CPEC: Reshaping Pakistan’s Railway

By Yasir Arrfat

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Pakistan railway is inefficient with several problems that affect both passengers and the freight sector. There are copious reasons for such a dilapidated railway network and makes one wonders as to what and how could be the possible reasons for such a run-down railway system, especially when other countries with similar economic standing has progressed by leaps and bounds in this sector.
Few explicit reasons are causing everlasting damage to railway sector, for instance, lack of sincere efforts in delivering services is missing by the authorities which in turn causes delays, repeated accidents occur, loss of goods and lead times are also observed. Poor rail linkages, outdated trains and manual signaling system coupled with the poor infrastructure consistently overburden government expenditure. Put together, these are some of the reasons that perpetually work to halt any improvement in the rail network of Pakistan. Having said this, the Chinese government and its entrepreneurs have extended their support to upgrade and turn around Pakistan’s railway system under the rubric of China-Pakistan Economic Corridor (CPEC) since its inception in 2013.
According to Ernesto Sanchez et. al, 2013, due to these inefficiencies, the use of rail freight has dropped over the years from 7.2 million tons to less than 4.6 million tons. These disorganizations have cost the economy about Rs.150 billion per annum when compared with regional and global countries a significant difference is seen. According to Reuters, 2017, China’s rail freight volume in February 2017 was 281.21 million tons, which is substantially higher than Pakistan’s decreasing volume. EU-27 was estimated around 389 billion tons in 2010 with the biggest country being Denmark (Eurostat, 2012).
Moreover, our rail freight takes about a couple of days on the main line (Karachi-Lahore) and up to 16 days (Karachi-Quetta) to deliver upcountry which is three times slower than China and US (Ovais, 2014). When compared to countries such as China, UK, and the US that are well known for having a well-established and successful rail freight network Pakistan certainly falls behind. Cheap and quick shipment of goods is crucial to ensure competitiveness and provide a regional and national edge over competitors.
Under CPEC there has been a huge investment into optimizing the rail network in Pakistan in order to make it efficient and competitive. Approximately $62bn is being invested into CPEC, out of which approximately $8.6bn is being allocated to the up-gradation of the ML-1 rail line. However, for a successful implementation and development of this project, consideration has to be made to creating an effective system that can support the capacity and speed of the trains at each junction keeping in mind the costs and time required.
The investment will be used to upgrade existing lines, modernizing and upgrading rail junctions and stations such as Havelian Dry Port and extending the rail network. It will support high speed/capacity trains, increasing the speed from 60 Km/h to more than 130 km/h under the CPEC initiative. This will allow the rail network to ship goods twice as fast which would reduce costs and lead time. It will also provide a cheap and quick way of transporting goods over long distances giving both private and public sectors a competitive edge.
According to the Reuters report 2017, China currently imports $6-7 billion of perishable food from Europe each year, mainly pork, dairy, fruit, and seafood. Under the Belt and Road Initiative, the rail network between China and Europe will reduce transportation time from 40-50 days to 13 days or two weeks it could bring a whole new potential to Europe-china Trade. Similarly, agriculture commodities are an important part of Pakistan’s trade and export, however, less than one per cent is shipped using the rail network. According to Road Freight Transport and Emerging Competitive Dynamics, 2016, due to current inefficiencies, about 30 per cent to 40 per cent of agricultural production is wasted due to inefficient supply chain infrastructure. It stands to reason if investment from CPEC improves and optimizes rail transport then, industries and sectors that depend on fast and cheap transportation in order to make a profit will benefit the most, especially perishable goods.
Rail is cheaper to use longer distances while the road is cheaper over shorter distances. The average trip distance for trucks in Pakistan is 947 km per trip. Using rail is far more competitive than the road for freight over longer distances (over 500 km); as such investment is crucially needed to fill this gap. Economies of scale can be achieved by using one rail with 30 carriages to transport goods from Gwadar to Kashgar (1700 Km), rather the equivalent amount of trucks which will have a higher cost, need more maintenance and will take far longer to reach the destination.
With the CPEC investment, the aim is to bring our out-of-date rail network into the modern age and become competitive with regional countries. There are obvious advantages that have been highlighted above. Having a proper rail system will help the economic corridor between China and Pakistan be utilized to its optimal potential. This will facilitate more growth, trade and investment in the long run not only between China and Pakistan but will have positive implications on the regional and global connectivity.

Co-Author: Ali Farooqi, is currently attached with Centre of Excellence, CPEC as a Research Assistant.

DISCLAIMER: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy and position of Regional Rapport.

Published in Regional Rapport, June 20th, 2017. Link

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