with transit times between Karachi and Lahore under30-36 hours and freight rates not above the Rs 5,000-6,000 per TEUrange; and

1/ Each container train will consist of 25 bogie wagons carrying 50 TEUs,and will have a turnaround time of 5 days. The proposed investment willbe sufficient to sustain comfortably the proposed target frequency.

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(c) provide a service with a degree of reliability and punctualitysimilar to that currently enjoyed only by passenger trains and thesuper-parcel express.

4.06 The actual impact of a technological change such as the introduc-tion of container services is not easy to quantify because it includes, amongother things, project-related increases in trade volumes, export shiftstowards goods with higher value added, and reduced costs of cargo handling atports. For the purpose of the economic analysis, the above benefits havebeen disregarded and only those listed below have been quantified: 1/

(a) the proposed container operation will be one of the meansat PR's disposal to attract a larger share of long-haulrail-suitable traffic in Pakistan; in the absence ofrail container services, the bulk of such traffic wouldbe carried by road; therefore, each ton-kilometer ofcontainer traffic to be carried by rail involves a bene-fit to the economy, equivalent to the difference intransport cost between rail and road (para 4.04);

(b) containerization normally leads to reduced cargo pilfer-age and damage, which is estimated at 5% of cargo value;

(c) another advantage of containerization is quicker cargohandling at ports, which in turn leads to shorter shipturnaround times; as shipping lines benefit from suchtime savings, they encourage containerization by reduc-ing freight rates anywhere from 5 to 12-1/2%; it hasbeen conservatively assumed that a 5% reduction inshipping rates will be a benefit attributable to thecomponent; and

(d) containerization permits a reduction in packaging costs,as certain goods will need less packaging while otherswill be packed in Pakistan instead of a nation withhigher unit costs; it is estimated that the relevant

1/ Among the assumptions made in the economic analysis are the following:the average load of loaded container is about 12 tons; about 25% ofcontainers are empty; the average value of container cargo is US$250 perton; the distance between Karachi and Lahore is 1,200 kilometers; theaverage shipping freight rate paid on Pakistani imports and exports isUS$40 per ton; and the average tax and duty incidence on capital costsis 25%, while that on operating costs is 20%.

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savings will amount to one-third of packaging costs,i.e., about 2.5% of cargo value.

D. Management Information System, Technical Assistance and Training

4.07 The benefits stemming from these components will appear in theshape of improved operations throughout the entire railway system. Thoughdifficult to quantify, such benefits are likely to be greater in relativeterms (per unit of investment) than those of the other two project com-ponents. For the purpose of economic evaluation, the costs of the MIS,technical assistance and training have been added to the cost of the UnitExchange System, as they will help its successful operation.

E. Economic Justification and Sensitivity Analysis

4.08 In carrying out the economic analysis, taxes and duties included incapital and operating expenditures have been disregarded. The officialforeign exchange rate has been taken as a good proxy for the relevant shadowrate. Shadow wages lower than market wages have been used where labor inputswill be partly supplied by currently under-utilized PR staff.

4.09 The rate of return of the Unit Exchange Maintenance System (Table 14),including the Management Information System as well as technical assis-tance and training, has been estimated at 17% on the basis of conservativeassumptions indicated elsewhere in this report. The rate of return of railcontainer services (Table 15) has been estimated at 29%. The overall rate ofreturn for the entire project is 18%. Sensitivity analyses have been carriedout to assess the impact on the rate of return of departures from base caseassumptions:

Base case 18%

If benefits are 15%less than expected 14%

If costs are 15%higher than expected 14%

If benefits materializetwo years later 10%

In sum, a 15% reduction in benefits or a 15% increase in costs would bringabout a 4-point drop in the rate of return. A two-year delay in projectimplementation would result in a drop twice as great.

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F. Risks

4.10 This project does not involve greater risks than those found insimilar projects in the region. However, since the proposed systems andservices are new to PR (the Unit Exchange Maintenance System, the ManagementInformation System and the container rail services), it will be necessary tokeep close supervision during project implementation; to this end, theproject is likely to require higher than usual supervision input on the partof Bank staff. As has been indicated elsewhere, the project's success andjustification very much depend on GOP's and PR's commitment to give priorityto freight traffic in the allocation of motive power, and on PR's ability torun reliable and efficient rail container services.

V. FINANCE AND EARNINGS

A. Introduction

5.01 GOP's stated policy is that PR should earn revenues sufficient tocover all operating expenses (including a depreciation charge), debt serviceand should pay a dividend to the government. As GOP determines the level offares and the costs of most of PR inputs (e.g., fuel and labor), the attain-ment of the policy objective is frequently frustrated by the effects of othergovernment policies.

5.02 Financial arrangements between PR and GOP, accounting proceduresand arrangements for audit are, with some improvements, the same as when the10th Railway Project was appraised in 1976. Reporting has been improved andthe Accounts Department now produces timely monthly management and annualaccounts. In 1979, PR completed an inventory of its fixed assets and valuedthem at replacement cost, which is now the basis of depreciation. A CostingCell has been established and is to be expanded. The introduction of aManagement Information System (MIS), as envisaged by the proposed project,will enable the Costing Cell to provide information other than historicalaccounts, particularly detailed data on the costs of different types oftraffic. PR's annual accounts are audited by the Auditor-General (AG) ofPakistan. PR has caught up on earlier arrears of work and the AG completedhis report for 1979/80 in June 1981. Agreement was reached at negotiationsthat future audited accounts will be available no later than nine monthsafter the end of each fiscal year.

B. Recent Changes in Financial Policies

5.03 In 1979, GOP set up an "Experts Committee on the Railways" toexamine the financial arrangements between the Railways and GOP. The Commit-tee reported at the end of 1980, and GOP has implemented almost all of itsrecommendations. The major changes are:

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(a) Payment of a Dividend on Capital at Charge: Previously PR wasrequired to pay a dividend to GOP even if its earningswere insufficient to generate sufficient cash. The pay-ment was financed by PR taking up an interest bearing loanfrom the Treasury or commercial banks. This practice has beenchanged and the dividend will be paid to GOP only when thecash to do so is available after meeting operating costs,appropriation to funds and debt service.

(b) Interest on Loans from GOP: Interest payments were treated inthe same way as dividends. If a shortfall of revenues left PRwith insufficient cash to meet its obligations to the Government,it borrowed from GOP to meet the payments. Should similarcircumstances arise in the future, 1/ sums unpaid will be recordedin PR's accounts as liabilities to be met from future surplus.

(c) Depreciation of Fixed Assets: The charge for depreciation,which is termed an Appropriation to the DepreciationReserve Fund (DRF), was previously determined annuallyat about 12% of total revenues. It is now based on thedepreciation of the fixed assets valued at replacementcost.

C. Past Performance

5.04 PR's revenue and expenditure accounts for the five years 1976/77 to1980/81 are shown in Table 16 and summarized below:

1/ e.g., in FY81/82

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Summary of Revenue and Expenditure 1976/77 - 1980/81(in Rs million)

1976/77 1977/78 1978/79 1979/80 1980/81

Operating Revenues 1728.5 2197.7 2273.6 2678.8 2931.7

Working Expenses 1536.4 1748.5 1929.1 2483.6 2778.0Appropriation to

Depreciation Reserve Fund 207.4 263.7 272.8 370.0 420.0

Net Operating Revenue (Loss) (15.3) 185.5 71.7 (174.8) (266.3)

Interest on Loans 143.7 154.6 175.7 305.8 135.5Appropriation to

Improvement Fund 25.1 35.2 39.4 54.9 60.0Dividend 34.3 154.1 171.9 - -

Net Operating Surplus/Loss (218.4) (158.4) (315.3) (535.5) (461.8)

Operating Ratio 101 92 97 107 109

Passenger/Km Million 13,198 15,375 16,712 17,316 16,311

Freight Ton/Km Million 6,793 7,580 8,455 7,555 7,910

Note 1. The policy changes which resulted from the Expert Committee'sReport (para 5.03) are reflected as follows:

(a) Appropriation to DRF: figures for 1979/80 and 1980/81 arecalculated on assets valued at replacement cost. On theprevious basis, the charges would have been 321 millionand 352 million.

(b) Dividends were paid by PR taking up loans from GOP.

(c) Interest on Loans: the lower costs for 1980/81 resulted fromthe cancellation of earlier loans taken up to finance dividendsand other payments to GOP.

Note 2. Figures of Freight Ton-kms carried are for Revenue EarningTraffic and exclude PR's own departmental traffic.

Agreements made in Credit 684-PAK envisaged that PR's finances would improveso that from FY77/78 revenues would be sufficient to cover operating expensesand debt service and, from FY78/79, they would also be sufficient to earn anincreasing percentage of the dividend until 100% is reached by FY81/82.

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Although dividends were paid up to FY79, the earnings were not adequate

enough to provide the cash. There are four underlying reasons for thedecline in PR's financial health:

(a) costs have risen faster than anticipated. Fuel prices haveincreased sharply, partly as a result of GOP's policy on energyprices. Between 1976 and 1981 total revenues increased by 170%while total working expenses went up by 185%. The cost of laborshows the lowest percentage increase due to action by PR to reducestaff numbers. An analysis of changes in costs and revenues isgiven in Table 17;

(b) the low rates charged for passenger services which do not cover thevariable costs of operation;

(c) the priority given to passenger traffic which caused a drop in theton/kms of freight carried;

(d) the shortcomings in management (described in Section II).

5.05 PR's operating expenses include costs which would not normally beborne by a commercial organization. By tradition PR provides its employeeswith medical, welfare and educational services and was a pioneer in doing sobefore facilities were generally available. The facilities include 60schools with an enrollment of over 40,000; 75 dispensaries and hospitals with1,300 beds. The annual expenditure on these services for 1980/81 was aboutRs 113 million (equivalent to 9% of passenger fares or 4% of working expen-ses). PR has a Police Department with a strength of 7800 (or 6% of the total

employees) which costs Rs 48 million a year; the Department is considerablyin excess of PR's needs for security. The decision by GOP that PR shouldprovide these non-commercial services is not in question, but it is felt thatthe costs should be separately identified in PR's accounts and agreement tothis effect was reached at negotiations. In viewing PR's operating costs italso should be noted that the railways contribute to the general revenue ofGOP. In 1980/81 PR paid, as part of working expenses, an estimated Rs 330million in duties and taxes (about 12% of its working expenses). These twoitems were equivalent to PR's operating loss in 1980/81.

5.06 The DCA for Credit 684-PAK includes a further agreement that fromFY79/80 the revenues of each service, passenger and freight, would be atleast sufficient to cover its variable costs. This was also recommended bythe Experts Committee. The extent of losses on passenger services wasrevealed in 1978 by a costing and traffic study done by consultants as part

of the 10th Project. Passenger fares were increased by 20% in July 1979 andby 30% in January 1980 to a level where revenues exceeded the variable costsof services. However, because of subsequent increases in costs, for thewhole of FY80/81 revenues from passenger service were estimated to cover only86% of the variable costs and 60% of total costs. In that same year freight

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revenues exceeded variable costs by 68% and total costs by 18%. The netoperating deficit of Rs 462 million in that year was made up of a deficit ofRs 750 million deficit on passenger services and a surplus of Rs 288 millionfrom freight. Passenger fares have not been increased since January 1980.The level of passenger fares is low, particularly for second class whichaccounts for 88% of passenger kms. The present charge for distances between41 and 500 km is 5 paisa per km - (equivalent to half a U.S. cent). Apassenger can travel 100 kms for the same cost as a pack of cigarettes. Thefare level today is in real terms about 75% of that charged in 1972 (seeTable 18). The largest loss, in percentage terms, is on the provision of airconditioned sleeping coaches - for which no justification is evident; thecurrent fares are estimated to cover only 50% of total costs, and additionalincreases in charges for this service are justified (see para 5.10).

