May Issue 2015

Rickety, overcrowded buses with commuters riding on roofs and hanging out of the doors, rickshaws and Qingqis packed like sardines, families of six on a single motorcycle… and all this vehicular traffic moving at a snail’s pace, some of the autos spewing noxious fumes, others honking frenetically, contributing to the city’s air and noise pollution. This daily scenario on the streets of Karachi is a graphic indicator of the city’s serious public transport problem.

The metropolis of Karachi is a perfect example of darkness under a lamp. The 18 million plus people living in Karachi provide 65 per cent of the tax revenues generated in Pakistan, yet the fruits of their labour have not concomitantly improved the quality of their lives. The poor public transport system is a prime example of this gross injustice.

At the core of Karachi’s woebegone transit system is a phenomenon of rapid urban growth, endemic to most third world cities, and the inability of the transport infrastructure to grow at the same rate to support the large increase in population. The poor infrastructure, in turn, is a result of poor planning and execution of mass transit projects by the concerned city authorities, the provincial and federal governments and the stranglehold of the transport mafia that is benefiting greatly from the increasing demand for public transport.

A look at the figures for registered vehicles compiled by the Urban Resource Centre, a public interest organisation in Karachi, correlates very well with the visual evidence on the streets. In 2011, there were about 22,000 buses and mini-buses, 106,009 rickshaws, 1,300,000 motorcycles, and 1,000,000 private vehicles.

The disproportionately large number of motorcycles and cars in comparison to buses is a clear indication that the only mass transit system in the city, ie bus transport, has failed commuters. The large number of motorcycles and four-wheelers has increased the congestion on the roads and further compounded the problems of traffic jams and environmental pollution.

Many mass transit projects have been planned for Karachi. But most of these have remained on paper, even after countless feasibility studies, meetings and conferences. The rare few actually built, such as the Lyari Expressway, were botched badly, and are still incomplete.

The latest in the series of mass transit plans for the city, is the revival of the defunct Karachi Circular Railway (KCR). The project is aptly named — it has being going round in circles since 1969.

The KCR, which started operating in 1969, was initially a great success. It was a 50 km line with 24 stations that ran from Drigh Road (now Shahrah-e-Faisal) Station to the Karachi City Railway station, in a circular route. It serviced six million commuters annually.

Over the years, however, the services deteriorated, and KCR started running into heavy financial losses. By 1994, a large proportion of the 104 daily trains were rendered out of service, and in December 1999, the system was eventually shut down altogether.

Multiple reasons are attributed to the failure of this once very useful project. As the city grew, the availability of alternative means of transportation, like rickshaws and mini-buses, cut into the KRC ridership. Additionally, financial mismanagement and corruption, carried out in collusion with the transport mafia, contributed to the misfortunes that brought the KCR to its knees. Thereafter, the KCR remained dormant for two years, until Pakistan Railways attempted to revive it in 2001.

Although Pak Rail was running at a loss and needed to generate sizeable finances to upgrade the KCR, it came up with a scheme in which it planned to build double tracks in a revived KCR system. It proposed to sell the land along the track to businesses and regularise the existing informal commercial activities that had sprung up along the line.

The plan got bogged down when the stakeholders in the project could not reach an agreement. These competing interests included the provincial government, the Karachi City government, Pakistan Railways and the Pakistan Railways Employees Union, mayors of the districts through which the KCR passed, and businesses and katchi abadi residents who operated and lived along the tracks.

Thus the KCR was once again back to square one. It took another nine years for the deceased project to reappear on the scene. This time the messiah spoke Japanese.

In 2010, the Japan International Cooperation Agency (JICA) showed an interest in the project. It proposed an investment of US$ 2.5 billion in the form of soft loans at 0.2 per cent interest. The loan was payable in 40 years with a grace period of the first 10 years.

The project was planned to be operated by the Karachi Urban Transport Corporation as a public-private partnership project, with JICA providing technical assistance.

Even as the negotiations with the Japanese were underway, the government of Sindh signed a Memorandum of Understanding (MoU) with the China Railway Construction Corporation (CRCC) in November 2014. This was followed by news reports in January 2015 that the Japanese government had cancelled its participation in the project, following a case filed against JICA.

No clear reasons were provided for this fiasco by the government which has promised to probe into who filed the case against JICA. Other reports quote the Sindh Transport Minister as saying that the case was filed by the 5,000 families of the people who would be displaced by the project. What is clear is that is that the Sindh government is unable to remove the encroachments on the track. And this was one of the key conditions JICA had laid down to participate in the project.

As a result, only the Chinese company is left in the race. Since China is not likely to send the Red Army to remove the annoying encroachments, it is difficult to see the new saviours of the project achieving better results than the Japanese. Or can Chinese medicine revive the project? Given past history vis a vis mass transit projects in Karachi, though, it is likely that KCR will also be consigned to the dustbin of history, leaving the commuters of Karachi at the mercy of the dire state of the current public transport system.

A Case Study in Mismanagement

I was personally involved in the light rail mass transit system (LRT) for Karachi that was initiated in 1995, during the stint of the second PPP government headed by Prime Minister Benazir Bhutto.

