It has become quite fashionable in Pakistan to compare every sector of the country with its respective Indian counterpart and start lamenting that Pakistan is far behind India in every field. Similarly there is a lot of hue and cry in the media-print, electronic and social, of the country that every state institution in Pakistan is woefully deficient in terms of service delivery, profitability, efficiency, customer satisfaction etc., while everything is far better in every institution of India.
Nothing can be farther than the truth in these statements. I am myself a great admirer of the progress made by India, proud inheritor of great Ganga-Jumna Civilisation, in different fields of her political economy. However, I will not indulge in any exercise of comparing the performance of two institutions in both the respective countries without understanding the context. Let me clarify my point by taking two examples; one sector and one institution from each country.
Where do we stand in respect of agricultural sector?
First take the case of Pakistan’s agricultural sector. Ask any political economist in Pakistan and he will start lambasting the poor Pakistani farmer for being inefficient and less productive than his Indian counterpart. When asked to substantiate his assertion with facts and figures, he has no answer. Now visit any website relating to agriculture-even an Indian one and find out what are the average yields of wheat, rice, cotton, sugarcane etc., in these two countries. I have taken the averages given below from the Food and Agriculture Organisation (FAO) of the UNO.
|Where we stand: Yield (maunds/acre)|
Despite the fact that Indian agriculture is heavily subsidized while agriculture in Pakistan always got step motherly treatment with few exceptions here and there,Pakistan compares favorably with its arch rival, India, in terms of yield in major agricultural crops.
Comparing inheritors of British Indian Railways
Now take the case of Pakistan Railways. Here again you will see the same irrelevant and out of context comparison between Pakistan Railways with its Indian counterpart. Irrespective of the fact whether everything is as rosy in Indian Railways as pointed out by our analysts and critics, you cannot have a meaningful comparison between these two institutions because of their different colonial legacies, different historical evolution, different market environments and the extremely different governance structures under which they respectively operate.
Is Indian Railways earning huge profits?
Before proceeding further, let me first of all dispel the myth about the huge profits being earned by the Indian Railways while Pakistan Railways is constantly running into losses. No railway in the world is in profit; it is never meant to be. They are not built for purely commercial purposes; they have multiple objectives in which profitability no doubt plays a major role but not a very significant one. That is why, even after privatisation in major European countries, not only the infrastructural development of the railway networks lies with the state, huge subsidies are being paid to the private sector operating those trains which are unable to earn profits. Known as Public Service Obligations (PSO), these payments are meant to maintain and increase connectivity of the remote areas through rail networks.
Indian Railways is no exception. Last year, Indian sources reported a loss of Rs 30,000 crore in the passenger segment while given a revenue growth in FY17 that is similar to that in FY16, the railways will earn Rs 1.89 lakh crore and has to finance expenses worth Rs 1.94 lakh crore — an operating ratio of over 100%. In other words, Indian Railways spend 102 paisas to earn one rupee. All the profit which Indian railways boast of is in fact the Public Service Obligations payments made by the Indian government to the Indian Railways to operate those services which are commercially not profitable but had to be kept operational due to their strategic or social welfare objectives.
On the other hand, Pakistan railways do not enjoy this facility. Profitable or not, it has to run a train which used to run in 1947.When restructuring the Pakistan Railways in 1990s, it was recommended that if the state was interested to continue running of strategically or politically important loss making trains, then it should compensate the Pakistan Railways for the loss incurred on its operation. These PSO payments were made to the Pakistan Railways for two years but were discontinued due to lack of funds.
British Imperialism, like any other imperialism before, was an exploitative one for which they developed an extensive infrastructure to achieve their strategic and commercial interests. As luck would have been, India which inherited more than 80% of their vast network got the best of the British Indian Railways, not only commercially viable railways network but also its vast manufacturing capability and huge pool of trained workforce. As only their branch lines were cut off as a result of the creation of Pakistan, Indian Railways were able to keep bulk of their train operational in the rest of the country
On the other hand Pakistan, which was carved out of the provinces situated in the outer periphery of the vast British Indian Empire, got the bulk of the railway built by the British to achieve their strategic and geopolitical objectives in these outlying areas. Fear of the Russian invasion through Afghanistan, real or imaginary, had forced the British to establish cantonments in areas bordering Afghanistan and lay a vast railway network for easy and rapid movement of troops and transportation of war material. Consequently, with the sole exception of Lahore to Karachi line which was commercially viable on its own, in 1947 and is still the same, all the other lines were non-profitable.
