Pakistan railways


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A brief report on how Pakistan Railways can use development strategies to bring change in a failed organization

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Pakistan railways

  1. 1. 2011Submitted to:Mr. Haroon Waheed [PAKISTAN RAILWAYS – THE LIFE LINE OF THE COUNTRY] Prepared By: Maria Jawed (9689) Safia AbdulAziz (9613) Sumaiya Farooqui (9570) Javeria Siddiq (xxxx)
  2. 2. TABLE OF CONTENTSS. # Topics Page # Executive Summary 2 1. Pakistan Railways – the life line of the 3 country 1.1 History 1.2 At Present 1.3 Organizational Structure 1.4 Human Resource2. Problems faced by Pakistan Railways 5 2.1 Shortage of Locomotives 2.2 Eroding Market Share 2.3 Soaring Budget Deficit 3. Entering & Contracting 6 3.1 Organizational Issues 3.2 Key Clients 3.3 OD Process 3.4 Time & Resources 4. Diagnosis of Pakistan Railways 7 4.1 Huge Losses and Budget Deficit 4.2 Mismanagement 4.3 Decreased Market share 4.4 Corruption 5. Action Planning 10 5.1 Structural Design 5.2 Downsizing 5.3 Reengineering 5.4 Alliance Intervention 5.5 Network Intervention 6. Conclusion 12 Bibliography 13Organization Development & Change Page 2
  3. 3. EXECUTIVE SUMMARYPakistan Railways (PR) is the state owned railway company of Pakistan. It is alarge organization under the administration of Ministry of Railways. PakistanRailways provides an important mode of transportation in the farthest corners ofthe country and brings them closer for business, sightseeing, pilgrimage andeducation. He current Chairman is Raja Shahid Hussain.Over the past many years, Pakistan Railways has been facing problems and is nowon the verge of bankruptcy. With budget deficit of billions, eroding market shareand corruption scandals, the future of Pakistan Railways – once the life line of thecountry – is grim. At the time of independence, both India and Pakistan, inheritedthe Railway Network laid down by British. While Indian Railways has emerged asa highly profitable organization, Pakistan Railways is struggling to keep itselfrunning.This report summarizes how organization development can help PakistanRailways revamp its image and goodwill. It is based on facts and hypotheticalsituations created by the group members to evaluate the applicability of ODinterventions. He data is collected from various sources including books,newspaper articles and internet.The report provides introduction of Pakistan Railways, its history, organizationalstructure which is then followed by how the concepts of entering and contractingcan be applied to this case. Diagnosis of the organization has been done with thehelp of data collected and hypothetical situations. Based on the diagnosis, ODinterventions have been suggested for Pakistan railways which include techno-structural interventions and collaborative interventions.Organization Development & Change Page 3
  4. 4. 1. PAKISTAN RAILWAYS – THE LIFE LINE OF THE COUNTRY 1.1 HistoryThe possibility of Karachi as a sea port was first noticed in the middle of 19thcentury. Sir Henry Edward Frere was appointed Commissioner of Sindh after itsannexation with Bombay in 1847 and sought permission from Lord Dalhousie tobegin a survey for a sea port. He also initiated the survey for a railway line in1858. It was proposed that a railway line from Karachi City to Kotri, steamnavigation up the Indus and Chenab rivers up to Multan and from there anotherrailway to Lahore and beyond be constructed.It was on 13 May 1861, that the first railway line was opened for public trafficbetween Karachi City and Kotri, a distance of 105 miles (169 km). The linebetween Karachi City and Keamari was opened on 16 June 1889. During 1897 theline from Keamari to Kotri was doubled.The railway line from Peshawar to Karachi closely follows Alexander’s line ofmarch through the Hindukush Mountains to the Arabian Sea. Different sections onthe existing main line from Peshawar to Lahore and Multan and branch lines wereconstructed in the last quarter of 19th century and early years of 20th century.The four sections, i.e., Scinde (Sindh) Railways, Indian Flotilla Company, PunjabRailway and Delhi Railways, working in a single company, were later onamalgamated into the Scinde, Punjab & Delhi Railways Company and purchasedby the Secretary of State for India in 1885, and in January 1886, it was namedNorth Western State Railways, which was later on renamed as North WesternRailway.At the time of independence, 1,947 route miles (3,133 km) of North WesternRailways were transferred to India, leaving 5,048 route miles (8,122 km) toPakistan. In 1954, the railway line was extended to Mardan and Charsada, and in1956 the Jacobabad-Kashmore 2 ft 6 in (762 mm) gauge line was converted intobroad gauge. In 1961, the Pakistani portion of North Western Railways wasrenamed Pakistan Railways. The Kot Adu-Kashmore line was constructedbetween 1969 and 1973 providing an alternative route from Karachi up thecountry.Organization Development & Change Page 4