5.07 As a means of reducing its losses, PR has identified 62 passengertrains, of the 450 operated daily, whose variable costs exceed revenues byRs 95 million. These trains have three characteristics viz., (a) theirridership is on average less than 50% of capacity; (b) they are on lineswhere there is at least one other train a day; and (c) there is an alterna-tive bus transport service. PR has begun a program of cancelling trains at arate of 2 or 3 a month and at negotiations agreed to continue this until therevenues from all passenger trains adequately cover variable costs.

5.08 The costing and tariff study also recommended a large number ofchanges in the tariffs for freight traffic designed to simplify the chargingsystem, the majority of which were implemented in 1980.

D. The Next Few Years

5.09 The financial results will be largely determined by the achieve-ments of PR's new management in carrying more freight and by GOP in permit-ting increases in passenger fares. The Emmay Report shows that there is noshortage of freight traffic and that rail haulage is more economical thanroad for distances over 250 kms at rates which are profitable to PR. Thefinancial forecasts have been prepared on the assumption that the declinein the volume of freight carried will continue in FY81/82 and this trend willbe reversed slowly as the benefits of the 10th and 11th projects begin toshow and freight services are given due priority. The estimates assume thatPR will carry 8,250 million tons/kms in FY85/86 - a lower level than inFY78/79 which was the best of recent years. Changes in passenger trainservices and fares are sensitive political issues in Pakistan. There is astrong public demand for more seats, particularly on the long distance trainswhich are chronically overcrowded, partly because there are no comparableroad coach services. GOP is attempting to meet the increasing demand and todo this at low prices. While decisions on passenger services and prices havea wider effect than PR's profitability, it is felt that the extent of the

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losses should be constrained so that at a minimum revenues should covervariable costs.

5.10 During negotiations it was agreed that GOP would take measures toensure that:

(a) from FY82/83 the total revenues from passenger and freight servicesbe sufficient to cover the costs of operation (includingdepreciation) debt service, the appropriation to theImprovement Fund and a prescribed percentage of the dividendon Capital-at-Charge, which shall be 100% not later than 1985/86;

(b) from FY83/84, revenues from passenger services be atleast sufficient to meet the variable costs of services;

(c) from FY84/85, revenues from ACC sleeper services cover total costs.

5.11 Financial forecasts, based on these assumptions and covenants, aregiven in Table 19 and a summary follows. While any increases in costs overthose assumed would have to be met by additional user charges the estimatesdo not take account of any cost reductions due to better management. Thebenefit of the proposed capital investment is reflected in the availabilityof locomotives to haul freight trains and thus higher freight revenues. Thenet operating revenue estimated for 1985/86 represents a Rate of Return onrevalued assets of about 3%. The estimates, though conservative, are pru-dent.

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Summary of Revenue and Expenditure Forecasts 1980/81 - 1985/86(in Rs million)

Actual Forecast Estimates1980/81 1981/82 1982/83 1983/84 1984/85 1985/86

Operating Revenues 2,932.0 3,055.0 4,140.0 4,820.0 5,500.0 6,320.0

Working Expenses 2,777.0 3,100.0 3,438.0 3,845.0 4,393.0 4,989.0Appropriation to

DepreciationReserve Fund 420.0 440.0 470.0 541.0 601.0 620.0

Net Operating Revenue(Loss) (265.0) (485.0) 232.0 434.0 506.0 711.0

Interest on Loans 135.0 130.0 146.0 220.0 260.0 280.0Appropriation to

Improvement Fund 60.0 67.4 73.7 97.4 112.8 135..9Dividend - - - - -

Net OperatingSurplus/Loss (462.0) (682.4) 12.3 116.6 133.3 295.1

Operating Ratio 109.0 115.9 94.4 91.0 90.8 88.8

Passenger/KmMillion 16,310 16,800 17,200 17,700 18,200 18,700

Freight Tons/KmMillion 7,900 7,500 7,900 8,000 8,100 8,250

E. Financing Plan

5.12 Table 20 gives estimates of the Sources and Application of Fundsfor 1981 to 1985. The following summary shows the financing plan for theperiod of the Mid-Term Development Plan 1981-84.

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SUMMARY

Financing Plan 1981-1984

Rs Million US$ Million _

Funds Required

A. For Mid-Term Development PlanAdditional Investment 1,943 185.0 31Replacement 2,557 244.0 41

4,500 429.0 72

B. For Other PurposesOperating Loss 552 53.0 9Debt Service 926 88.0 15Improvements 1/ 193 18.0 3Dividend 129 12.0 2

1800 171.0 29

Total 6,300 600.0 100

C. Sources of FundsPR Internal Cash Generation 1,870 178.0 26Government Funds as Capital 2,524 240.0 40Government as Loans 1,354 130.0 22Government as Grant 552 53.0 8

Total 6,300 600.0 100

Based on US$1 = Rupees 10.5

1/ Minor Capital works not included in the investment plan.

5.13 In addition to the proceeds of the proposed IDA credit of US$50million equivalent, GOP has secured bilateral finance from a number ofcountries of which the principal donors are Canada, Japan, Sweden, WestGermany and the United Kingdom. The Medium Term Investment Plan includes theproposed project. The proceeds of the IDA Credit will be onlent to PR inaccordance with GOP's practice for Government departments, with the addi-tional requirement that sums equivalent to the Rupee value of the loan repay-ment are added to PR's Capital-at-Charge on which a dividend is paid to GOPin perpetuity. (See Annex 4 for details) PR pays the local currency equiv-alent of interest charges and bears the risk of fluctuations in foreignexchange rates. About 5 million U.S. dollars equivalent will be provided to

-42-

PR's Replacement Capital Account on which the current interest rate of inter-est is 11%, compared with the forecast CPI changes of 12% for 1982, 11% for1983 and 10% thereafter.

VI. AGREEMENTS REACHED AND RECOMMENDATIONS

6.01 During the negotiations, agreement was reached on the followingprincipal matters:

(a) Completion of plan of reorganization of PR's management(para 2.02);

(b) A timetable for improving locomotive maintenance and trainoperations in accordance with targets set forth in Annex 2(paras 2.08 and 2.13);

(c) A timetable for reduction of uneconomic passenger trains(paras 2.13 and 5.07);

(d) PR's Investment Plan and limitation of changes to it (para 2.22);

(e) The provision by PR of Pro Forma accounts and reports showingseparately the costs and revenues of passenger and freightservices and the costs of those activities not directlyrelated to its railroad operations (para 5.05); and

(f) Financial targets for PR (para 5.10).

6.02 The proposed project provides a suitable basis for an IDA credit ofSDR 44.3 million equivalent to GOP.

-43- ANNEX 1

PAKISTAN

ELEVENTH RAILWAY PROJECT

Documents Available in the Project File

1. The Future Role of Railway Transport in Pakistan. EMMAY Associates Ltd.,August, 1981.

2. Master Plan for Movement of Indigenous Fertilizer (1979/80-1982/83).The Fertilizer Task Force, April 1979. Working Paper (up-date),September 1981.

3. The Feasibility Study on the Introduction of Containerization in theIslamic Republic of Pakistan, Interim Report. Japan InternationalCooperation Agency (JICA), March 1981.

4. Pakistan, Electrifizierung der Eisenbaham Streke Khanewal - Samasata.Kreditanstalt fur Wiederaufbau, September 1980.

5. Pakistan Railways, Management Information Needs, Identification Mission.W.H. Thompson, December 1980.

6. Report of Experts Committee on Railways, GOP, September 1980.

7. Modernization of Locomotive Facilities. Pakistan Railways, September1981.

8. Pakistan Railways, Traffic Costing Study, Final Report. Sofrerail,July 1979.

9. Pakistan Railways, Dry Port Authority, A Case Study (Interim Report).R. Waheed Associates Ltd., October 1981.

10. Supply Management of D.E. Loco Spares (A Study Based on Visit to US andCanada, October-November, 1981). M.I. Hasan, CCS, Pakistan Railways,February 1982.

11. Locomotive Study. Pakistan Railways, April 1979

12. PC-1 Proformas:- Rehabilitation and Improvement of Track (1977-1983)- Passenger Carriages for Pakistan Railways (April 1976)- Procurement of 38 Diesel Electric Locomotives (December 1980)- Rehabilitation of 42 ALPW-18 D.E. Locos (March 1981)- Setting Up a Locomotive Factory, Phase-i (February 1981)- Improved Signaling, Revised PC-1 (October 1981)

Annex 2Page 1 of 3

PAKISTAN

ELEVENTH RAILWAY PROJECT

Plan of ActionFor Improving the Operational and Financial Performance of PR

1. PR shall develop and implement measures to achieve the targetsset forth below:

1981/82 1982/83 1983/84 1984/85

(a) Locomotive Maintenance Improvement

Availability of diesel locomotiveas a % of total fleet 83 84 86 88

Number of diesel locomotives outof service for want of spares asa % of total fleet 4.0 4.0 3.0 2.0

Diesel locomotive downtime duringscheduled heavy repairs

Class I (days) 32 30 28 25

Class II (days) 18 17 16 14

Number of traction motors aboardlocomotives not working 250 150 100 25

(b) Freight Train Operations

Diesel locomotive-km per dayper locomotive in use* 310 345 365 385

Average net-tons**per freight train* 570 625 675 725

Total daily number of wagonsto be dispatched out of Karachi 750 780 845 910

(c) Rail Container Operations

Minimum weekly frequency ofcontainer trains in eachdirection (Karachi-Lahore) 1 2 3 4

* Excluding shunting and departmental trains** Metric tons

May 12, 1982

-45-Annex 2Page 2 of 3

2. PR shall not increase the number of passenger trains per day onthe Karachi-Peshawar line to exceed the level as shown in the timetabledated April 15, 1982.

3. PR shall institute a program to eliminate uneconomic passengertrains at the rate of 2-3 trains per month beginning July 1, 1982 untilsuch time as the condition of Section 4.04 of the Development CreditAgreement is satisfied.

4. PR shall:

(a) undertake the following studies on a division-by-division basisin order to increase the utilization of the motive power androlling stock:

1) Volume of traffic at each freight station with a view toreducing the number of goods booking points by consolida-tion. The study should be completed by March 3, 1983; and

2) Economics of passenger services on the main line (Karachi-Peshawar) with a view to (i) elimination of unnecessarystoppages, in particular the elimination and 4 a.m.; (ii)methods of increasing coach and locomotive utilization bydiverting equipment from poorly patronized trains or sec-tions to more remunerative sections. This study should becompleted by December 31, 1982 and the first changes areexpected to be made in the subsequent timetables.

