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Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
Irp presentation 1
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Irp presentation 1

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  • 1. 1
  • 2. Individual Research Paper Locomotive Availability: Cost–Benefit Analysis between Imported and Local Manufacture By Athar Riaz (Pak Railway) Faculty Advisor: Brig (R) M. Irfan
  • 3. • Introduction • Problem Statement • Scope of study • Locomotive Availability • Procurement of new locomotives • Local Manufacturing • Cost Benefit Analysis • Conclusion/Recommendations 3 Sequence
  • 4. • Factors contributing to low induction of Locomotives. – Lack of funds for manufacturing/rehabilitation of locomotives. – Dependency on foreign technology. – Lack of long term planning for rehabilitation, procurement or manufacturing of new locomotives. • PR need an induction of 20-25 new DE Locos every year • PLF is available but never utilized to its design capacity • No project has so far initiated for the local manufacturing/assembling – Self sustainability in improving the availability of locomotives – Reduced dependency on foreign countries and saving of huge foreign exchange 4 Introduction
  • 5. • DE locomotives can be manufactured/assembled with at least 40-50% saving of foreign exchange • Due to non-availability of requisite FE funds every year for the replacement of 25 overage DE Locos – it is need of the hour to start manufacturing locomotives locally. • Without, self sustainability as a first step towards standardization, the problem of availability and reliability of locomotives will remain a question. • PR has the potential and expertise but whether it would be an economical decision? 5 Problem Statement
  • 6. • Study involves the cost benefit analysis of – Imported vs Local manufacturing of locomotives – Research is conducted to analyze the factors required for increasing locomotives’ declining availability and subsequent reliability online • Scope of study is limited to the American and Chinese locos imported in 1997 and 2003 – As CBU, SKD and CKD at PLF, RCS. – Comparison of their costs and the subsequent benefits have been analyzed on the CBA technique by working out the Cash flow statements to reach at the conclusion. 6 Scope of Study
  • 7. LOCOMOTIVE AVAILABILITY
  • 8. • Pakistan Railway owns a fleet of 465 Diesel Electric Locomotives • The requirement of effective train operation is 600 • 46 are temporary deleted meaning thereby they are not feasible for economical repairs. • Only 419 are for working and turmoil is that they also are not road worthy • Only 165 are available for passenger and freight train operations as on 10.10.2013 8 Basic Facts
  • 9. Horse Power Make 3000 hp 137 General Electric, USA 79 2400 hp 21 General Motors, USA 119 2000 hp 214 Hitachi 112 1500 & less 93 Chinese 69 Total 465 ALCO, USA 86 Total 465 9 Categories
  • 10. 10 Availability Statistics
  • 11. • Non availability of spares and components on time • Inadequate budget allocation for routine repair and maintenance of locomotives under head of Revenue • No new DE locomotive inducted in the system during last 11 years. • More than 59% (277) DE locomotives are overage (Economic Life of 20+15 years) • No program is in line for assembling/manufacturing of DE locos in PLF 11 Reasons of Decline
  • 12. • Economists believe that at least 50% freight traffic should be carried through Rail • Requirement is ascertained by the business plan provided by the Traffic and Commercial branch of Railways • Railway carried 16,093.350 MPKMs and 402.481 MTKMs during 2011-2012 • Passenger and Freight traffic targets for 2017-18 have been fixed in Business Plan as 32,800 MPKMs and 25,200 MTKM • The minimum availability requirement comes to 560 in 2017- 18 after condemnation of 170 DE locos 12 Requirement
  • 13. How to Improve? Rehabilitation • Only 60% cost of new locomotive • So far 101 locos are rehabilitated • No loco is rehabilitated since 2004 Procurement • 20 locos per year is the requirement • No loco procured in last 11 years • 277 locos are required to be condemn due to overage 13 After completion of economical life of locomotives, any Railways then have two choices
  • 14. • PC-I of 75 DE locomotives approved by ECNEC on 14.12.2005 – Agreement signed with the Dong Fang on 31.12.2008 and 15% down payment is also been made by GoP – Could not matured due to lengthy hearing by the honorable courts – Delayed by the cabinet too of the previous government. – The current status is that the case is filed and fresh tenders are in process. • PC-1 of 150 US origin locomotives finalized but – The agreement challenged by the competitive firm in the court of law and the matter is still pending 14 Unsuccessful Attempts
  • 15. PROCUREMENT OF NEW LOCOMOTIVES
  • 16. • Procurement history dates back to 1958 • Several renowned manufacturers of the world have so far been trialed – Transfer of technology and their local assembling in Pakistan Locomotive Factory, Risalpur. • The major manufacturers of PR currently owned 465 DE locomotives are: General Electric USA = 79 General Motors USA and Canada = 119 Hitachi Japan = 112 ALCO, USA = 86 Dalian China = 69 16 History of Procurement
  • 17. • To achieve the target of 11.5 billion tonne-kilometer and 22.9 billion passenger kilometer by 1997-98. – 30 DE Locos of 3000 hp were procured from USA (AGE-30) – During 1997 – 2001 • In order to enhance the availability of locomotive and replace the over age fleet uneconomical for repairs. – 44 DE Locos of 3000 hp were procured from China (DPU-30) – 25 DE Locos of 2000 hp were procured from China (DPU-20) – During 2003 – 2008 17 Last 15 years
  • 18. 18 USA 3000hp Chinese Total 3000 hp 2000 hp CBU 10 8 7 25 SKD 10 16 8 34 CKD 10 20 10 40 Total 30 44 25 99 Manufacturing – Breakup
  • 19. Type of manufacturing Cost (In Rs. Million) CBU 142.50 SKD 140.50 CKD 134.60 19 Cost of American Locos • The final capital cost as per PC-IV was Rs. 5,531.428Million • Including foreign exchange cover of Rs. 3,072.124Million
  • 20. Type of manufacturing Cost (In Rs. Million) CBU 109.00 SKD 99.43 CKD 84.52 20 Cost of Chinese Locos • The final capital cost as per PC-IV was Rs. 7,723.232Million • Including foreign exchange cover of Rs. 5,907.662Million
  • 21. 21 Maintenance & Operational Cost AGE – 30 DE locos (American) • Repair & Maintenance cost / loco / year = Rs. 5.585Million • Operational cost / loco / year = Rs. 6.018Million DPU – 30 DE locos (Chinese) • Repair & Maintenance cost / loco / year – Rs. 3.292Million in 2003-04 to 8.600Million in 2010-11 • Operational cost / loco / year – Rs. 8.616 Million in 2003-04 to 18.295 Million in 2010-11
  • 22. LOCAL MANUFACTURING
  • 23. Import Deletion Program • Import Deletion Programme was initiated in 1970 – Railway Diesel Spare Manufacturing Shops at Rawalpindi and Railway Workshops, Moghalpura. – The other indigenous sources utilized were Local State-owned and Private Industries. • Curtail the cost and increase the number of locomotives • Foreign exchange saving • Self-Reliance by enhancing ratio of local cost in production of locomotives • Standardization of major assemblies.