  5. 5. 1.2 At PresentAt present Pakistan Railway comprises of 8,163 route km, 1,212 stations and 42train halts. It has a fleet of 546 diesel electric locomotives, 25,815 wagons and2,099 passenger coaches. Maintenance is provided by three major locomotiveworkshops and thirty-five smaller workshops. Signaling facilities at importantstations are track circulated within interlocking limits. Most routes have VHFradio coverage for communication between train dispatchers and trains. TelephoneCommunication is over wire lines and microwave. Pakistan Railways is multisystem and operates on three gauges, i.e. broad gauge, meter-gauge and narrowgauge. 1.3 Organizational StructureMinistry of Railway is responsible for overall control of Pakistan Railways as wellas to guide the overall policy. There are four (4) Directorates in this PR namelyAdministrative Directorate, Technical Directorate, Planning Directorate, andFinance Directorate.The following officers also report directly to the Secretary Railways:-a. General Manager (Operations)b. General Manager/Manufacture and Servicesc. Federal Government Inspector of RailwaysRailway Board is the highest body for technical matters of the Railways andconsists of Chairman and five Members out of which three are from the privatesector. Secretary to the Government of Pakistan, Ministry of Railways is the ex-officio Chairman of Railway Board and the General Manager, Railways is theChief Executive Officer. Organization Structure of Pakistan Railways is offunctional type, headed by GM and assisted by four Addl. General Managers.Pakistan Railways at this time is a vertically integrated organization and has fourbusiness units: 1. Infrastructure Business Unit 2. Passenger Business Unit 3. Freight Business Unit 4. Manufacturing and Services UnitOrganization Development & Change Page 5
  6. 6. 1.4 Human ResourcePakistan Railways is the largest civil employer in the country and has about90,000 employees consisting of staff and officers as of 2008). 71% of the totalemployees are working in Civil, Mechanical and Transportation departments. Allthe hierarchy positions are held by graduate Engineers. 2. PROBLEMS FACED BY PAKISTAN RAILWAYSSince 1861 when the first railway line was laid down between Karachi and Kotri,the expansion of the railway network by the British came at a rapid pace up until1947. The driving factors for this growth were strategic and economic in nature.For instance to thwart the Russians from the West, the British built the Khojaktunnel, the fourth largest at that time, in seemingly inaccessible areas ofBalochistan to reach Chaman railway station. But after 1947, little has been doneto expand and maintain this network. 2.1 Shortage of Locomotives:The Pakistan Railways has a total of 546 locomotives but only 290 are on trackwhile the rest are out of order. Similarly, 70 per cent carriages are out of service.In a report submitted to Railway Ministry, it has been disclosed that as many as 70locomotives are awaiting spares at Pakistan Locomotive Factory, Risalpur since2004. 2.2 Eroding Market Share:Railway sector in Pakistan has not maintained its position in the transport sector.The market share of Pakistan Railways kept on declining with the passage of time.For example, annual passenger volume carried by Pakistan Railways in late 1970’swas approx. 145 million, which has come down to 59 million in 1992/93. Thefreight business was of PR was 15 million tons in late 1960’s but has come downto 7 million tons. Roads have steadily become the more preferred form oftransportation. An example of PR’s declining market share is that it is movingonly 11% of total petroleum products and 2% of the total containers. A moreprofessionally managed and independent railways have immense growth potential. 2.3 Soaring Budget Deficit:The biggest problem for Pakistan Railways is the soaring budget deficit. Althoughrailways are traditionally not expected to earn profit. However, it is legitimate toexpect from railways to meet at least operational expenses. Today PakistanOrganization Development & Change Page 6
