Purchase part of $8.5 billion restructuring program
CAIRO: The Ministry of Transportation (MOT) is set to sign contracts in January to import 100 new locomotives from Chinese and American manufacturers, a senior ministry official revealed Wednesday.
The official, who declined to be identified because the deals have not yet been finalized, said the companies include the China’s Ziyang Locomotive Works, and the United States’ General Electric and Electro-Motive Diesel. As of press time, deal amounts and financing details have not yet been announced.
Work to modernize the country’s ailing railroad system began in October after the August Qalyoub crash that killed 58 and injured 144. Just days after the crash, Minister of Transportation Mohamed Mansour renewed his appeal to the People’s Assembly to finance an $8.5 billion (LE 48.5 billion) renovation plan of the system and received approval.
MOT was awarded $5.5 billion (LE 31.4 billion) from third mobile license auction proceeds and permitted to finance the rest of the amount through loans. The money will be used to buy new locomotives and raise employee salaries, some of whom earn as little as LE 250 per month. A portion of the budget will also be used to upgrade the signaling system, which investigators eventually blamed for the Qalyoub crash. The Railway Authority (RA) now operates less than 300 locomotives of the 700 available because of the deficiency in its maintenance infrastructure, according to Mansour. It employs more than 70,000 of MOT’s 280,000 workers, and serves 1.5 million passengers per day, according to MOT figures.
Speaking to the Shura Council’s Energy and Industrial Production Committee just before the Eid Al-Adha holiday, Mansour reiterated his promise to turn RA into a profitable institution by 2012 without privatization as was rumored throughout the year. According to MOT, the authority lost more than LE 6 billion since 2002 because of fare subsidization and mismanagement.
How did the Railway Authority get to this point? Railway Authority Chairman Ashraf Abu Zeid said. It s the accumulation of -years of not having the right equipment because of under-funding. With the government s recent approval of the minister s plan, we think things will change.
Abu Zeid, MOT plans for the authority includes utilizing its 190 million sq. m. of land assets either through leasing or advertising. And despite the planned improvements to passenger cars, Abu Zeid said ticket prices should stay within current limits for second class passengers but will see additional raises for first class. The authority raised first class fares by 25 percent in September.
The crux of the plan to generate revenue, according to Mansour, will be to increase freight volumes. Railways now haul 12 million tons per year using just a handful of locomotives, despite their potential to general profits enough to sustain the entire system, he said.
How can a railroad that loses LE 1.6 billion every year for the past four or five years become self sustained? says Mansour. [With] the participation of the private sector, we are going to be self-sustainable and we will break even in four years.
There was no immediate word from MOT on whether it planned to partner with the private sector to purchase more locomotives. Mansour has appealed repeatedly in the second half of 2006 for investors to join hands with the ministry to execute transportation projects including ones in railroads. He received a strong response with the entrance of an Egyptian-Gulf consortium now set to execute an $8 billion (LE 46 billion) Borg El Arab-Aswan highway, in addition to other plans for roads and light rail. Still, the ministry is yet to announce a partnership with the private sector to execute RA development projects.