  • 24. • Established in 1993 • State of the art plant, machinery and equipments make this factory exceptional in the manufacturing capabilities. • 25 CKD DE locomotives designed capacity of manufacturing annually • To progressively enhance the domestic production of locomotives to an extent of 50% • So far manufactured 99 DE locomotives of 2000-3000hp for PR • Saved CFE of Rs. 1,392.00M 24 Pakistan Locomotive Factory
  • 25. • A pilot project initiated in 2005 for the manufacturing of 5 DE locos of 3000hp • PC-I in this regard was approved by ECNEC on 19.09.2007. • This could be the major step in departing from the old practice of importing locomotives as completely built units. • The existing infrastructure and facilities in PLF, RCS are sufficient for such manufacturing • OEMs remain sidelined in the International tender and thus filed after even providing three chances to the participating firms. 25 Step Forward
  • 26. • At Pakistan Locomotive Factory, Risalpur – 19 major assemblies/components • At Railway Workshops, MGPR – 5 components/assemblies • From approved manufacturers/vendors – 35 components/assemblies 26 Scope of Work – Local
  • 27. Some of the following important assemblies/components are required to be imported – Diesel Engine – Traction alternator with auxiliary Generator – Air Brake System – Wheels & bearings – Traction Motors & Suspension Tubes – Control equipment and cab equipment – Invertors – Air compressors with motors – Turbo Super Charger 27 Scope of Work – Imported
  • 28. COST – BENEFIT ANALYSIS (CBA)
  • 29. 29 What is CBA? • Is the project worthwhile financially? • Is it the best option? • Should it be undertaken at all?
  • 30. • For a company – Concerned with the profit earning capacity and income flow of a proposed project – A cash flow analysis • For the Government – A cash flow analysis – Decision making for governments is much harder. – Expected to consider the profitability (or at least neutrality) of the costing – Include consideration of the social cost and benefits of their choices. – Must also comply with environmental considerations. 30 What is CBA?
  • 31. 31 Decision Making BENEFITS > COSTS
  • 32. @ 12% discount rate Chinese Locos Imported Local Manufacture PWC 298.212 276.355 PWB 460.133 460.133 BCR 1.542 : 1 1.665 : 1 32 Cash Flow Result •Cash flow is carried out by using Microsoft Excel tool. •Repair & maintenance costs and Fares have been kept constant during the period of life span of 20 years •50% of this earning is attributed to locomotive on the basis of investment ratio on other elements or infrastructure as per Planning division formula.
  • 33. @ 12% discount rate American Locos Imported Local Manufacture PWC 231.885 206.832 PWB 421.770 421.770 BCR 1.971 : 1 2.039 : 1 33 Cash Flow Result •Cash flow is carried out by using Microsoft Excel tool. •Repair & maintenance costs and Fares have been kept constant during the period of life span of 20 years •50% of this earning is attributed to locomotive on the basis of investment ratio on other elements or infrastructure as per Planning division formula.
  • 34. CONCLUSION & RECOMMENDATIONS
  • 35. • The discounted present value of the benefits exceeds the discounted present value of the costs thus the strategy of local manufacturing of DE locomotives at PLF, RCS is worthwhile. • In addition, Net Benefit is positive which was considered decision criteria to adopt local manufacturing strategy on PR. • Ratio of the present net value of the benefits to the present value of the costs is greater than one. This further justifies to adopt local manufacturing strategy • Engineering Techniques not available at PLF, RCS should be obtained from OEM through Technology transfer in the future contract agreements. 35
  • 36. • The present deletion rate to the extent of almost 40% at PLF, RCS are needed to be enhanced beyond 50% within a span of next FIVE YEARS. • Long term adoption will take PR to the standardization of major assemblies and components • The rehabilitation of old age locomotives shall also be carried out with the components proposed for the standardization in addition to the new manufacturing. • A Railway Engineering & Technical University in the country is recommended to be established as soon as possible in consultation with the Association of American Railroad (AAR) • The pilot project for manufacturing of FIVE 3000 hp locomotives shall immediately be taken in hand 36
  • 37. 37

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