  7. 7. Railways with Rs.334 billion liabilities is at the verge of bankruptcy because ofcorruption, shortage of locomotives and losses incurred due to the runningexpenses. According to one report Rs 21 billion is spent on wages and pensionsevery month leaving the department less or nothing for maintenance of power androlling stocks.In the light of above problems the Railway Board decided to hire external ODconsultants to design interventions that can help in turning around the organizationinto a successful commercial entity. 3. ENTERING & CONTRACTINGA group of four OD practitioners has been approached by the Railway Board tohelp Pakistan Railways recover from the verge of bankruptcy. As OD consultantsfor Pakistan Railways (PR), the first and foremost task for us is to understand thecurrent structure of the organization and the issues. A meeting with the Chairmanof Pakistan Railways, Raja Shahid Hussain and other members of Railway Boardwas conducted to discuss the issues. 3.1 Organizational Issues:We conducted meetings with the members of Railway Board, General ManagerRailways, and Additional General Managers of each business unit of PakistanRailway and found out the following issues: - Huge financial losses - Decreased market share - Inefficient operations - Corruption 3.2 Key ClientsIn case of Pakistan Railways, our main client is the Railway Board. Otherimportant key clients include GM Railways, Addl. GM of each business unit, andrepresentatives from Railway Employees Union, Railway Workshop Worker’sUnion, and Association of Station Masters etc. 3.3 OD ProcessTo fix the problems faced by Pakistan Railways (PR), we recommend the processwith following key steps:Organization Development & Change Page 7
  8. 8. - Selecting a design team: A team of 8-10 individuals will be selected which will include key policy makers for Pakistan Railways, representatives from various functional areas of the organization and worker’s unions. - Diagnosing: Once the team is selected a joint diagnosis of the organization will be conducted which will include understanding organization’s current strength and weaknesses, growth opportunities, organization culture and values etc. - Action Planning: The first key output of the team is a 5 year action plan that describes where Pakistan Railway should move to, key activities and milestones, assigned responsibilities/accountabilities for those activities, and contingencies/assumptions that need to be monitored. - Implementation, Monitoring & Evaluation: As the plan is implemented, new information, changes in the environment and other issues always arise that need adjustment. In this phase the OD consultants along with the design team will monitor the implementations and collect feedback to evaluate whether action plan is on track or not and will fix any deviations. Also design team will conduct formal evaluation processes and discuss their learning about organization structure and change. 3.4 Time & ResourcesAs OD consultants, we will provide consultancy services up to and includingdevelopment of action plan. Additional time beyond that time can be contracted.Apart from the consultancy fee Pakistan Railways will also be responsible for allthe direct expenses including airfares, hotels, etc. for the research. The completeprocess including diagnosis and development of action plan might take six to eightmonths subject to: - Access to key information and people. - Commitment from PR management - Access to sensitive information like HR records, PR policies, PR contracts etc. - Prompt response/feedback from key clients. 4. DIAGNOSIS OF PAKISTAN RAILWAYSIn order to carry out a detailed diagnosis of Pakistan Railways, the ODConsultants along with the design team gather the key information through: - Questionnaires - InterviewsOrganization Development & Change Page 8
  9. 9. - Observations - Unobtrusive measuresThe data collected help us in identifying the root causes behind the problems facedby Pakistan railways. Since the overall organization is facing problems, thediagnosis is carried out at organizational level. The findings of diagnosis arediscussed in detailed as below: 4.1 Huge Losses & Budget DeficitThe reason for this loss is the presence of unnecessary departments which arewhite elephant for Pakistan Railways. The biggest among those is the RailwaysPolice that takes over Rs 1.5 billion including emoluments and other facilitiesfollowed by Stores and Purchase. These departments should be abolished fromRailways without further delay. Their utility for railways is marginal at best. TheAudit and Accounts, Railways Workshops Division, and General Administrationstaff need drastic cuts. These organizations are heavily overstaffed. If they willcontinue to ignore the presence of non-productive over staffed departments withvery insignificant contribution in overall performance of Pakistan Railways, thedepartment will continue to decline. It shall never be in a position to meet theexpectations of public.Railways are operating at low rates. A flexible policy for rates and fare requires tobe adopted whereby freight rates could be varied according to the type ofcommodities as well as direction. 