(b) develop quarterly movement plans aimed at increasing unit andblock trains in order to increase the utlization of availablecarrying capacity, taking into account revenue-earning potentialand the specific needs of traffic for which alternative modesare not available.

(c) work more closely with the appropriate concerns, particularlythe National Fertilizer Corporation, to produce an orderlymovement plan and improve wagon allocation for transportation offertilizer.

(d) reduce the number of non-professional and unskilled staffthrough attrition.

(e) implement measures to increase average commercial speed offreight trains to attain 25 km/h by no later than September 30,1983.

(f) carry out tests to ascertain the feasibility of application ofthe MATE locomotive operation on the line from Sibi to Quetta.

-46-Page 3 of 3

(g) study the use of Pipri shed for running repair and servicingof main line train diesel locomotives.

(h) increase the number of coaches per passenger train on the mainline Karachi-Rawalpindi.

(i) promptly implement recommendations, to be agreed with theAssociation, resulting from Supply Management of Diesel ElectricLocomotive Spares Study.

May 12, 1982

-47- ANNEX 3Page 1 of 3

TERMS OF REFERENCE

STUDY OF THE FUTURE ROLE OF RAILWAY TRANSPORT IN PAKISTAN I/

I. BACKGROUND

1. Similar to the experience in many other countries, the railroads

in Pakistan have been losing freight traffic in recent years due mainly to

road transport competition. This trend will be accelerated by the completionof the Karachi-Multan pipeline, currently scheduled to start operations in1981. Nevertheless, rail transport is a very important means of communica-

tion in Pakistan; if moved around 17.3 billion passenger-kilometers and 8.4billion ton-kilometers in 1979/80.

2. The Government of Pakistan (GOP) has been investing, with WorldBank assistance, in the rehabilitation of infrastructure, motive power androlling stock and in the improvement of operations and finances of theGovernment-owned Pakistan Railways (PR). Important improvements have beenobtained under the ongoing Tenth Railway Project (Loan 1372/Credit 684-PAKof March 1977) which have helped increase PRs capacity. Further improvementswill be obtained through the purchase of urgently needed spare parts forlocomotives and the provision of a backbone microwave network includingrelated communications and signalling equipment. These crucial elements of

the ongoing project should be completed within the next two years and shouldallow PR to improve the quality and dependability of its transport services.

3. The structure and pattern of traffic flows have changed recently.Further changes are expected after the completion of ongoing fertilizer,

cement and steel mill projects. These changes will further affect PRs opera-tions and role by modifying the relative weight of imports/exports and inter-nal distribution flows in the country.

4. PR is currently preparing a three-year railroad development planincluding a manufacturing plant for rebuilding components and assemblies forlocomotives in a new management information system and container transportfacilities.

1/ This study was completed in 1981.

-48-ANNEX 3Page 2 of 3

II. OBJECTIVES AND SCOPE OF CONSULTING SERVICES

5. The objective of the technical assistance to be provided under thiscontract is to ascertain the future economic role of railroad transportservices in Pakistan in sufficient detail for appraisal of a proposedEleventh Railway Project by a Bank Mission in August 1981.

6. To this end, the consultant shall review, check and appropriatelyamend whatever work and data collection has been done by GOP/PR in connectionwith road and rail transport demand in Pakistan and shall produce estimatesof future demand for inter-urban passenger and freight movements in thecountry. In the case of freight traffic, the consultant shall study thebehavior of the major commodities now moved by PR or which could constitute apotential source of new traffic. These commodities should include wheat,rice, paddy, petroleum products, cement, fertilizer, containers and any othercommodity or group of commodities which the consultant deems appropriate.For each commodity, the consultant will establish:

(a) Origin and destination and total annual traffic volumes,indicating, when required, seasonal fluctuations. Thesedata shall be compiled for 1975-1980, indicating themodal distribution (road, rail or air transport). Majorpoints need only be considered. Similarly, the cargowith origin and/or destination abroad shall be classifiedonly in four groups (Afghanistan, Iran, India and othercountries) indicating for each group the port of entryor exit into or out of Pakistan.

(b) For the 1979/80 series, the consultant shall, in addition,estimate the approximate travel times, tariffs and overalldoor-to-door transport costs based on a review of existingcosts and tariffs and on detailed interviews with shippers,freight forwarders and other users of freight transportservices. In this case, the consultant shall also identifyother major reasons for user's preference of any mode(dependability, financial expedience, availability ofstorage facilities, marketing convenience, easier transferto other modes, etc.).

7. The consultant shall review the ongoing or proposed developmentsin Pakistan's economy, particularly in the agricultural, industrial andmining sectors which may bring about substantial changes in existing trafficpatterns or produce new transport demand, within the next five years(1981-86).

-49-ANNEX 3Page 3 of 3

8. Based on the findings under 2.02 and 2.03 above; the consultantshall estimate two possible scenarios of future freight traffic demand inPakistan. The first would assume a growth in the country's gross domesticproduct (GDP) of 4% per annum in real terms between 1981 and 1986; and thesecond would assume a growth of 6% per annum. In establishing an elasticityof transport demand to GDP growth, the consultant may take into considerationthat between 1971/72 and 1978/79 the country's GDP grew at about 5.2% perannum in real terms, while freight traffic in ton-kilometes increased byapproximately 7.0% annually. These two hypotheses of future GDP growth areto serve only as a general framework of analysis in building up the twoscenarios. The consultant may modify them as he sees fit. Specifically, heshould incorporate into the scenarios specific assumptions regarding thelikely completion of ongoing projects (e.g. the Karachi Steel Mill) whichwould materially affect transport demand.

9. In addition to the two scenarios mentioned above, the consultantshall estimate two scenarios of cargo modal split between road and railtransport, in line with his assumptions regarding future development of roadand rail transport infrastructure, services and technology in the comingyears.

10. The consultant shall carry out a similar exercise to the onerequested above for rail passenger transport demand in the future. It issuggested that, as a basis for developing future transport demand, he bearsin mind that gross national product per capita increased by about 3 percentannually in real terms in the early seventies, reach US$200 in 1977. Pas-senger transport demand in Pakistan (in passenger-kilometers) apparentlyincreased by about 10% between 1971/72 and 1978/79. In developing the lasttwo rail transport scenarios, the consultant shall assume in one case thatpassenger rail tariffs would be adjusted in line with inflation (alternativeone) and that in addition to adjusting increases in real terms would be addedto the present level of tariffs in order to at least cover relevant variablecosts (alternative two). Although the modal split among rail, bus and alltransport should be based on plausible scenarios regarding future passengerfares for each mode, the consultant shall establish present transport costsfor passengers via each mode and the difference between such costs and exist-ing fares. He should then assess the changes in modal split that wouldoccur, should the tariffs reflect the relevant costs. This comparativeanalysis needs to be done only for the base year chosen for the demandanalysis (ideally 1980).

11. Based on the findings and studies under the previous paragraphs,the consultant shall establish PR's future role in the movement of inter-citypassengers and goods in Pakistan.

-50- ANNEX 4-50- ~~~~Page 1 of 3

PAKISTAN

ELEVENTH RAILWAYS PROJECT

The Basis for Financial Forecasts

1.0 In 1961 the Railway was "separated" from the Government andprepared its own budget and accounts but in recent years PR has beentreated as a Government department in all matters except its liabilityto pay a dividend on Capital-at-Charge. PR's accounts are kept on thebasis of annual receipts and expenditures though there is a slow changetowards keeping commercial accounts. Since 1977, PR's budget has been mergedinto the Federal Budget.

2.0 Funds for Capital Investment

A. Replacements are provided as follows:

Local Currency

(i) Provided by PR from the Depreciation Reserve Fund.

(ii) A shortfall in any one year is provided by GOPas "grant in aid" and added to the Capital-at-Charge.

Foreign Currency

Provided by GOP. From the DRF, PR pays to GOP the localcurrency equivalent of debt service. The onlending terms arearranged so that GOP retains the benefit of any concessionalfinancing. Current terms of on-lending are 20 years includingfour years of grace, interest is 11%.

B. Additional Capital Investment

Local Currency

Provided by GOP and added to Capital-at-Charge.

Foreign Currency

Provided by GOP. PR pays the local currency equivalent ofinterest. Then, as the principal is repaid, an equivalent sumis added to PR's Capital-at-Charge attracting a liability todividend in perpetuity.

Fixed Assets

3.0 Fixed assets registers were made for assets as at July 1, 1973 andupdated at July 1, 1976 and again in 1979 and valued at current replacement

-51-

ANNEX 4Page 2 of 3

costs. The exercise was done according to methods designed by consultants,Booz Hamilton and Co. in 1968. The work was reviewed in 1978 by consultantsSOFRERAIL as part of the Costing and Tariff Study. Between the years whenassets are methodically revalued, the charge for depreciation is increasedannually by indexing.

The Improvement Fund

4.0 The Fund is used to finance minor capital works on Public andPassenger Amenities, Staff Welfare, Unremunerative Projects Research andDevelopment. The Fund is financed by an appropriation of 5.5% from theearnings from passenger fares.

Assumptions for Future Years

5.0 Revised estimates for FY81/82 are used as the base year. Passengertraffic measured in passenger/kms is assumed to increase at 2.75% annually.This is lower than the actual growth rate of the last ten years but is pru-dent in view of the measures proposed to reduce some unpopular passengerservices and to maintain fares at levels at least sufficient to cover thevariable costs of operation.

Freight Revenues

6.0 1978/79 was PR's best year, with 8,455 million ton/kms of revenueearning freight. Traffic is assumed to fall to 7,500 in FY81/82, and toincrease slowly to 8,250 million ton/kms in 1985/86.

Costs

7.0 Operating expenses are based on the price levels of 1981, increased

by 10% per annum for estimated inflation. Fuel consumption is assumed to bedirectly variable with tons/kms and passenger/kms. Labor costs assume noincrease in staff strengths.

Net Operating Surplus/Loss

8.0 Any loss will be met by payments from GOP. A surplus in a future

year will be applied to repaying any amounts of unpaid debt service and thento either a dividend on Capital-at-Charge or a contribution to ReplacementCapital Expenditure.

Dividend on Capital-at-Charge

9.0 At July 1981, the Capital-at-Charge was Rupees 4,369 million; thefull amount of dividend for 1981/82 is Rs 225 million.

-52-

ANNEX 4Page 3 of 3

Changes in Costs and Revenue

10.0 The year-by-year changes and the relative importance of cost itemsare shown in Table 15. The ratios between the 4 main elements of cost are:

Actual for 1980/81 Estimated for 1985/86

Fuel 27% 28Labor 42% 40Material 19% 21Other 11% 11

Balance Statements

11.0 As PR maintains its accounts on a Revenue and Expenditure Basis,balance statements of the normal commercial type are not prepared.

Proportions of Fixed and Variable Costs

12.0 For 1980/81, PR estimates the proportions of expenses for passengerand freight service to be:

Total Expenses Attributable to

Passenger Services Freight Services

100 59% 41%of whichVariable Costs 70%Fixed Costs 30%

The passenger share of total expenses is assumed to decline to 53% in FY86due to the diversion of resources to freight.

