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World Bank Document Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. 3818-PAK STAFF APPRAISAL REPORT PAKISTAN Public Disclosure Authorized ELEVENTH RAILWAY PROJECT Public Disclosure Authorized May 25, 1982 Transportation Division Public Disclosure Authorized South Asia Projects Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit = Rupees (Rs) US$1.0 = Rs 10.5 US$0.0952 = Rs 1.00 (= Paisa 100) US$95,238 = Rs 1.0 million WEIGHTS AND MEASURES Metric British/US System 1 meter (m) = 3.281 feet 1 square meter (m2) = 10.760 square feet 1 ton kilometer (km) = 0.621 ton-mile 1 passenger-km (pass-km) = 0.621 pass-mile ACRONYMS AND ABBREVIATIONS AC - Alternating Current BG - Broad Gauge CDLW - Central Diesel Locomotive Works CIDA - Canadian International Development Agency CIF - Cost, Insurance, Freight DF - Development Fund DRF - Depreciation Reserve Fund GOP - Government of Pakistan KPT - Karachi Port Trust LDP - Lahore Dry Port MG - Meter Gauge MIS - Management Information System MOR - Ministry of Railways MTDP - Pakistan Railways' Medium Term Development Plan NG - Narrow Gauge NLC - National Logistics Cell PER - Pakistan Eastern Railways POH - Periodic Overhaul POL - Petroleum, Oil and Lubricants PR - Pakistan Railways PWR - Pakistan Western Railways TEU - Twenty-Foot Equivalent Unit UEMS - Unit Exchange Maintenance System UEP - Unit Exchange Pool GOVERNMENT OF PAKISTAN Fiscal Year July 1 - June 30 FOR OFFICIAL USE ONLY PAKISTAN APPRAISAL OF AN ELEVENTH RAILWAY PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. I. THE TRANSPORT SECTOR ...... .............. 1 A. Background .................... 1................... B. The Transport Sector ............................. I C. Transport Policy and Investment ............. 5 II. PAKISTAN RAILWAYS ....... ............... 7 A. Organization, Management and Staff .... ........... 7 B. Railway Infrastructure ........................... 8 C. Motive Power and Rolling Stock. 9 D. Operations. 9 E. PR's Role and Prospects .10 F. Railway Investment Plan .11 G. Performance Under Previous Projects .14 III. THE PROJECT .......................................... 15 A. Background ................... .................... 16 B. Objectives ................... .................... 16 C. Description ................... ................... 16 D. Cost Estimates ................................. 24 E . Financing ........................................ 26 F. Implementation ................. .................. 26 G. Procurement ................... ................... 27 H. Disbursements .................. .................. 27 IV. ECONOMIC EVALUATION ................ ................. 28 A. General .......................................... 28 B. Locomotive Maintenance Improvements .... .......... 28 C. Rail Container Operation ......................... 31 D. Management Information System, Technical Assistance and Training ...................... 33 E. Economic Justification and Sensitivity Analysis 33 F. Risks ......... ...................... 34 This report was prepared by Messrs. M. Melrose (Railway Engineer), E. Pogson (Financial Analyst), M. Pulgar-Vidal (Economist) and A. Sabeti (Railway Specialist). This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Table of Contents (Cont'd) Page No. V. FINANCE AND EARNINGS ................................. 34 A. Introduction ....... ..............................34 B. Recent Changes in Financial Policies ............. 34 C. Past Performance ............... 35 D. The Next Few Years ....... ........................ 38 E. Financing Plan .. .40 VI. AGREEMENTS REACHED AND RECOMMENDATIONS ............. 42 ANNEXES 1. Documents Available in Project File .... ..............43 2. Plan of Action for Improving the Operational and Financial Performance of Pakistan Railways .... ..... 44 3. Terms of Reference for a Study of the Future Role of Railway Transport in Pakistan .... ...............47 4. The Basis for Financial Forecasts ..... ...............50 TABLES 1. PR's Freight Traffic by Main Commodities from 1969/70 to 1980/81 ...... ......................53 2. PR's Passenger Traffic from 1959/60 to 1980/81 ....... 54 3. PR's Staff by Department and Category as of July 1, 1981 ......... ..............................55 4. Inventory of PR Track ................................ 56 5. Inventory of Motive Power and Rolling Stock (Actual Numbers) for Broad Gauge, Meter Gauge and Narrow Gauge ................................... 57 6. Diesel Locomotive Fleet - Age, Class and Manufacturer ....................................... 