4.2 MismanagementCurrently Pakistan Railways is facing acute shortage of locomotives and spareparts for maintenance of out of service locomotives. Since independence little hasbeen done to expand the railway network in Pakistan. As per the reports compiledby the design team, Pakistan Railways need 40 – 50 locomotives annually to runits operations effectively. However, during the past two decades only 100locomotives have been added. The management of PR has failed to generaterevenues through use of assets like land, locomotive factory, carriage factory etc.The focus of Railway officials is on getting new locomotives while ignoring theimprovement in operations and maintenance of existing locomotives. The plans tochange broad gauge into standard gauge at this stage are not just costly but alsounnecessary. 4.3 Decreased Market ShareOrganization Development & Change Page 9
  10. 10. Over the years, Pakistan Railways could not maintain its share in the country’stransport sector. With Railway ministry shutting down operations of various trains,it is no wonder that the market share of Pakistan Railways in cargo transport hasfall to mere 5% from 75% in 1960s and 1970s.Around the world, railways are the cheapest and safest mode of transport andmajority of goods transport is carried out via railways. However, in Pakistan thesituation is completely different. The indifferent attitude of various governments,direct competition from NLC, container mafia and bus mafia are all behind thedrastic condition of Pakistan Railways today. Railways and NLC need tocoordinate their operation and also compete in their operations to economize onthe inter – modal movement of goods traffic. The Railway should carry goods inbulk in the plains, while NLC and private road transport should take over furtherdistribution from these points in to the hilly regions. This will help the railway toconcentrate its resources of locomotives and wagons on the main line in the plains,after withdrawing them from the hilly regions. This is in fact the best and mosteconomical rail road mix for the country. 4.4 CorruptionCorruption is the biggest problem Pakistan Railways is facing today. The RailwayDepartment has been suffering losses since years long. Contractor system is one ofthe causes of such losses. Moreover, there are enormous irregularities in localpurchases. The number of officers’ cadre has increased considerably since 1977,mostly due to political appointments. It has been revealed that the crises are selfgenerated creating a space for more corruption and PRACS-Pakistan RailwaysAdvisory Commute Services is responsible for this mess.Selective services have been privatized by allotting its contract to different privateparties to operate those privatized trains. Ironically the contract has been awardedonly for ticketing and like buss conductors those private firms after selling out theticket deposits payments into the Railways account. As per agreement afterdeducting its commission the contractors are legally bound to deposit the fundsinto the Railway account but due to the nexuses between Railways bosses andprivate contractors deposit the funds in private accounts. This illegal practice hasconfronted Railways with financial crunch where as the officials of Railways areleast bothered for the interest of Pakistan. Some Railways circles insist thatPakistan Railways is still a viable and progressive organization, provided therampant corruption could be controlled.In short Pakistan Railways is a classic example of bad governance, poor policies,corruption and mismanagement.Organization Development & Change Page 10
  11. 11. 5. ACTION PLANNINGAfter a careful diagnosis, the results were feedback to the main clients. Severalmeetings were conducted with key clients to determine the type of ODinterventions that will most appropriately suit the needs of Pakistan Railways. Theclients and consultants jointly agree that Pakistan Railways need a mixture oftechno-structural and collaborative interventions to recover from the current crisis. 5.1 Structural DesignPakistan Railways is a vertically integrated highly bureaucratic organization. Thecurrent organizational structure is a mixture of functional and divisional structures.The positions are divided into four classes: - Officer Cadre - Station Masters - Running Staff - Class Four comprises of labors, signal operators etc.The structure needs to be revamped into a more leaner and flexible one. Acombination of divisional and network structure will be most appropriate forPakistan railways. The PR management can retain the structure based on currentdivisions and create a network of these divisions for better management ofoperations and resources. 