ElF.VCENTH RAIlWAY PROJECT

PR's F:reight 'raffic hR Commoodities from 1969/70 to 1980/81

1969/70 1_ 196/77 191//78 - 198/78 1929/80 1980/81T TK AD T TK AR T TK AT) T TK AD TK AR T TK AD

Wheat 1,305 724.2 555 1,128 610.3 541 1,423 1,347.2 947 2,069 2,376.1 1,146 1,149 1,012.5 881 809 583.1 721Rice and Paddy 706 505.9 716 625 509.4 815 329 794.1 958 1,005 996.6 992 754 722,2 958 539 529.4 982Other Grains 162 121.9 751 54 38.6 715 20 13.7 635 15 10.1 673 11 8.4 764 10 10.4 991Sugar and SRgarnano I00 48.4 486 268 100.1 374 178 67.0 376 196 91.0 669 211 202.7 961 171 143.9 842Timber and Firewood 609 221.0 364 438 160.5 366 406 156.4 385 351 139.7 398 414 169.7 410 434 172.7 398Coal and Coke 984 894.6 911 471 486.3 1,033 390 425.1 1,090 333 371.1 1,114 328 380.6 1,157 361 432.6 1,199P.O.L. 759 803.2 1,057 1,629 1,686.7 1.035 1,613 i,.'84.5 1,106 1,514 1,752.8 1,156 1,680 1,880.4 1,119 1,561 1,675.5 1,073Ce-ent 1.113 333.3 299 958 485.4 423 9Z2 231.6 3.36 472 230.0 487 792 526.4 664 784 561.4 716F-rtilizer 988 709.8 719 856 633.3 740 709 596.5 841 691 668.8 968 977 785.5 847 1,081 875.5 810Iron and Steel 228 257.8 1,133 104 36.1 347 94 84.2 896 71 53.9 759 38 43 1,132 34 42.0 1,235 5Other Co-mdities 3,974 2,248.4 566 2,955 2,126.6 720 2,846 2,020.3 713 2,417 1,765.1 730 2,471 1,824.2 738 3,369 2,884.0 856Total Reseoue Earning Traffic 1, 928 6,870.5 629 9,486 6,793.3 716 9,428 7,570.f 883 9,074 8,455.2 932 8,775 7,555.6 861 9,153 7,910.5 864PR Traffi 1,598 769.3 505 4,882 1,063.4 218 3,916 976.6 249 884 919.5 319 3,078 1,042.9 339 3,041 891.2 30?Total Traffic 12,526 7,639.8 651 14,368 7,856.7 547 13,344 8,547.2 640 11,958 9,374.7 784 11,853 8,598.5 725 12,194 8.801.7 722

Notes: T= Metric Tons (000)TK- Metric Ton Kil.oeters (000,000)ADS Average Distaner (khs)

Source: Pakistan Railways and Appraisal Mission

March 1982

PAKISTAN

ELEVENTH RAILWAY PROJECT

PR's Passenger Traffic from 1959/60-1980/81

1959/60 1969/70 1975/76 1976/77 1977/78 1978/79 1979/80 1980/81

I. Passengers (millions)

Upper Class - n.a. 0.5 0.5 0.4 0.2 0.2 0.2 0.2First Class - n.a. 5.7 6.1 4.9 5.0 5.4 4.6 3.8Second Class - n.a. 125.7 140.7 137.2 143.8 140.4 138.9 119.2Total 121.1 131.9 147.3 142.6 149.0 146.0 143.7 123.2

II. Passenger - Kms(millions)

Upper Class -/ n.a. n.a. 265 265 122 107 161 205First Class n.a. n.a. 1,265 1,137 1,434 1,868 1,747 1,637Second Class - n.a. n.a. 11,426 11,797 13,819 14,737 15,407 14,469Total 8,894 9,842 12,956 13,199 15,375 16,712 17,315 16,311

JII. Average Travel Distance(Kms)

I/Upper Class - n.a. n.a. 542 602 626 634 765 823First Class n.a. n.a. 206 230 290 349 380 435Second Class - n.a. n.a. 81 86 96 105 111 121All Passengers 73 75 88 93 103 114 121 132

1/ As of 1978/79, "upper class" includes both ACC and upper class services. Up to and including1977/78, "upper class" includes ACC, upper class and the old first class services; "first class"is the old second class; and "second class" is the old third class.

Source: Pakistan Railways and Appraisal Mission

March 1982

PAKISTAN

ELEVENTH RAILWAY PROJECT

PR's Staff by Department and Category as of July 1, 1981

Civil Mech. Trans- Head All

Eneg. Engg. ort ation Commercial Stores Medical Electrical Police Accounts Quarters Other Total

D. S. Lahore 4,818 6,257 3,395 2,030 - 559 1,301 - - - 609 18,969

D. S. Multan 5,704 3,394 2,957 1,586 - 418 632 - - - 69 14,760

D. S. Sukkur 5,444 2,913 2,616 1,184 - 386 557 - - - 139 13,239

D. S. Karachi 4,568 6,657 3,632 2,105 - 756 838 - - - 295 18,851

D. S. Rawalpindi 5,003 7,464 4,242 1,661 - 606 1,082 - - - - 20,058

D. S. Ouetta 2,889 2,011 1,080 260 - 345 299 - - - 6 6,889

D. S. Workshops 306 14,153 - - - 228 2,624 - - - - 17,311

D. C. 0. S. (Main Depot)MGPR - - - - 1,992 - - - - - - 1,992

D. C. 0. S. (Shop Depot)MGPR - - - - 1,135 - - - - - - 1,135

D. C. 0. S. Karachi Cantt. - - - - 1,544 - - - - - - 1,544

A. W. M. Signal Shop 70 - - - - - - - 70

A. W. M. (Bridge) Jhelum 47 - - - _ - - - 47

F,A. & C.A.O. (GB) - - - - - 2,619 - - 2,619

Principal Walton Training

School - - 100 - - - - - 100

X.E.N. Water Supply Lahore 191 - - - - - - - 191

X.E.N. Bridge Lahore - 301 - - - - - - - - - 301

Track Supply Officer

Lahore 42 - - - - - - - - - - 42

S.A.O./ADMN-II (E-III) 507 126 351 505 496 28 31 - - 1,196 100 3,340

S.P.O.I. (Officers only) - - - - - - - - - - -

Supdts. W&W Walton - - - - - - - 118 - - - 118

M.S. Cairns Hospital - - - - - 31-6 - - - - - 316

X.E.N. (Track Field) 42 - - - _ - - - - - 42

X.E.N.(CSF) Sukkut 14 - - - - - - - - - 14

ADMN/ET - - - - - - 12 - - - - 12

ADMN/Elec. Division - - - - - - 6 - - - - 6

ADMN/Div. Engg. - - - - - - - - - - -

I.G.Police - - - - - - - 7,738 - - - 7,738

TOTAL 29,645 43.276 13,373 9,331 5,167 3,647 7,361 7,856 2,619 1,196 1,218 129,704

Source: Pakistan Railways

March 1982

-56-

Table 4

PAKISTAN

ELEVENTH RAILWAY PROJECT

Inventory of PR Track

Double Track ElectrifiedRoute-Kms Route Kms_ Route Kms

Broad Gauge 7,766 1,018 283Meter Gauge 446 -Narrow Gauge 611 -_

Total 8,823 1,018 283

Transportation CommercialRunning Track Siding Siding Total

Broad Gauge 8,917 2,260 148 11,325Meter Gauge 445 98 10 553Narrow Gauge 642 77 10 729

Total 10,004 2,435 168 12,607

Notes:

1. Route-Kms represents the kilometerage centre to centreof stations. It does not include the kilometerage ofmultiple lines, yards, sidings etc.

2. Track-Kms include all tracks in multiple lines, yards,sidings etc.

Source: Pakistan Railways

May 1982

PAKTI STAl

ELEVENTH RAILWAY PROJECf

Tetory o lotl-e Power and Rolling Stock (Actual N-labcrs)

Inumbers an oP June 30, 1081

Stean Lorunntives Diesel Eiectrig Electric DIe-el Tralleed Ceachiger_________ _______ Enohiug Othe Enechieg Freight We u_ocootives Lacumntisves Reilcats Vehicles Vehcles 4 Wheelers nge

T81 474 29 46 124 2,061 691 31,643 3,097

Mule Lice Branch Line Shunter Main Line Branch Line ihunter

Lens than 20 yearn - - -

Stean Bet. 21 end 40 year 67 -

Over 41 years - 159 155

Le.s than 10 years T19 85 6

Diesel Bet. 11 aed 20 yearn 103 53 5 33 88

3et. 21 and 30 yearn 62 25 13 10 36Over 31 yearn 3 3

Leoo thae 10 ypoemElectric Bet. 11 and 20 years 29

Bet. 21 and 30 yearsSuer 31 years

AGE ACE 2h5~L . h- 1 7 - 6 39 h38 554Lges thee 10 yearn 567 13 25,535 2,299

passenger Bet. 11 aud 40 years 485 117 1 330 -

Carriern Bvet 45 yendA 241 352 4,140 244

Less than 10 yearnFreight Bet. 11 and 40 yearsWSains Bet. 41 and 45 years

Over 45 yearn

l-ea thee 10 t-neCarrying Bet. 11 and 15 tensCapacity Bet. Ih and 20 tans

uf Bet. 21 and 25 tensFreight Bet. 26 and 30 tons n1,643Waguns Bet. 31 aad 35 tons

Bet. 36 eed 40 toan 103

See. 41 dand 45 tensI,7BRt. 46 and 50 tnns 368

Over 51 tans

I/ Figures te arrived at by recokning each vehicle an one

nnhur, lrmespective of the nine af diese- 1ailcars2/ EncIuding brake oaua, deperteenstl wagons, special wagone

_nd privately-owned -agons

3/ Inclndes 40 re-engRoed anita

4/ Includes 2 re-engined -nits

-5g-

taibleSPage 2 of 3

el | , en j t t t R ~0,-' ' N'O J

0.10~~~~~~~~~~~~~~~~ N N 4

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Nc I0e

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o ~ ~ a a w a ~ O e a wa a a a C

04 al. gtN a. N o . a . o-a

NO 4 0 40 O N N O ON N N 0

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a, a a a a a , o t a a a a 0

aw C , w N a , t o . a o o e a -

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01,=l~~~~~~~ I

a o aI ,. ._ a , -- 0a-v- 0

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o~~~~C I -Ir

PAKISTAN

FLEVENTH RAILWAY PROJECT

levee' cry of Motive Power cod Roiling Stock (Actoal Nuombrs)

Narrow Gauge Lines

Nohbers as_of Jone 30, 1981

Steam Locomotives Etese Eletriange Other Freight WagonsElectric iesel Coahin Coaching h4hees Bge

