Undeterred, Railways hopes to procure Chinese locomotives


Despite disapproval by the federal cabinet and the formation of a committee to probe the contract to purchase 75 locomotives from a Chinese company, Railways ministry official are still hopeful that the government will condone the violation of Public Procurement Regulatory Agency (PPRA) rules for the procurement.
An official source said that a committee constituted by the Prime Minister, headed by the Deputy Chairman Planning Commission and including secretaries of ministries of finance, railways and General Manager Pakistan Railways (PR) Lahore, to look into the allegations had recommended that the federal government condone the deviations from PPRA rules to avoid delay in procuring the locomotives. The source said, “the alleged violation of rules are minor in nature and any further delay in procurement of the locomotives will be detrimental to Pakistan Railways interests.” An acute shortage of locomotives has stalled the freight sector and resulted in the suspension of main line passenger train linkages, causing extensive loss of revenue to the PR.
Out of the total 75 locomotives, 50 were to be assembled at Locomotive Factory Risalpur and the delay in finalising the transaction has left the factory without work. Additionally, the delay in opening the Letter of Credit is causing a recurring financial loss of Rs 125,000 per day as obligatory payments comprising commitment charges. According to Railways Ministry summary sent for the consideration of the cabinet, the procurement of 75 diesel electric locomotives was approved by ECNEC on December 14, 2005 at a cost of Rs 12,700 million, with a foreign exchange component of Rs 8,400 million. A contract agreement of $105.143 million duly vetted by the Law and Justice Division was signed between the government and Dongfang Electric Corporation, China on December 31, 2008. A down payment of $ 15.771 million, comprising 15 percent of the contract amount, was released to the firm in June 2009. A buyer’s loan agreement was signed with Export-Import Bank of China on December 14, 2009 and an amount of $ 10.801 million was transferred to China Exim Bank and Sinosure in March 2010. However, Letter of Credit has not yet been ossied/.
The National Assembly Standing Committee on Railways had referred to certain procedural flaws, a deviation from PPRA Rules 2004 the rectification of which requires exemption by the competent authority.