60 7. Selected Operating Statistics (1975/76-1980/81) 61 8. Medium-Term Plan 1981/82-1983/84 and the Project 62 9. Maintenance Modernization - Cost Estimate Details . 64 10. Unit Exchange Pool: List of Components and Cost Estimates ..................................... 65 11. Cost Estimates for Containerization Component ........ 66 12. Summary of Project Cost Estimates ..... ...............67 13. Estimated Schedule of Disbursements .... ..............68 14. Economic Evaluation: Unit Exchange System, Management Information System, Technical Assistance and Training ............................ 69 -iii- Table of Contents (Cont'd) 15. Economic Evaluation: Container Rail Operation .. 70 16. Revenue and Expenditure for Financial Year to 30 June for 1976/77-1980/81 ................. ........ 71 17. Changes in Relationship of Revenues and Costs 1972-1982 .......................................... 72 18. Passenger Fares and Costs 1972-1981 ................ 73 19. Forecasts of Revenue and Expenditure: 1980/81-1985/86 .................. 74 20. Forecasts of Source and Application of Funds: 1980/81-1984/85 .................. .................. 75 CHARTS Chart 1 - Pakistan Railways Organization, February 1982 76 Attach. 1 - Pakistan Railways Organization, May 1982 .77 Chart 2 - Expansion of Dry Port at Moghalpura, Lahore (Key Plan) ..................................... 78 Chart 3 - Proposed Layout of Remanufacturing Shops in Central Diesel Workshops (Rawalpindi) ....... 79 Chart 4 - Project Implementation Schedule .... ..............80 Maps IBRD 16207R - Pakistan - Eleventh Railway Project This report is based on information provided by the Government of Pakistan and on the findings of project preparation and appraisal missions in 1980, 1981 and 1982 which consisted of Messrs. D. Bickers (Economist), N. Holcer (Telecommunications Engineer), M. Melrose (Railway Engineer), E. Pogson (Financial Analyst), M. Pulgar-Vidal (Economist), A. Sabeti (Railway Specialist), T. Shima (Railway Engineer), and A. Soto (Economist); and consultants W. Anderson (Container Specialist), D. Burns (Mechanical Engineer) and W. Thompson (Operations and Management Specialist). The main reports and data used are listed in Annex 1. I PAKISTAN ELEVENTH RAILWAY PROJECT STAFF APPRAISAL REPORT I. THE TRANSPORT SECTOR A. Background 1.01 Pakistan covers a land area of about 800,000 square kilometers. It consists mainly of a flat plain stretching from the foothills of the Himalayas in the northeast to the Arabian Sea in the southwest. It is crossed by five great rivers, the Indus, Jhelum, Chenab, Ravi and Sutlej, which, after their confluence, flow as the Indus towards the sea. These rivers frequently overflow their banks, causing serious interruptions to transport. The country's population, which is growing at about 3% p.a., is estimated at 83 million and is concentrated in the fertile Indus basin. Karachi, the largest city and port, is also Pakistan's main commercial, financial and industrial center. 1.02 Pakistan's gross national product (at market prices) was estimated in 1980/81 at US$30 billion, and per capita GNP in 1980 at about US$300.1/ The largest sector in the economy is agriculture, which generates about 31% of GNP; other important sectors are manufacturing (16%), commerce (14%) and transport, including communications (7%). The balance-of-payments situation has been characterized by persistent current account deficits during the past four years. B. The Transport Sector 1.03 Pakistan's transport system and traffic densities reflect the concentration of population and economic activity in the Indus basin; the location of the ports of Karachi and Qasim; and the long distances between the location of the few mineral resources currently exploited (gas, coal, oil) and the consumption centers. Because the border with Afghanistan was closed in 1979, and trade with India and Iran is insignificant, practically all imports and exports move through Karachi. Over half the international traffic originates in or is bound to Karachi and its environs; most of the balance goes to or comes from the Punjab, whose capital, Lahore, is 1,200 kilometers north of Karachi. Hence, fairly long transport distances are involved for many traffic flows, especially imports and exports. Because of this and the generally flat terrain along most of the densely trafficked corridors, Pakistan is a country well suited for rail freight transport. As the main railway lines are in the northeast-southwest direction, Pakistan Railways (PR) is in an advantageous position to carry such traffic. 1.04 Freight traffic growth in Pakistan has been faster than GNP growth. While real
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