The project envisaged an elevated light rail train system that would have serviced a transit corridor from Mereweather Tower in the southwest, to Karimabad Station in the northeast. Fourteen passenger stations were planned on the route.  A road feeding the system at the Karimabad Station was also a part of the project.

The project was to be privately financed and was to follow a Build Operate and Transfer (BOT) model. This model involves private financing, construction and operation, for typically 25 years, and finally transfers the asset to the government.

Following an international bidding process, a letter of Intent was signed in October 1995 with a consortium called Indus Mass Transit Company (IMTC) that was led by the Canadian company SNC-Lavalin (SNCL). SNCL had partnered with a Pakistani construction company Adcon — part of the Adamjee group — for the civil works, and a Turkish company, Sezai Turkes Feyzi Akkaya Construction Co. (STFA) for the construction of the elevated portion of the system. The estimated project cost was US$ 500 million. The financing was to be arranged by the consortium, the government of Pakistan and export credit agencies.

The first phase of the project was to carry out the engineering and arrange financing in a year.

In 1995 I was working for SNCL at their head office located in Montreal. My involvement in the project started when the vice president of the transport group appointed me as the manager responsible for the costing and planning of the project. He called me for a meeting in which he briefed me on the project. During the meeting, he closed the door of his office and told me that a certain very powerful man close to Prime Minister Benazir Bhutto was asking for a large sum of money upfront. He then showed me a spreadsheet on his computer screen where that figure was written under a column titled “commercial costs.”  I do not recall the number, but there were seven figures. He asked me if I had any contacts in Pakistan through whom I could talk to this man. I told him that I had met the man only briefly on social occasions, and was not in a position to help in this matter.

In the meantime, engineering commenced, with the civil part of the work being carried out in the Adcon offices of Karachi.  The SNCL engineering manager relocated to Karachi and started supervising the design phase.  I arrived in Karachi to handle the cost and planning aspects of the project.

Before moving to Karachi I was involved in discussions with senior SNCL management in Montreal over the strategy for the commercial aspect of the project. SNCL was not comfortable with the idea of carrying the financial risk in case the ridership was below the levels that made the project profitable. A plan was developed to suggest to the Government of Pakistan that they pay a fixed amount per month to SNCL for the capacity of the rail system. How many people actually rode the system and what revenues it would generate was to be the responsibility of the government. This model was very similar to the private power model in place at that time in Pakistan, whereby the operator was paid a tariff based on the capacity of the plant while the cost of operating the plant (fuel and maintenance) were to be paid, on the actual cost basis by the government. This model was virtually risk-free for the investor, as it got paid no matter whether the capacity was utilised or not.

The government meanwhile, had formed an organisation titled National Mass Transit Authority (NMTA) to manage the project and to be the owner.  A civil engineer, Dr Seema Alim, was appointed the chairperson of NMTA.

SNCL made a presentation to NMTA in Islamabad to describe the capacity charge model. In the meeting, SMTC was represented by Dr Alim and the organisation’s lawyer. NMTA rejected the idea of such a model saying that the private power deals were too sweet and would not be offered again for any project.

One issue that came up during the discussions with NMTA was the proposed fare for the commuter. SNCL had conducted a study to determine the expected volume of ridership and the fare expectation of the commuters. SNCL informed SMTC that the fare assumed for the project feasibility was too low for it to be financially viable. Much to my surprise, this was seen as a minor irritant and a decision was taken with the agreement of SMTC that a higher fare would be charged to make it feasible. It was also agreed that a flat fare would be charged. This meant that whether the commuter rode to just one stop, or all the way from the start to the end of the line, the fare would remain the same. It was clear that neither of these assumptions were realistic, and if such a fare structure was actually put in place, the ridership would be very low and could kill the purpose of the project.

In order to make the project financially viable, a reduction in the scope of the project was also sought. It was decided that firstly, the line would be shortened and would terminate at Karimabad Station, rather than the originally planned terminus of Sohrab Goth, and secondly, the stations would have no escalators and no air conditioning. Given that the height of an LRT station can be from 50 to 75 feet from street level, it was obvious that it would be very difficult for the commuters to climb the stairs to the trains, particularly during the summer months.  Also, many commuters carry heavy goods with them or are aged and thus would have been averse to taking the LRT.

It was also disappointing that all of these key decisions were being taken without any involvement of the public or even others in the provincial administration.  Dr Alim and the lawyer clearly had carte blanche to run the project as they wished.

While it was understandable that SNCL, a company with a commercial interest, would push for such unreasonable decisions, the attitude of the NMTA was quite shocking.  It was as if their only interest was to ensure that this expensive mega project got off the ground, whether it was useful for the public or not.

As all this was happening, the Benazir Bhutto government was dismissed and new elections were held which brought Nawaz Sharif to power in 1997. The project came to a halt. The SNCL team was dismantled and I was assigned to another project.  Later, in casual conversations with my colleagues, I gathered that the project was back to square one and there were fresh demands from the new administration. Eventually, the project was cancelled. SNCL sued the Government of Pakistan for several million dollars for the cost incurred during the post-award engineering and financing phase work. I do not know how the lawsuit was settled.

This project is a sad example of the greed and complete indifference to the interest of the public that has become a hallmark of the infrastructure projects planned and carried out in Pakistan — and those that never even get off the ground.

This article was originally published in Newsline’s May 2015 issue.