Multi-billion rupees locomotives scam in the making

A multi-billion rupees locomotives scam is in the making in the Ministry of Railways with an entire project being driven by the sellers of locomotives. According to sources in the Ministry of Railways and official documents, the PC-1 for Rs 55.488 billion (about $650 million) is replete with deliberate errors and falsifications.
The real story starts with General Electric (GE) Company of USA submitting a proposal to supply 150 locomotives in February 2010 for about $500 million. GE offered 75 locos of 3000 HP and 75 of 2000 HP. All these had AC-AC transmission, which has never before been tried out by Pakistan Railways.
Sources said that all 150 locomotives, offered by GE, were to be supplied in 'Completely Built Up' (CBU) condition, ignoring the local manufacturing facilities available at Risalpur Railways factory. This offer was backed with a commercial loan from US Exim Bank. (Not a concessionary loan or grant, but a commercial credit with normal interest costs).
According to sources, Pakistan Railways tried to convert the GE offer into a contract, and had the executive committee decide to take up GE's offer in their meeting of March 2010 without conducting a study on whether Railways actually needed these locomotives. The rationale provided appeared half-baked: that Railways had not replaced steam locomotives with sufficient diesel locomotives.
"In fact, Railways tried their best not to carry out any feasibility study, and categorically mentioned in the executive committee minutes that if this proposal was carried out as a replacement proposal, no PC-1 would be required," sources said.
However, this move was stopped by Ministry of Finance and it forced to prepare a PC-1. In the PC-1, they parroted the GE proposal completely ie 150 locomotives with AC-AC transmission, and in CBU condition with no local manufacturing at their Risalpur factory.
The 'real players' tailored the PC-1 in a way that excluded all non-USA manufacturers of locomotives. Since 1979, Pakistan Railways has not procured any locomotives of USA origin (even those locomotives with GE, General Motors/EMD and ALCO engines came from German and Japanese locomotive manufacturers).
When contacted, the officers involved with this PC-1 angrily pointed out that the PC-1, which they prepared and signed in Lahore, is not the PC-1 submitted by GM Manufacturing Shahid Ahmed to the Planning Commission. In particular, Chairman Sami-ul-haq Khilji, GM Manufacturing Shahid Ahmed and the Chief Mechanical Engineer (CME)/Loco Behzad Mehmood deliberately changed many pages in the signed PC-1. Among other things these three officers changed the title to allow only American origin manufacturers to participate, and made numerous small changes within the PC-1. All this was done in order to facilitate the American manufacturers, particularly GE.
Official documents show that if the official Railways file on this PC-1 is examined it has comments from officers complaining about the changes in the PC-1 after they had signed it. Sources said the PC-1 was practically prepared by Chief Mechanical Engineer (CME)/Loco Behzad Mehmood in consultation with GM Manufacturing Shahid Ahmed. They deliberately exaggerated the revenues from the project and deliberately estimated all the costs at unrealistically low levels in order to justify the economic viability of the project.
Their clumsy rigging of the figures is easily exposed by comparing this PC-1 with the previous PC-1 prepared by Railways for locomotives. Some examples of the changes they made are as follows: (i) implied that Railways had done studies that they need these 150 locomotives, whereas the truth is that far less locomotives (if any) are required in case the existing locomotives are repaired and (ii) included technical specifications of the equipment (US origin, AC-AC traction and Electronic Fuel Injection System).
This shows that AC-AC traction which has never been used in Pakistan has been standardised for the project for 150 locomotives without any test and trials. (AC-AC traction can be supplied by a few manufacturers only, and is much more expensive than AC-DC traction.) Sources deliberate there was exaggeration of passenger and freight traffic estimates in order to justify requirement of 150 additional locomotives. These traffic estimates cannot be achieved.
"It assumed that the locomotives will work for 350 days in a year, instead of the standard assumption of 300 working days as in all previous PC-1s. (In actual fact, the Railways locomotives are now working far less because of their inability to maintain them," sources added.
The real player has given the impression that Risalpur factory will be busy manufacturing 75 Chinese locomotives, so all these new 150 locomotives should be purchased in CBU basis ie 100 percent made in USA. It is a fact that using double shift basis, the Risalpur factory can cater to both projects. Official documents indicate that the clumsy attempt by Chairman Khilji, GM Shahid Ahmed and CME/Loco Behzad Memhood was clearly exposed when the PC-1 was submitted to the Planning Commission on June 7, 2010.
The working paper produced by Planning Commission for the CDWP meeting of June 8, 2010, as well as the minutes of the CDWP meeting and the comments of the Finance Division clearly exposed the many problems in the figures of the PC-1. The minutes went so far as to clearly state that this project appears to be donor-driven rather than on the genuine needs of Pakistan Railways. The fact of this forgery can be corroborated by contacting the other signatories of this PC-1 (GM Operation Ishfaq Khattak (retired), and incumbent GM Manufacturing Naeem Malik), who were outraged that it had been amended without their knowledge and submitted to the top brass. However, the PC-1 was surprisingly approved immediately by both CDWP and subsequently by Ecnec.
Meanwhile, the tendering process was halted by the Lahore High Court (LHC) and suo motu action was also taken by the Supreme Court. Railways had to give their undertaking that they would cancel the tender and re-invite it with the appropriate technical specifications which would allow wide international competition so that the procurement was done in a legal and transparent manner.
Railways cancelled the last tender, but when they re-invited it last August 2011 the technical specifications were clearly in favour of only one bidder again ie EMD of USA. The pre-bid conference, held on September 6, 2011, witnessed the other bidders complaining bitterly to Railways with the hope that better sense would prevail and they would remove the offending clauses in the technical specifications favouring EMD and GE of USA.
These include the following requirements: (i) requirement of having exported 500 locomotives of AC-AC transmission; (ii) requirement of radial/semi-radial design bogie (patent of EMD); (iii) requirement of having certificate from United States Environmental Protection Agency (met only by EMD and GE of USA). This will result in higher fuel consumption; and (iv) requirement of having Electronic Fuel Injection (EFI) system (EMD and GE specific). Ambiguous evaluation criteria, which can be used to award discretionary marks to their preferred bidders (EMD and GE) appeared to be the norm. However, no effort has been made by PR to change the basic terms of the PC-1 for this project (apart from cosmetically erasing the "US Origin" requirement).