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Outline of a transport policy.

Outline of a Transport Policy

The transportation system in Pakistan is in a mess and has failed to keep pace with the demands placed upon it. Railways' performance has continuously declined and the road transportation has increased without the requisite development of highway infrastructure. Government has also entered most of transportation fields and created inefficient and highly unprofitable organisation, like NLC, PNSC, PRTB and STC.

Transportation is being dealt with by various ministries at the Federal level. Highways, ports and shipping are with Ministry of Communication. Civil Aviation is with the Ministry of Defence. Railways have their own Ministry and pipelines are controlled by the Ministry of Fuel.

There is requirement of a single Ministry which should coordinate allocation of resources and coordinate various modes of transport so as to provide the most economical transportation system especially by economizing in fuel consumption. Railways are extremely economical for long hauls. Most of our exports/imports like wheat, cotton and rice can be cheaply transported by the Railways upto Karachi rather than by road as is being done now. Fuel consumption in the transport sector is too high due to underutilisation of Railways. Also pipelines are extremely economical for transportation of fuel over long distances. But most of transportation of oil is being done by the road transport using a dilapidated road network.

Fuel consumption on highways is increasing at over 10 per cent per annum and in case of Railways it is static or declining. Estimated fuel consumption in 1990 in transport sector is over Rs. 50 billion compared to the cost of all shares listed on stock exchange which is Rs. 54 billion.


It is an antique department which is highly overstaffed and is extremely slow to change. It is still using tickets which are pre-World War II vintage. It shows the frame of mind of Railway bureaucracy. It is an organisation which is continuously in loss and its growth rate of passenger traffic is negative and in case of goods traffic, it is static or declining.

Railways is operating many lines. Most of these lines are in loss. As matter of fact most of our road network is parallel to railway lines. Therefore, even if railways suspend their operation on such lines, it can be taken over by road without causing any inconvenience to the public.

Railways has many workshops and factories which are underutilized and can be highly productive if they are privatised. Either the Railways should properly utilize such factories or hand them over to the private sector.

Railways has enormous property which can be disposed of. An example is Peshawar Cantt. Railways Station. In case Peshawar city is made into terminal station and railway property in cantonment is disposed of, it can generate immense resources. It would mean that Peshawar-Torkham line would become non-operational and might be objected to by the Army. This is in correct as this line was never used in the recent Afghan War and there is no likelihood of its being used in future even for the tourists. In order to make the Railways effective following action will have to be taken:- - Railway Management has to be completely

overhauled and a person from

private sector be appointed as head

of Railways. - All Railway services which are losing

may be closed. - Railway should concentrate on long

haulage for freight and passengers. - Railway surplus assets may be disposed

of. - All factories of the Railways may be

privatised. - Railways should plan and operate

mass transit in Karachi, Lahore and



The present highways network requires induction of resources which is not forthcoming. The principle of investment in infrastructure is that the user who benefit from it should pay for it. Fuel consumed by the road users should be taxed and its revenue utilized for development of roads. Also the roads are damaged by heavy trucks which should be taxed according to their capacity to damage the road. In case of USA there is a Federal Highways Trust Fund which is financed by a fuel levy and tax on heavy vehicles and tyres. In case of Pakistan a similar tax was in vogue but was discontinued in 1973. In case the Government creates "Highway Trust Fund" and privatises those sections of road which have high traffic, enough revenues can be generated for the development of highways.

In order to implement the development of national highways and motorways, National Highways Authority is being created. This authority should be completely autonomous and should be allowed to generate its own resources by floating bonds and taking loans for the construction of toll roads. In addition, the National Highways Authority should be provided funds based on fuel consumed on highways as roads are being used without any fee. A fuel cess of 60 paisa per litre would be enough for the National Highways and Provincial Highways. 50 per cent of the fund may be used for the National Highways as they carry 65 per cent of the entire traffic and the remaining 50 per cent be given to the Provinces based on length of highways network, area and population of the province. This will take away a major burden from the ADP of federal and provincial governments.

Ports and Shipping

The Government owned shipping company is running in loss while the private sector is making money. Therefore, it is best to denationalise PNSC so that Government does not have to bear the loss sustained by PNSC. In case of ports, KPT has no problem but PQA is having financial problems. KPT is a Trust and cannot provide any financial assistance to PQA. It would be a good idea to levy limited tax on ships using KPT which may be given to PQA for its development. It means that ships using KPT will have to pay more but the increase in shipping charges will be marginal.


Presently Ministry of Defence is dealing with civil aviation as PIA is using some of PAF Airports. There is no logic in having civil aviation in the Ministry of Defence whose functions are quite clear and have nothing to do with air transportation. Civil aviation should be under the Ministry of Transportation which should be responsible for development of airports and navigational aids. CAA is already generating revenue from passengers as airport taxes and landing charges from Airlines. CAA should only develop commercially viable Airports. In case the Government wants to develop an Airport for political reasons it should pay for it rather than CAA bear the burden of such development.


This is the best and cheapest way of transportation of fuel for long distance. The existing pipelines should be used to the full capacity and as at present pipelines should remain in the private sector.

Road Transport

The Government should leave it entirely to the private sector and dispose of the present government owned companies. NLC deprives the government of import duties, income tax, registration and tolls and should be privatised as it is providing an unfair competition to the transporters. Road transport should be entirely in the private sector. In case of Lahore and Karachi urban transport may be given to Municipal Corporations and may be subsidised.

In order to streamline the activities of transportation in the country a Ministry of Transportation may be created which should have Railways, Highways Aviation and Ports under it. All these organizations should be self-financing. In case of Railways, Government may provide subsidy for the next five years till they become financially viable. In case of Highways Government should levy a fuel cess of 60 paisa per litre and create a "Highway Trust Fund". Additional excise duty may be levied on trucks over 35,000 Lbs. GVW and tyres over 40 psi pressure and paid to NHA. National Highway Authority should administer this fund and privatise high traffic road. Motorways will be justified after the year 2,000 and should be planned now and their construction should start in the late nineties. In order to build construction industry, it should be declared an industry and easy loan may be provided. This can be done by having a bank which should provide bridge financing during contracts. Also, heavy import duties on construction equipment may be reduced.
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Title Annotation:transportation system in Pakistan
Author:Amin, Khalid M.
Publication:Economic Review
Date:Jun 1, 1991
Previous Article:Privatization: a viable policy option.
Next Article:Petroleum refining sector - potential for private investment.

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