Locomotives Locomotives Railcars Vehirles Vehicles

Total in fleet 381 474 107 45 100 419

Main l.ine Brsnch Lice hoter M.iv ice r Le hcter

Less then 20 yearsSteam Bet. 21 and 40 years

Over 41 yeace

Less than 10 yearsDiesel Bet. 11 and 20 years

Bet. 21 and 30 yearsOver 31 years

Less than 10 yearsElectric Bet. 11 and 20 years

Bet. 21 and 30 yearsOver 31 years

AGELess than 10 years

Parsenger Bet. 11 and 40 yearsCoach Bet. 41 and 45 years 3

Over 46 years 104 45

Lens thee 10 year.s -

Freight Bet. 11 sod 40 years - 25

Wagons Bet. 41 and 45 yearsOver 45 years 95 394

Carrying Less thee 10 tonsCapacity Bet. 11 and 25 tons

ofFreightWagons

Source: Fakistan Railways and Appraisal Mission

March 1982

PAKISTAN

ELEVENTH RAILWAY PROJECT

Diesel Locomotive Fleet - Age Class and Manufacturer

COUNTRY TOTAL

OF ON

CLASSES MANUFACTURERS 1947 1954 1955 1956 1957 1958 1959 1961 1962 1963 1964 1965 1966 1967 1970 1975 1976 _1977 1979 1980 1981 LINE

ADE-36 U.S.A., 3 3

ALU-14 U.S.A. 7 _____7

GEU-61 U.S.A. 10 _____ 10

FAU-66 FRANCE 3 3 _

CLP-15 AUSTRALIA 8 1 ____ ___ ___ _ _ _ _ 9

ALPW-16 U.S.A. 2 _____ _2

ALPIq-18 U.S.A. 4 ___ _3

ATRU-95 U.S.A. ____ 16 9 25___ 25

ALU-18 I.S.A. 30 __ 30

ALU-12 U.S.A. 11 4 2 -- -- ___53_

ALU-20 U.S.A. 12 30 10 52

GEU-64 U.S.A. ________ ___ _ _ __

ALU-26 U.S.A. I_

ALU-24 U.S.A. 2__ _ ___ __ __ _ __ 20 _ _ _ _30 __ _ __ 20

GEU-20 U.S.A. 42 42

GEU-15 U.S.A. 23,1_ _ 3 __30 73_ 23 15 _6 _ I 3 _0 _ 23

GM10-30 U.S.A. _ ______36 ____36

Gm115-15 U.S.A. ________32 __ __ __ 32

*ARP-20 U.S.A. ___ ________- ___- 2 19 - 2 2___ 23

*ARU-20 U.S.A. I__ _____ ___ 11 6 19

*FRU.75 FRANCE _ _ _ ____ _____1 1 __ _ 2

GMCU-15 CANADA ______30 ___ 0

qAUl-- I JAPAN 44

TLOTAL_ 3 10 15 3 3 59 9 30 23 72 10 5 1 20 65 68 1 3 50 18 6 47

* Re-engined Utnits - Canadian MU1W engines.

Source: Pakistan Railways

March 1982

-61-

Table 7

PAKISTAN

ELEVENTH RAILWAY PROJECT

Selected Operating Statistics (1975/76-1980/81)

1975-76 1976-77 1977-78 1978-79 1979-80 1980-81System

Total route (km) 8,311 8,815 8,815 8,815 8,323 8,823Total staff (000) 137.5 140.0 139.8 139.3 132.3 130.3

Traffic

Passengers -total (million) 147 143 149 146 144 123Metropolitan 42 41 44 46 43 38Non-metropolitan 105 102 105 100 101 85Pass-km-total (million) 12,957 13,199 15,375 16,713 17,316 16,311Average journey (km) 87.9 92.6 103.2 114.0 120.0 132.4Net paying tons (million 10.1 9.49 9.43 9.08 8.78 9.15Net paying ton-km (million) 7,890 6,794 7,581 8,455 7,556 7,911Average haul (km) 594 547 640 784 725 722Total gross ton-km (million) B.C. 33,264 28,999 32,381 33,434 32,572 31,681Loaded freight car-km (million) 453.4 385.7 425.4 473.1 421.4 384.8Empty freight car-km (million) 273.6 223.3 284.6 293.3 301.3 295.9

Traffic Density

Pass.km/route km (thousand) 1,471 1,497 1,744 1,896 1,964 1,849Freight-net ton-km/route km (thousand) 1,056 891 971 1,063 976 897

Operations

Train-km-passengers (million) 33.6 33.7 34.9 34.7 34.9 35.5Train-km-freight (million) 14.5 12.3 14.0 14.8 14.1 13.5Train-km-total (million) 48.1 46.0 48.9 49.5 49.0 49.0Loco-km-steam (million) 15.2 13.6 14.3 14.0 13.7 13.0Loco-km-diesel (million) 41.0 42.7 42.7 48.6 43.3 44.2Loco-km-electric (million) 3.52 3.54 3.87 3.64 3.65 3.45

Operating Efficiency (Freight)

Gross ton-km/train km (B.G.) 1,297.6 1,307.4 1,200.0 1,304.4 1,269.5 1,252.5Net ton-km/train km (B.G.) 618 647 616 647 604 591Net ton-km/loaded car km (B.G.) 19.4 20.1 19.9 20.0 19.8 20.0Car turnaround time (days) 16.1 17.2 15.6 15.5 14.9 14.7Average speed (km/h) 18.3 17.7 17.5 17.5 17.6 18.2Traffic units/employee (thousand) 254.7 241.6 278.9 307.2 326.7 311.1

Availability

Steam locomotives (X) 83.3 80.5 85.1 84.0 82.7 83.4Diesel locomotives (%) l/ 84.2 88.1 82.4 83.6 84.7 84.7Electric locomotives (X) 91.3 88.7 88.4 86.3 82.6 81.7Freight cars (%) 94.7 94.4 94.2 95.2 94.6 92.8Passenger cars (1) 80.4 81.0 73.3 76.7 78.7 79.2

1/ These figures do not reflect reliability and overstateactual availability by not reflecting such factors asabout 250 traction motors being inoperative on theavailable units.

Source: Pakistan Railways

March 1982

IA 'K l U I \.

ELEVENTlH RArLW PROJECT

Medin-Term lan 1981/82-1983-84 and the Pro-,ct I/

(Rn Million)

Serial Total 1911 82 1982 83 1_ 983-34 _ __ 1984-85No. Descripilao 1it Qu.aniltr Loc.al I .1. Tota1l O>uanoto I .otai ''.i. o1°L_ Ooti- l,oc-l, F.C. l. oIa loa-i local P.E. Total O tL Local FE. Tota

1. Socv ronstruct_no

Coo--rsio-o f Marilodoas-Bansol Soc. - - 5.88 5 .00 4.87 - 4.5 .13 .13

Sobtotal I 5.88 - 5.36 - 4.87 - 4. e- 13 .1 3

71. Tr.ack RahbiLltatLon

(a) Conploto Track-- l lHR-KYC MiIs 180 389.40 185.(8 574.40 60 129.40 3S.00 184.4' 60 125.00 68.00 185.00 60 135.00 70.00 205.00

(b) Cooplote Trackoooooal Ll.M-PSC Miles 30 154.20 28.60 182.80 10 49.20 3.60 57.8' 10 50.80 10.00 60.00 10 55.00 10.00 65.00

(r) Rall e-a MIlos 60 40.41 . 12.55 52.96 20 10.41 2.55 12.9t 20 15.80 5.00 20.00 20 1.80 5.80 20.T00

(dl Sloopeor renewalMaie l.ioi MIles 60 28.70 21.60 50.30 20 8.70 11.60 20.30 20 10.00 5.88 15,80 20 10.08 8.88 13.00

In) Sleeper resnealISoccodary Lino Mil-s 180 39.69 41.69 31.38 60 5.69 13.69 19.3' 60 13.00 14.80 27.00 60 21.00 14.00 35.00

(I) Pointr & XiRgs-ad Rail Anchors Varlo-s - 01.20 24.58 _65.78 V-rio_s 18.20 11.58 3 V.., RirLos 9.00 _ 6.00 15.00 - 14 .8 £00 7,20, 0

Sabtotal II 693.60 314.02 1007.62 - 221.62 104.02 325.6 - 222.00 100.00 322.00 2 750.00 110.80 360.00

III. Brdidoe Work k Cioil_ng�ieengcl Works

(a) Bridge works - - 13.00 - 23.80 0 6.75 - 6.75 - 8.00 - 8.00 - 8.25 8.25

(b) Cioil EsRi-oooiogWorks - 52.00 - 52.00 - 18.00 - 18.0'. - 17.00 - 17.00 - 17.00 - 17.00

SObtotal III 79.00 75.08 24.75 - 24.75 25.00 - 25.00 25.25 - 25.25

IV. Marskalling Ya-dat Pipri No. 1 4.75 5.00 9.75 - 0.75 0.00 9.7. - - -

V. 1.ine Capacity Works Te-r-nal FPolLitis

(a) Isc doobl ihg(Kotoi-Hyd.ra.bd) KR 1.6 3.80 - 3.00 - 3.00 3.3(

(b) Othor 00 40100 corhs 0.0i060 - 30.O0 - 30.00 V-ario 8.(8 - 81.( Rarious 10.00 - 10.00 Var-ois 12.00 - 12.00

Ic) Lahor- Dry Port Z./ No. 1 44.30 28.00 77.30 - 1.30 - 1.31 26.00 19.00 45.00 - 17.00 9.00 26.00

(d) 1il Yard atMahoud Kot, 2.00 2_.0 - 2.00 2.41,

Sbob-tol V 79.10 28.00 107.33) 14 301 - 14 . 1, _ 36.00 19.00 55.00 29.00 9.2( 78.00

v] . ()To 1---iatslot iooVl. ( co TeLelased sicoollkco - Ranun 277. 90 2880 567.90 - 165.90 148.00 313.9( - 70.00 130.00 200.00 44.00 10.30 54.00

(b) Inproo.d nigoallog - VarRosa 65.00 35.00 100.00 r 9.00 5.00 14.00 - 26.00 18.80 36.00 20.0( 50.08 tse'

Subtoral VI 344.90 323.00 667.90 174.90 153.00 327.9( 96.00 140,00 236.00 74.00 30.00 104.00

PAIISTAN

ELLVPRTR RA[LWAY PROJECT

Medim-Term Plan 1981/8.-1983/84 and the Project 1,

(Re MRllion)

Iot.>l 1031 8 1-_95-3 I93-R84 _1984-85 .. .

No. Q. c±toI Qa I. r F Ttll c0--ti' I , I( F(= l- I ''-t I i .f I,,,I 0.3F. I,1 Qoartity Local F.E. Total

V11 MloLl-c P-wet & Roll- StReoce

' 1) I_oti-

R--engi,elio n D.1.

