Outsourcing Train Operations Under Challenging Conditions
Pakistan Railways (PR) is seeking to outsource the commercial operation of 22 additional trains. However, past experiences—such as a leading firm’s inability to operate the Business Express due to financial issues and another firm halting the Bahauddin Zakaria Express (Multan-Karachi-Multan) for administrative, financial, and technical reasons—raise doubts about the plan’s potential success.
In a recent development, PR has decided to reissue tenders for outsourcing the trains. This decision comes after only three companies expressed interest, offering amounts below the established benchmark. PR found it unfeasible to proceed with these firms under the Public Procurement Regulatory Authority (PPRA) rules and will therefore re-float the tenders soon.
Currently, PR operates 49 passenger trains, with 12 already managed by private entities under the Public-Private Partnership (PPP) model. This includes trains such as the Sir Syed Express, Karakoram Express, Karachi Express, Awam Express, Green Line, and Pak Business Express.
PR to Reissue Tender Following Insufficient Bids
“The conditions are very demanding, and managing a train has become increasingly challenging. Additionally, profit margins are shrinking due to rising costs,” said a senior official from a private firm currently operating a train in Punjab. “This is why we opted not to participate in the current bidding, as the benchmark is too high for us.”
The benchmark for train earnings is based on a three-year average of ticket sales, considering the peak year. For instance, if a train’s total earnings over three years is Rs2 billion, the benchmark is set higher, including a 10 percent potential increase in fare for enhanced services such as Wi-Fi and complaint management.
Contractors offering above the benchmark price will be eligible to operate the trains commercially. They are also required to sell tickets through PR’s official Rabta application, available at 86 locations, and submit their tax returns, financial statements, and other documentation to PR for sharing with the Federal Board of Revenue (FBR).
Contractors must provide high-quality catering services, including hygienic food, trained staff, branded products, improved dining facilities, and other amenities. They are also responsible for maintaining cleanliness, uniformed janitorial staff, and a well-presented train interior, as well as offering advanced infotainment (LCD screens in AC compartments) and security services during journeys.
Conversely, PR will provide well-maintained passenger coaches, locomotives, experienced drivers, and other technical staff necessary for smooth operations. PR will also permit minor adjustments to train departure/arrival times.
The three firms that submitted technical and financial proposals offered amounts below the benchmark. Consequently, PR has decided to re-advertise the tenders. According to another PR contractor, the high benchmark and ticket sales through the Rabta application have deterred potential bidders, who are reluctant to share passenger data and meet the high benchmark.
Issues such as the requirement for advance payments to PR and other concerns have also affected participation. The benchmark for major express trains is set at an 80 percent passenger occupancy ratio, while trains with fewer carriages have benchmarks ranging from 60 to 90 percent.
PR Chief Executive Officer Amir Ali Baloch remains optimistic about the outsourcing plan. He stated that if the contractors fail to meet expectations, PR may continue operating the trains itself. “Our committee has found that the firms participating in the bidding submitted low technical and financial proposals. Thus, we will re-advertise to attract more competitive firms,” he said.
Mr. Baloch added that the benchmark is reasonable and emphasized that a delay in bidding is acceptable as the trains currently being re-advertised are operating smoothly.