Being the branch lines of an integrated network, feeding the main lines in the interior of British India before partition, the severance of those connections as a result of the partition of the Subcontinent, made them totally nonviable. Pakistan Railways kept these lines operational mainly due to momentum effect by cross subsidization with a view to implement the social welfare objective of the state to provide facilities to the public for transportation of goods and commutation of passengers in the absence of roads in the far-flung areas of the country.
Keeping in view the above mentioned peculiar colonial legacies of the railway networks of the respective countries, it will not be appropriate to club them together to assess their respective performance and profitability.
After independence, India and Pakistan both embarked on planned development in which infrastructural development, with special emphasis on expanding the communication network, was the key priority Here both the countries opted for different policies. In the absence of a comprehensive transport policy which would have given the direction to the transport sector and had also encouraged private sector to come forward, in a mutually consistent and competitively neutral way, Pakistan preferred roads which got more funding than other three modes of transport i.e. rail, aviation and marine. Being geographically smaller in size, Pakistan was able to extend its road network substantially.
Over a period of time a robust private transport sector emerged which was able to ply buses, trucks on these improved roads. Consequently, in the overall national transport perspective, instead of a national multi-modal transport network, there was an unnecessary competition between these two modes of transportation. As railways got a step motherly treatment in the allocation of funds for their operations, maintenance and improvement and construction of new networks, it was an unequal fight. Thus all the profit earned from commercially viable train operations was eaten up in running the loss making trains which soon ran out of steam.
India, on the other hand, opted for improvement and expansion of rail network, a priority dictated by the political and strategic imperatives of keeping a continent-size country together than any profit motive. Indian Railways, therefore, got generous funding from the government as compared with the road which is still far from satisfactory in India. Indian Railways is lucky in another sense-four of their ministers later on became the prime ministers of the country and always had a patronising attitude towards railway. Even in the latest budget the present Indian leadership has tried to strengthen this institution and announced an initiative of us $137 billion investment in Indian railways.
Thus comparing a strategic railway with a commercial one on the basis of profitability is as inappropriate as comparing Pakistan road transport with Indian counterpart; both have evolved over a period of time under different sets of policies and priorities. That’s why running of trains in remote regions of India is still a viable option; doing the same in Pakistan is a recipe for disaster for the balance sheet of Pakistan Railways
Fourthly, it is the operational autonomy and financial independence of the Indian Railways which makes it possible to rationalise its operational policies and priorities in accordance with the changing economic conditions. Terminating loss making trains aside, Pakistan Railways cannot increase the railway fares even when the price of fuel skyrockets. Similarly the degree of political interference in the operations of Pakistan Railways is far more than it is in case of Indian Railways. For example, while the Indian Railways can afford to disallow uneconomical train stoppages howsoever strong the political pressure may be, in Pakistan, having train stoppages, whether economically justified or not, is considered to be a prerogative of a political leader in his constituency.
Economies of Scale
Economies of scale play a decisive role in determining the profitability or loss of a commercial venture. Indian Railways is one of the world’s largest railway networks comprising 115,000 km of track over a route of 65,808 km and 7,112 stations. Employing more than 1.3 million persons and operating in twenty nine states and seven union territories, it carries around 9 billion passengers annually or more than 23 million passengers a day and more than 1000 million tons of freight per year. Running more than 12,600 passenger and around 7400 freight trains daily, Indian Railways earns approximately US$25 billion every year. In the presence of above mentioned facts and figures, any comparison between Indian Railways with that of Pakistan Railways is meaningless
Lastly, it is the same old business principle-you earn if you invest and you earn more if you invest more. Conscious of the role of railways as the lynchpin of the Indian economy and the lifeline of its society, every Indian government has been allocating huge funds for its maintenance and development. On the other hand, it is an irony of fate that Pakistan Railways has remained under funded for the last several decades. Since 1990s, every government, civilian or military, has been trying to privatise the Pakistan railways and considered investing in an entity meant for privatisation as a sheer wastage of resources. This underinvestment has taken a heavy toll of the commercial viability of Pakistan Railways. Noam Chomsky was right-if you want to privatise something for pittance, first reduce its state funding, it will go in loss, and then sell it for a pittance. That is precisely the policy adopted by Nawaz Sharif in the 1990s and later on continued by Shauket Tareen in the 2000s in respect of all the state owned enterprises. No doubt they are running into losses, a perfect justification for their privatisation!