Lo .. oti-o N". 611 '0.03 '1.00 9 T 00 - 10.1n 10.00 2.10 - 10.0 10.0 'OO (_

lopmotcosNT p oo.cc 10.00) 52)00 - O0T 2010 3li.1 - I.0 ccl c' 10 -Onc 200.30n 043.O3

i} P i>(uaoll o . No 13 191.00 '170.00 56'.00 - 51.10 SC0.3On 1136.3 -_ ' cn no 00 .00.00 - 16.0c TO 1( 'h 26.(

Pctomo t oeo D.E.IV) -oce-o N-. 00 5cn1 65.00 70.02 - .I .01 - Ti - .01 - 0.01 65(cn 70.nn

v .) Uit ExchAoge Pool - - 69.00 138.00 207.00 - - - - 18.Q0 45.00 b3.00 - 18.00 45.00 63.00 - 33.90 48.000 03100

(b) OIlleoc 81001)

i) Ncw Poc-e-g-rCarr-,oo- N . 010 4iT.8O :15. 0n 700.80 145. W0 75.00 2)0.83 - 165.0( 75.00 .'40.00 - 165 GO 75.00 230.00

ii) llOppoC T-ruck NS. 430 88.60 11.40 100.00 ) c 33.10 00.00 50 18.60 11.40 50.00 130 20.00 - 20.00

iTil Container l,oo-c NL. 100 34.03 '6.0( (.0.00 - - 2 T 0.00 30.00 - '04.0 6.00 30.00

SOihbotal VII iL.O.O 0184.40 2267.80 252.01 216.90 469.41 413.70 541.40 955.10 301.00 301.00 392.00 00.00 40 00 01.00

\ I . P &lo M-chinerT tcrW-rkshop,, Shodt _ad_rp))LO

In) Ploot b Rophieory No. Varioun ! .00 48.00 75.00 - 15.00 23.00 n '0 00 - 4.00 8.oc 12.00 - 8.00 16.00

(b) Otrocoro 'cke - --k - 1.0 - . - _ 0.03 3 8.00 - 10.00 - I3. o - 1. 03 - 13.00

Ic) F-celiti-s foc -Cc--

factorloo of D.E.I.ocomoLive romponent6 ~ 187.10 149.90 337.0 _ - - 28.00 20.00 48.00 - 60.00 56.00 116.00 0q.10 73.00 170.5n

Slihtotal VIII 245.10 197.90 443.00 23.00 '.0 470.00 42.00 28.00 70.00 81.00 72.00 153.00 99.10 73. 9( '730.0

IX. Ocproveoet n Rrrkcog*ne-t- - - 15.20 10.80 c0.00 - .70 1.80 1'.50 - 4.0( 8.00 12.00 - 10.00 5.00 15.50

X. T-echo,-l OeeTe1oec - - 04.0 26.00 40.00 - - - 1.50 - 4.00 0.00 13.00 - 5.00 7.50 12.50 5.00 6.00 11.00

IT. Plc tolcal Po-l' rte - - 10. S .00 25.00 - 6.33O I .i00 7.50 - 6.50 2.00 0.50 - 6.00 3.00 9.00)

011. ManaRgment Information System - - 30.00 55.50 85.50 -- - 11.00 19.00 30.00 - 15.00 25.00 40.00 4.00 11.50 15.50

GRA_ND TOTAL 2609.25 2154.62 4763.87 - 3,.40 O1..0 1269.S0 860.20166. 40 1726.60 871.80 662.50 1549.30 05.50 169.40 264.90

1/ Based on Jose 1981 prioes, foloding Iontlngeeoiea in ocodane-with PR oode. Als, the proposed 1noo=oti-e -aosfaotoring planthas be-e e-oloded.

2/ Civil wo-ks and handling equip=eet

S-orc: PR and Appra-isl Mission

elan 1982

-64- Table 9

PAKISTAN

ELEVENTH RAILWAY PROJECT

Maintenance Modernization - Cost Estimate Details 1/

(Rupees Million)

Local Foreign Total

1. CDLW (Rawalpindi)

a. Plant and Machinery 26.7 134.8 161.5b. Civil Works 77.5 - 77.5c. Taxes and Duties 67.4 - 67.4

Sub-Total I 171.6 134.8 306.4

2. Karachi Base Shed

a. Plant and Machinery - 3.5 3.5b. Civil Works 3.1 - 3.1c. Taxes and Duties 1.8 - 1.8

Sub-Total II 4.9 3.5 8.4

3. Unit Exchange Components Pool

a. Components - 142.0 142.0

b. Taxes and duties 56.9 - 56.9Sub-Total III 56.9 142.0 198.9

4. Quality Control Equipment

a. Test Equipment 4.1 7.4 11.5

b. Taxes and Duties 3.7 - 3.7Sub-Total IV 7.8 7.4 15.2

5. Component Transport Equipment

a. Wagons and Containers 3.0 5.7 8.7b. Racks 3.0 - 3.0c. Duties and Taxes 2.9 - 2.9

Sub-Total V 8.9 5.7 14.6

6. Training and Technical Assistance

a. Training 2.1 2.2 4.3b. Technical Assistance 1.1 2.0 3.1

Sub-Total VI 3.2 4.2 7.4

Total 1-6 253.3 297.6 550.8

7. Revenue Spares

a. Spares - 318.2 318.2

b. Taxes and Duties 127.3 - 127.3Sub-Total VII 127.3 318.2 445.5

GRAND TOTAL 380.6 615.8 996.4

1/ Not including contingencies (see Table 12)

Source: Pakistan Railways and Appraisal Mission

May 1982

-65-Table 10

PAKISTAN

ELEVENTH RAILWAY PROJECT

Unit Exchange Pool: List of Components and Cost Estimates 1/

Recommended CostDescription Number Estimate

(Rupees Million)

1. Diesel Engine 10 32.012. Traction 11 10.273. Traction Motor 66 21.854. Turbo Super Charger 76 19.995. Air Compressor and Exhauster 32 3.646. Truck less Traction Motor 18 6.977. Aux: Generator 8 0.478. Aux Exciter 14 1.429. After Cooler 13 0.4310. Engineer Governor 12 0.3711. Lube Oil Pump 18 0.6912. Water Pump 30 1.4613. Radiator 45 5.5414. Lube Oil Cooler 28 1.5915. Traction Motor Blower 37 1.4216. Fuel Pump with Motor 35 0.4117. Crank Case with Motor 13 0.1918. Wheel Axle with Gear 167 10.5919. Fuel Injection Pump 293 1.8520. Fuel Injection Nozzle 322 0.7821. Eddy Clutch Gear Unit 8 0.8422. Exhaust Manifold 29 1.8523. Power Assembly Complete 354 17.48

TOTAL 142.11

Taxes and Duties 56.84

GRAND TOTAL 198.95

1/ Not including contingencis (see Table 12)

Source: Pakistan Railways and Appraisal Mission

May 1982

-66- Table 11

PAKISTAN

ELEVENTH RAILWAY PROJECT

Cost Estimates for Containerization Component 1/

(Rupees Million)

Local Foreign Total

1. Civil and Electrical Works

a. Land (three-year lease) 6.93 - 6.93b. Structural Works 38.38 1.20 39.58c. Track Work 4.39 - 4.39

Subtotal 49.70 1.20 50.90

2. Equipment

a. Fork Lift - 35 ton, I No. 0.35 5.70 6.05b. Yard Tractor, 3 Nos. 0.35 1.71 2.06c. Chassis, 36 Nos. 0.49 4.20 4.69d. Fork Lift for Shed, 10 Nos. 0.76 2.80 3.56e. Wagon Mover 0.35 1.43 1.78

Subtotal 2.30 15.84 18.14

3. Rolling Stock

a. Modify Containers

i. 60 flat wagons 1.20 - 1.20ii. 100 special container

flat wagons 24.30 28.30 52.60

Subtotal 25.50 28.30 53.80

4. Technical Assistance 1.20 2.30 3.50

Subtotal 1.20 2.30 3.50

Taxes and Duties 22.70 - 22.70

Subtotal 22.70 - 22.70

GRAND TOTAL 101.40 47.60 149.00

1/ Not including contingencies (see Table 12)

Source: Pakistan Railways and Appraisal Mission

May 1982

-67-Table 12

PAKISTAN

ELEVENTH RAILWAY PROJECT

Summary of Project Cost Estimates

__---- Rs Million -------- ___-------US$ Million--------------

ProposedI. Maintenance Improvements Local Foreign Total Local Foreign Total Credit

1. CDLW

a. Plant and Machinery 26.7 134.8 161.5 2.5 12.8 15.3 12.8b. Civil and Electrical Works 77.5 - 77.5 7.4 - 7.4 -c. quality Control Equipment 4.1 7.4 11.5 0.4 0.7 1.1 0.7d. Component Transport Equipment 6.0 5.7 11.7 0.6 0.5 1.1 0.5

2. Karachi Shed 3.1 3.5 6.6 0.3 0.3 0.6 0.33. Technical Advisory and Training 3.2 4.2 7.4 0.3 0.4 0.7 0.74. Unit Exchange Components - 142.1 142.1 - 13.5 13.5 13.55. Taxes and Duties 132.5 - 146.8 12.6 _ 12.6 -

Sub Total I 253.1 297.7 550.8 24.1 28.2 52.3 28.5

II. Management Information System

1. Data Network 5.8 12.5 18.3 0.6 1.2 1.8 1.22. Hardware 22.0 39.6 61.6 2.1 3.7 5.8 3.73. Software 6.9 11.3 18.2 0.6 1.1 1.7 1.14. Technical Advisory 1.2 3.4 4.4 0.1 0.3 0.4 0.45. Training 2.1 5.3 7.4 0.2 0.5 0.7 0.76. Taxes and Duties 31.7 - 31.7 3.0 - 3.0 -

Sub Total II 69.7 71.9 141.6 6.6 6.8 13.4 7.1

III. Containerization

1, Container and CargoHandling Equipment 2.3 15.8 18.1 0.2 1.5 1.7 1.5

2. Civil and Electrical Works 49.7 1.2 50.9 4.7 0.1 4.8 0.13. Rolling Stock Modification (60) 1.2 - 1.2 0.1 - 0.1 -4. Rolling Stock Purchase (100) 24.3 28.3 52.6 2.3 2.7 5.0 2.75. Technical Advisory 1/ 1.2 2.3 3.5 0.1 0.2 0.3 0.36. Taxes and Duties 22.7 - 22.7 2.2 - 2.2 -

Sub Total III 101.4 47.6 149.0 9.6 4.5 14.1 4.6

IV. Technical Advisory and Training

1. Maintenance and Operations 1.1 2.1 3.2 0.1 0.2 0.3 0.32. Costing Cell 1.1 1.1 2.2 0.1 0.1 0.2 0.23. Electrification Study 7.4 3.2 10.6 0.7 0.3 1.0 1.0

Sub Total IV 9.6 6.4 16.0 0.9 0.6 1.5 1.5

V. Contingencies

1. Physical 13.2 - 13.2 1.3 - 1.3 -

2. Price 20.0 57.3 77.3 1.9 5.4 7.3 3.3

Sub Total V 33.2 57.3 90.5 3.2 5.4 8.6 3.3

TOTAL T-V 467.0 480.9 947.9 44.5 45.8 90.3 45.0

VI. Revenue Spares

1. Spares - 318.2 318.2 - 30.3 30.3 5.02. Taxes and Duties 127.3 - 127.3 12.1 - 12.1 _

Sub Total VI 127.3 318.2 445.5 12.1 30.3 42.4 5.0

GRAND TOTAL 594.3 799.1 1,393.4 56.6 76.1 132.7 50.0

1/ Includes assistance to KPT for container yard information system

Source: Pakistan Railways and Appraisal Mission

May 1982

-68-

Table 13

PAKISTAN

ELEVENTH RAILWAY PROJECT

Estimated Schedule of Disbursements

IBRD Fiscal Year Cumulative Disbursementand Quarter at End of Quarter

US$ Million

1982/83

December 31, 1982 1.3March 31, 1983 2.3June 30, 1983 4.5

1983/84

September 30, 1983 8.5December 31, 1983 13.0March 31, 1984 19.0June 30, 1984 27.0