5.2 DownsizingThe Pakistan Railways is an over staffed organization. Political appointments overthe years have added to the problem and are the major reason behindorganization’s financial troubles. Departments like Railway Police, Stores &Purchase need to be abolished. Other over staffed departments like Audit &Accounts, General Administration etc. need drastic cuts in workforce. Forsuccessful implementation of downsizing, the PR management must follow thefollowing steps: - Clarify organization’s strategy to its members and provide ample opportunities for them to voice their concerns ask questions and obtain counseling. - In case of PR, the structural change will help in eliminating unnecessary layers, merge units and non productive staff can be reduced through layoffs and buyout packages.Organization Development & Change Page 11
  12. 12. - While implementing methods of downsizing, management should use a top down approach. It should target inefficient and high cost areas. Keep people informed throughout the process about restructuring activities. - Address the needs of survivors and those who leave to help them overcome the stress of structural changes. 5.3 ReengineeringPakistan Railways have great potential for growth. However, the current processand technology does not provide much room for implementing growth strategies.Pakistan Railways can improve the performance of its various functions anddepartment through proper use of information technology. The areas whereinformation technology can play a vital role include: - Seat Reservations - Freight Management - Asset Management - Track Management - Rolling stock inventory - Electric Billing - TimetableDuring diagnosis many members of Pakistan Railways suggested that theorganization should be privatized like PTCL to improve performance efficiency.However, research suggested that key state owned enterprises like Railways,Airlines, and Road Transport etc. should remained publically owned for theoverall benefit of the customers. However, Pakistan Railways can privatize someof its units like The Locomotive Factory, The Carriage Factory and other largemanufacturing units. 5.4 Alliance InterventionsApart from techno-structural interventions, Pakistan Railways can make good useof collaborative interventions to improve productivity. Instead of hiringinformation technology and database experts, Pakistan Railways can create analliance with National Database & Registration Authority (NADRA) fordeveloping Track Management and Seat Reservation Systems.Similarly Pakistan Railways can create alliance with China Railway EngineeringCorporation (CREC) for expansion of railway tracks in Pakistan.Organization Development & Change Page 12
  13. 13. 5.5 Network InterventionsWith the help of Public-Private Partnership, Pakistan Railways can createnetworks to operate some of its route for privatized trains. For creating such anetwork, PR can call for a private investor’s convention and brief those about theavailable opportunities select the organizations that can fit in the network best andimplement networking strategies and evaluate the performance of networksperiodically.For small routes Automatic Train Operation System can be implemented bycreating a network of Pakistan Railways with US General Railway SignalCorporation (GRS), UK Westing House and Siemens Germany. 6. CONCLUSIONWith growing interest in the development of Trans-Asian rail links, one mightthink that Pakistan Railways has a promising future. However, the RailwayMinistry, the Railway Board and all the relevant agencies have to play their role toreturn Pakistan Railways to its glorious days. Before allocating any further fundsto bail out the organization, government should force the management to undergovast structural changes as recommended by OD consultants in this report. Thesechanges can be implemented within a period of 3 – 5 years and once the changeshave been made and evaluated then new investment plans can be made.Organization Development & Change Page 13
  14. 14. BIBLIOGRAPHY - Organization Development & Change – 8th Edition by Cummings & Worley. - - - - - Article “Corruption in Pakistan Railways” published in Pukhtoonistan Gazette on Friday, 26 November, 2010 - pakistan-railways.html - Various articles and editorials published in Daily Dawn and The Nation from July 2010 – March 2011 - Development & Change Page 14