1984/85

September 30, 1984 33.5December 31, 1984 40.0March 31, 1985 44.0June 30, 1985 46.5

1985/86

September 30, 1985 48.5December 31, 1985 50.0

Principal Assumption: Effective date of credit, not laterthan October 1, 1982

Source: Appraisal Mission

May 1982

PAKISTAN

ELEVENTH RAILWAY PROJECT

Economic Evaluation: Unit Exchange System, Management Information System, Technical Assistance and Training

(US$ million)

1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97

Economic Costs

Unit Exchange System

Capital Cost 23.48 39.14 15.66Operating Cost 1.31 2.62 3.93 3.93 3.93 3.93 3.93 3.93 3.93 3.93 3.93 3.93 3.93 3.93 3.93

Management Information

System

Capital Cost 2.57 3.01 1.18Operating Cost 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.80

Technical Assistanceand Training 0.54 0.54 0.26 -

TOTAL COSTS 28.70 46.11 21.83 4.73 4.73 4.73 4.73 4.73 4.73 4.73 4.73 4.73 4.73 4.73 4.73

Economic Benefits

Reduction inlocomotive downtime - 0.79 1.57 2.36 8.99 8.99 8.99 8.99 8.99 8.99 8.99 8.99 8.99 8.99 8.99

Increased fleet-wide

availability 1.50 3.00 4.49 4.49 4.49 4.49 4.49 4.49 4.49 4.49 4.49 4.49 4.49 4.49

Reduction in numberof locomotives

awaiting spares 1.58 3.15 4.73 4.73 4.73 4.73 4.73 4.73 4.73 4.73 4.73 4.73 4.73 4.73

Utilization ofincreased tractive

effort 3.70 7.41 11.12 4.49 4.49 4.49 4.49 4.49 4.49 4.49 4.49 4.49 4.49 4.49

TOTAL BENEFITS - 7.57 15.13 22.70 22.70 22.70 22.70 22.70 22.70 22.70 22.70 22.70 22.70 22.70 22.70

NET ECONOMIC BENEFITS (28.70) (38.51) (6.23) 17.97 17.97 17.97 17.97 17.97 17.97 17.97 17.97 17.97 17.97 17.97 17.97

The Estimated Economic Rate of Return is: 17%

Source: Pakistan Railways and Appraisal Mission

March 1982

PAKISTAN

ELEVENTH RAILWAY PROJECT

Economic Evaluation: Container Rail Operation

1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97

TEUs handled atKarachi Port 50,000 60,000 70,000 80,000 92,000 106,000 122,000 1/ 1/ 1/ 1! 1/ 1/ 1/ 1/

TEUs handled atLahore Dry Port 2,000 4,200 7,700 12,000 18,400 26,500 36,400 36,400 36,400 36,400 36,400 36,400 36,400 36,400 36,400

(as % of those handledat Karachi Port) 4% 7% 11% 15% 20% 25% 30% 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/

Economic Costs(US$ million)

Capital Investment 6.90 3.07 0.98

Operating Costs 0.22 0.46 0.84 1.31 2.01 2.89 3.97 3.97 3.97 3.97 3.97 3.97 3.97 3.97 3.97

Total Costs 7.12 3.53 1.82 1.31 2.01 2.89 3.97 3.97 3.97 3.97 3.97 3.97 3.97 3.97 3.97

Economic Benefit$(US$ million) 0.55 1.15 2.11 3.29 5.04 7.26 9.97 9.97 9.97 9.97 9.97 9.97 9.97 9.97 9.97

NET ECONOMIC BENEFITS

(US$ million) (6.57) (2.38) 0.29 1.98 3.03 4.37 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00

The estimated Economic Rate of Return is 29%

1/ In year 1988/89, container traffic between Karachi and Lahore willreach the maximum amount that can be carried by the proposed investment.

Source: Pakistan Railways, Karachi Port Trust and Appraisal Mission

March 1982

-71- Table 16

PAKISTAN

ELEVENTH RAILWAY PROJECT

Revenue and Expenditure for Financial Year to June 30 for 1976/77-1980/81

(Figures in Rupees Million)

1976/77 1977/78 1978/79 1979/80 1980/81

Operating Revenue

Passengers 473.6 640.7 697.8 998.0 1,090.6Other Coaching 69.1 80.9 82.3 95.1 104.1Freight 1,152.7 1,446.0 1,458.0 1,558.0 1,700.0Sundries 31.5 27.8 32.6 26.5 35.3Miscellaneous 1.6 2.3 2.9 1.2 1.7

Total Operating Revenue 1,728.5 2,197.7 2,273.6 2,678.8 2,931.7

Operating Expenses

Fuel 342.4 376.3 457.0 678.7 814.4Labor 734.7 992.9 1,048.9 1,082.2 1,230.5Material 342.0 246.1 329.6 454.0 462.4Others 117.3 133.2 93.6 268.7 270.7

Total Working Expenses 1,536.4 1,748.5 1,929.1 2,483.6 2,778.0

Appropriation toDepreciation Reserve Fund 207.4 263.7 272.8 370.0 420.0

Total Operating Expenses 1,743.8 2,012.2 2,201.9 2,853.6 3,198.0

Net Operating Revenue (loss) (15.3) 185.5 71.7 (174.8) (266.3)

Interest on Loans 143.7 154.6 175.7 305.8 135.5

Appropriation toImprovement Fund 25.1 35.2 39.4 54.9 60.0

Dividend Paid onCapital-at-Charge 34.3 154.1 171.9 - -

Net Operating Surplus(deficit) (218.4) (158.4) (315.3) (535.5) (461.8)

Operating Ratio (percent) 101 92 97 107 109

Average Receipt perPassenger-kilometer (paisa) 3.6 4.2 4.2 5.8 6.7

Average Receipt perTon-kilometer (paisa) 14.7 16.9 15.6 18.1 21.5

Source: Pakistan Railways

March 1982

PAKISTAN

ELEVENTH RAILWAY PROJECT

Changes in Relationship of Revenues and Costs 1972 - 1982

BaseYear =100 Actuals Estimate Forecast

Revenues 1972/73 1976/77 1977/78 1978/79 1979/80 1980/81 1981/82

Passenger 100 150 203 222 317 344Coaching 100 170 199 202 234 286Freight 100 201 253 254 272 300Total 100 185 234 241 287 312

Costs

Fuel 100 221 243 295 439 527 556Labor 100 220 298 315 325 356 361Materials 100) )274 )226 )252 )430 )521 )540Other 100) ) ) ) ) ) )

Total WorkingExpenses 100 235 267 295 379 439 473

Source: PR Budget Estimates for 1981-82

March 1982

P3

PAKI STAN

ELEVENTH RAILWAY PROJECT

Passenger Fares and Costs 1972 - 1981

PR II Class PR II pass.fare fare @

Infla- charged 1972/73tion i current constantBase paisa/ price paisa/1972/73 pass. Km pass. Km

Fare Increases

1 2 Date % Note 3 4

1972/73 100.00 July 1972 20 A/C + 1st 2.50 2.50

1973/74 132.85 - _ only 2.50 1.88

1974/75 164.19 July 1974 20 3.03 1.851975/76 178.28 March 1976 20 Not 3rd (1) 3.03 1.701976/77 198.38 3.03 1.531977/78 210.92 July 1977 20 3.70 1.751978/79 225.14 3.70 1.641979/80 246.14 July 1979 20 4.40)* 1.79)*

January 1980 30 5.02) 2.04)1980/81 264.50 5.10 1.93

H

(1) Now 2nd Class mH

* Based on fares introduced on July 15, 1979 and January 17, 1980

Source: EMMAY CONSULTANTS andReport of the Experts Committee on Railways 1980

March 1982

Table 19

-74-

PAK STAN

ELEVENTH RAILWAY PROJECT

Forecasts of Revenue ard Expenditure: 1980/81 - 1985/86

(Fivures in Million Pupees)

Year Ending June 30

Actual Estimate Forecast * ******* ******* *******1979/80 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86

-'?ERATING REVENUESPASSENGERS 998.0 1091.0 1100.0 1200.0 1570.0 180(.0 2200.C

.THER SOAC4ING 95.0 104.0 125.0 140.0 200.0 250.0 270.3D=REIiGHT 1558.0 1700.0 1800.0 2750.0 2000:D.0 3400.0 3800.(

LTHER 28.0 37.0 30. C0 50.0 50.0 50.0 50 .0

T-'A. OPERATING REV.;ENUES 2979.0 2932.0 3055.0 4140.0 4820.0 5500.0 9320.0

AiMTNG EXPENSESCE_ 579.0 814.0' 8O.0 94G.0 1070.0 1302.0 1487.0

*ASCR 1082.0 1230.0 1314.0 1445.0 1590.0 1748.0 1981.0M;ATERIAL 454.0 482.0 583.0 670.0 770.0 887.0 1004.-D

. . -HER 289.0 271.0 343.0 377.0 415.0 452.0 517.0

f_lA xORKING EXPENSES 2434.0 2777.0 31C0.)0 3438.0 3845.0 4393.0 489E.0

''PR-PPRIATION TO DRF i70.0 42.0) 440.0 470.0 541. 0 S01.0 520.(D

.7A. OPERATING EXPENSES 2854.0 3197.0 3540.0 3909.0 4335.0 4554.0 580D9.0

-0T CPERATING REVENUES (LOSS) -175.0 -265.0 -- 485.0 232.0 43f4.0 506.0 7.1.0NTLRES ON OANS 308.0 135.0 130.0 146.0 220.0 250.0 280D.0

^ PROpRIAT

I3N TO IMPROV'EM-NT FUND 80.1 65.7 87.4 73.7 97.4 112.8 135.5;'.'ID-NDO

VET OPERATING SURPLUS (LOSS) -541.1 -465.7 -682.4 12.3 115.6 133.3 295.1

nSSEENGER K'15 (MIL-ION) 16310.0 18800.0 17200.0 177-0.0 18200.0 18700.0

E'.ENL- EAR'(ING TON KM (MILLION) 7600.0 7800.0 7500.0 7800.0 8000.0 8100.0 8250.0'EVENUE PER PASSENGER KM (PAISA) 9.7 8.7 8.8 8.4 9.8 n1.8-_;'E!E PER FREIGH7 73N KM (PAISA) 21.5 24.0 34.8 38.0 42.0 46.0

:=DRATZN2 RAT'O 109.5 .08.0 11-5.9 34.4 S81.0 50.8 86.8

~ourcs: Pakistan Railways & missionMay 1982

-75-

Table 20

PAKISTAN

ELEVENTH RAILWAY PROJECT

Forecasts of Source and Application of Funds.: 1980/31 - 1984/85

(Figures in Million Rupees)

Year Ending June 30

T otal I otal1980/81 1981/82 1?82/83 1983/84 1981/84 1984/85 1981/85

SOURCE OF FUNDS

N--T OPERATING REVENUE (LOSS) -265.0 -485.0 232.0 434.0 181.0 505.0 687.0APPROPRIATION TO DRF 420.0 440.0 470.0 541.0 1451.0 601.0 2052.oA

5PROPRIATION TO IMPROVEMENT FUND 65.7 67.4 -73.7 97.4 238.5 112.8 351.3

DRAWN FROM RESERVES 21.0

RAILWAYS CASH GENERATIDN 241.7 22.4 775.7 1072.4 1870.5 1219.e 3090.3

FOREIGN EXCHANGE GOVERNMENTFOR ADDITIONS 30.0 271.0 214.C 223.0 714.0 714.CFOR REPLACEMENTS 170.0 234.0 464.0 441.0 1139.0 228.0 1337.0

LOCAL CURRENCY GOVERNMENTFOR ADDITIONS 382.0 433.0 333.0 463.0 1228.0 504.0 1733.0FOR REPLACEMENTS 174.0 328.0 489.0 5S8.0 1385.0 1385.0GRANT IN AID FOR OPERATIONS 188.0 552.0 552.0 552.0

lOTAL SOURCES 1205.7 1840.4 2275.7 2773.4 6888.5 1151.8 8841.3

APPLICATION OF FUNDS

D:BT SERVICE 231.0 221.0 308.0 386.0 8Z6.0 420.0 1346.0INVESTMENT ON ADDITIONS 457.0 705.0 547.0 691.0 1943.0 700.0 2ZE43.0INVESTMENT ON 9EPLACEMENTS 331.0 562.0 953.0 1042.0 2557.0 228.0 2785.0EXPENDITURE ON IMPROVEMENTS 36.0 53.0 60.0 80.0 193.0 100.0 293.0AVAILABLE FOR/PAST LIABILITIES/DIVIDEND -466.0 -G62.0 12.0 117.0 -553.0 133.0 -42J.0

-CTAL APPLICATIONS 589.0 859.0 1881.0 2326.0 5066.0 1581.0 6847.0

CHANGES 1N WORKING CAPITAL/8ALANCES 316.7 981.4 384.7 447.4 1823.5 370.8 Z194.3

TOTAL 1205.7 1840.4 2275.7 2773.4 E889.5 1951.8 8841.3

Note: The investment on additions in 1984/85 includes the sum of 264 million Rupees included in the Medium-Term Development Planfor 1981-1984 which the mission estimates will be spent after June 1984.

Source:Pakistan Railway MissionMay 1982

-76- Chart 1

PAKISTANPAKISTAN RAILWAYS ORGANIZATION

S FEDERAL MINISTER OF RAILWAYS

DNSECTOR OF RA SECRETARY, MINISTER OF RATLFAYS

CHAIRMAN,. RAILWAY .. AR.

MEMBERA NNINMEG1ER AND PROCUREMEN MANAGER IF O FFINANCE | ENGINPERINGRSS TRA FFICPDTR

CHIEF CH EF D~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1 VISIOIN | D I SIDN

ACCOUNTS PERSONNEL SUP~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ER NTENDENT - t UPRIN TEINDENT]

CRIESERS OFFICER CFULTAN OUETA

CHSV ACF F NR R IC DR AV P C DIVIS ONADMINISTRATIO'N SUERINTENDE]NT_ SUEll NTENDENlT

AND CUDGET STORS AN EAWALPINDF

PRJEC EDGIREER CHIEFCHIEF OPERATINR ESUPERINTNENT

OPEN L NES ESUPERINTENDENT

KARACH ROTRI~~~~~~~~~~~~~~TMOHLPR

| CH EFGENAL ANEER L CHIEIEF FICEMMERCIAL|TELECOMMUNICATIONS E| C3 EGNEER j HATOFIE | MNAGER

CH, 7]~~~REEAC

R FINANCE AS RDIRECTOR E O CHISR TRAANIC L E OF FIFICEE

SSGSARY 1982 P~~~PROGESSIG 2E- DREPOR

| SURVEY ANG ER __ CIFCNRLE ORGANIZATION L_ PROJECT DIRECTOR| ONSTRUCTION STRSAND METHODS SOFRERAIL

rPROJECT DIRECTOR1 __ CIF ,CONHTAROL LE R|

| IPRI r UCAE

|PIROJECT DIRECTOR] __t RDEC DRETO

| ARACH r KOR

'VEMBER FINANCE ALSO REPORTSTO SECRETARY. MINISTRYOF FINANCE

;'FBRUTARY 1982 1od-ak -23804

PAKISTAN

PAKISTAN RAILWAYS ORGANIZATION

Federal Minister of Railways

Secretary, Ministry of Railways

Chairman, Rail]way Board

Member Railway Board ~ Member-Railway Board SceayRiwyBrdIn-C'harge

Member Railway Board Member Railway Board Federal Government

Traffic l | Civil Engineering Inspector of Railways

General Manager Railways

Railway Staff

rT

May 1982 WORLD BANK 23804

PAKISTAN: ELEVENTH RAILWAY PROJECTEXPANSION OF DRY PORT AT

MOGHALPURA LAHORE(KEY PLAN)

S. NO DESCRIPTION EXISIING XPANSION

NO. 2

1. TOTAL AREA OF LAND 812535 SRES 435 ASEST; 103000 SFT;18.65 ACRES 10.345 ACRES 2.364 ACRES

/ 2. AREA COvERED 41800 SFT, 60000 S F1

ii. OPENi14000 SFT

3. TRACK'S LENGTH 5000 LFT; 2800 LET.lEOWAGONS 1lOOWAGONS

4 AREA OF OFF ICES 24500 LFT, 800 SFT,

PLATFORMS5. HIGH E VE L 2000 LET; 400 LET,

ii. HAIL LEVE 5O LET;

DDgITIONAL < \ < \ 6 ROADS 6000 LFT, 240 LFT;

/v </ > A R E AX \ < 7 FIRE I IGHTING WITH 13 NO> 7.~~~~~~~~~~~~~~~~~~~ HYDRANTS 3- 3800 LET; 2000 LET;

T0UNDABY W A L>//@/ < \ AND TCSTOLONYE 8 OPEN AREA FOR STACKING 576300 SFT 330900 SFT, 103000 SFI;

W/bHO~~~~~~~~~~~~~~~~~~// w , X / < \ re ~~~OF TRACK / H

DliARAMPURA YARD // // /

///////<~~~~~~~~~~~~~~~~~~~~~Z 7= = 7 =2. ~-C//

%///- t E ~~~~~~~~~~~~~~~~~~~~~~~O AD 30' VVIDOF OLFIC F`T N-- C- N D A\ V-

--- X EIS TI ING D RY PO RT CULTIVATED LANDt .2. WORK TO BE DISMANTLED

3. PROPOSED WORK World B-lk 23563

Chart 3

-79-

PAKISTAN ELEVENTH RAILWAY PROJECTpROPOSED LA-YOUJT OF RFMANUFACTURING SHOPS

IN CENTRAL DIESEL WOCRKSHOPS RAWALPINDI

MAIN OrFICE BUILOING

CY I- SMAIN soE)

FACTURING LER ANO AIR CMPREsSSO US SPAE E PAR S_|,-f w tl MILLL RIGHT C,2n{CRANK

SHAFT rI,CRMCYCLE STAND ~ ~ MAHIE

EEHCETAVORFF

ICLE _ p _ ,NoMA nh , fMLCTHIgNGETRUCKTRLCKAll9t

CAR REPAIrN SFIOP SUPPORTIhItG FACILITTES REPAIRLT__

SHOP ---

PIFRE ENGINE AND_TRUCK OS

ELECTRIC

SIJESTA&LrT FACILI IESf

t I t I I , . _ i I I _ I R~~~~~~~~~~~UN NJNG ROOM fi7

ENGINE rco.7T EAIC INTI C_tJ I l a C 3 ANC COMPONENT .J I| flRE PIGHTING RfRPAIR8SH P= ip

rAl AK AND) PUMP HOUiSE LON _ , _=

______OILET____________________ _

Wo.la 5an' - 235C2

-80-

Chart 4

PAKISTANELEVENTH RAILWAY PROJECT

PROJECT IMPLEMENTATION SCHEDULE

1982 | 1983 1984 1985

J F MIAIMIJ IJ A S 0 VD JIFIMIAMIJ |JAIS|O N|DJ F|M|A|M J|J|A Slo NI J FM A|M|J J|A|S|O|N|D

AppraisalIS1OO

Report Preparation

EffectienesBo0aercdiPresenntation p a. Maintenance Improvements il

i Central Diesel and Other Shops

Specifications -nd Tender Documents

Consltaon with Bank

Tendering

Contrast Awards

Dnli-ey 4Construction and I nstaation

ii Unit Ehcha-ge Components

Specification ond Tender Documerts

Consultation w th Bank

Contract Awaros

Delicery t

iii. Reoenue Spares

Specifications and Tender Documents

Con.ltation w th Bank

Contrat Aw,ards

b. Management Information System

Data I Neatwork

Specification and Tender D---mnt q l r

Contract Awards

cC nstain Oriaioni,

i, Facilities Lahore Dry PortIi j| i Ii

Speecifictions and Tender Do et

Contract Awards

Fabrication and C-nt-utonv-

ii. Equipma -a d Rolle g Stock

Specfications and Tender Documents

Tendering |*__

Contract-Awards

d. Te~i"ctal AOitn d Staff Tr a imin g

Spiii lectificatio StudTen om s

So.-,eq B ank StRff

May 1982 World B-k 23803

IBRD 16207R-7n; 643 oso U 5 5 R 701 -N4r

73o APRIL 1982

S.l RE 0Us,. ...

RA. 9 s AFGHAUI TA t DEMOCRATIC REPUBLIC OF t > C H C NNSuFX No tfT'3AFGHANISTAN . , d H I AB

SOA HDI A RAB IA _ / INDI4\

20" ARAB EMIRAT. .. 1

P1AKISTAN ,3 rPA~~~~~~~~~~~~~~~ ~ KO5 Ioi Sk TAG Af. tOroo,- {- \s ,nm,etoe LleOf Control

ELEVENTH RAILWAY PROJECT - J / -

* LAHORE IDR PORT , S-

RAWALPIND DIESEL LOCOMOTIVEWORKSHOP IlLC W)

>1 1 BROAD GfUOF, DOOjRLE TRACK 00.20' 00100

-I-I-I~ I IBROAD ,0AUGE SINGLE TRACK ii-32 ° I-'.------ .1 METER GAUGE . / / \ 00.0V1, 0 AO A 1o

OTHER GAUGE KEO.N 320

I:E- :--E-HS ELECTR FIED SECEION 010d 01 > S /

.01% 6 NATIONAL CAP TAL

) 0 o CITIES, TOWNS, AND RAILWAY STATIONS

j0~ - - DNTERNATIONAL BOUNDARIES

-28-~' T/,

> /I N D I A 2

280

I R A N it hte b y

0 50 MB 1 lEO 200 250

010000; {'N0 D s2 5 3O0 40D 500

T. KA )NO)i ., ARACHI AREA

ft. ' ,0>>- 2'.

24. A R A 8/A N S E A 2470 ~- ($./ . o .

Ž4. n>Ih..s{~ sA 10.0.A-. # \ 'e >.. I_ _ E4° 9i I~ba<s ;nyoWas'OsUhle?als sSSO/avVe?rltowadnkenwamen/ol AA 9,AN tA \ i C X u ,, >,_ 72