The Pakistan Railways is reportedly facing a crisis because of the unserviceability of 32 of the 69 locomotives bought from a Chinese company. It has been alleged that the Railways were forced to buy these locomotives by President Asif Ali Zardari and his advisers even though expert opinion in the Railways was against buying locomotives from a Chinese company, which turned out to be sub-standard. It has been reported that to keep the Railways going, they are thinking of ordering 75 new locomotives from non-Chinese sources. The text of a report on this subject carried by "The News" of Pakistan on May 15,2010, is attached.
2. This has an important lesson for India, which has been developing a dependence on Chinese equipment and technology in key sectors of the economy such as electricity production and mobile telephone networks. Procurement of mobile telephone network equipment and technology from Chinese companies by Indian private companies on which there were no major restrictions till last year, has now been slowed down following concerns reportedly voiced by the Indian intelligence agencies over the security implications of a growing dependence on Chinese equipment and technology in this sensitive sector. It has been reported that the Government has not cleared any proposal for fresh procurement during the last four months and has undertaken a study of the concerns voiced by the intelligence agencies. In the meanwhile, pressure has been mounted on the Government to reverese its curbs by the Chinese authorities through their Embassy in New Delhi and by officials of the Chinese companies.
3. A point made by the Chinese companies is that while India has suspended the procurement of mobile telephone network equipment and technology from China on security grounds, it continues to import similar equipment and technology from Western countries. The question posed by them is:If similar Western equipment and technology do not pose a security threat, why should Chinese equipment and technology pose a threat? An insinuation made is that the real reason for the suspension of the procurement from China is not secuity, but concealed commercial motives to favour Western companies.
4. Even if what the Chinese companies say is correct, the Government's caution in buying similar equipment and technology from China, even at much lower prices, is understandable because China is still perceived in India as a possible adversary. India and China had fought a war in 1962 and one should factor into our decision-making the possibility that there could be another military conflict if the border dispute is not satisfactoily settled.When the intelligence agencies talk of the security implications, they keep in view not only the circumstances of today, but also what could happen in future if the bilateral relations deteriorate.
5. While the Chinese and their supporters in India are unhappy over the curbs imposed by India on security grounds, they tend to play down the fact that the Chinese themselves had imposed similar restrictions on security grounds on Indian information technology companies in China. Mr.Zhu Rongji, the former Chinese Prime Minister, had allowed Indian IT companies to open branches in Shanghai. But for many years, they were not allowed to have a presence in Beijing. Chinese Governmental and non-Governmental entities were secretly advised not to give any contracts to the Indian companies. The Indian companies survived in Shanghai with the contracts won by them from the local offices of Western multinationals. Only now the Chinese have allowed Indian IT companies to have a presence in Beijing and other cities and permitted some of their banks to award contracts to the Indian companies. Even now, will the Chinese authorities allow Indian IT companies to operate in Tibet and Xinjiang?
6. While security is and ought to be an important consideration in the case of telecommunication equipment, serviceability of the equipment and assured future supplies of spare parts should be equally important considerations in sectors relating to key segments of our economy such as power production. The Pakistan Railways developed an unhealthy dependence on Chinese equipment and it is now threatened with serious dislocation despite the excellent state-to-state relations between the two countries.
7. We have been developing a dependence on the Chinese for our thermal power stations because the Chinese power equipment like their telecommunication equipment is much cheaper as compared to Western and Japanese equipment and the Chinese have a reputation of completing their projects in time. Other important considerations such as the quality and serviceability of the equipment and the guarantee of future supplies of spare parts are not given the attention they deserve.
8. Before deciding to order any equipment and technolgy from the West, an important question considered by us is: What are the chances of the Western Governments suspending the supply of spare parts in future to exercise political pressure on India? The US had not hesitated to use this weapon on some occasions in the past. If tomorrow there is a military conflict between India and Pakistan and the Chinese authorities, to help out Pakistan, suspend the supply of spare parts for our power projects set up with their assistance, what will happen to our power production and the economy as a whole?
9. Are such questions carefully considered before allowing the procurement of Chinese equipment and tchnology? One has the impression that in our keenness to improve bilateral trade with China, which is racing towards the annual target of US $ 60 billion with China being the main benficiary with a big trade surplus in its favour, we are not paying attention to important questions such as what I have explained above.Let us by all means allow a free hand in India to Chinese manufacturers of consumer goods, but in respect of other goods of a sensitive nature which could affect our national security or future economic stability, we have to be more careful.
10.Since India and China will continue to be potential adversaries so long as the border dispute is not settled, the argument that we should treat the Chinese companies in the same way we treat the Western companies does not hold good. Security and guarantee of future supplies should be important considerations in the case of Western companies too, but certain risks which we can afford to take in the case of Western companies, we cannot in the case of Chinese companies. ( 16-5-10)
( The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. He is also associated with the Chennai Centre For China Studies. E-mail: firstname.lastname@example.org )
FROM " THE NEWS" OF MAY 15,2010
Chinese suppliers fail to deliver
By Ahmad Noorani
ISLAMABAD: The shortage of locomotives in the Pakistan Railways has reached such a crisis stage that an emergency plan to procure 150 engines from reliable international suppliers has been put together as the Chinese suppliers have failed to deliver, senior officials of Railways told The News.
General Manager Railways Shahid Ahmad on Thursday night confirmed to The News that the top Railways management had finally decided to drop the idea of acquiring 75 locomotives from the Chinese company as 32 previously supplied engines out of 69 have been scrapped after they became unserviceable.
The 75 locomotives were ordered from China after President Zardari himself intervened and forced the Railways to oblige the Chinese suppliers despite large-scale opposition within the Railways Ministry. Railways Minister Ghulam Ahmad Bilour had gone on record against the Chinese suppliers but he was given a shut-up call.
The GM Railways disclosed that already an advertisement to purchase 150 locomotives has been published internationally and now the Railways will ensure that no substandard locomotives are procured.
Sources say the Chinese supplier has also refused to honour the warranty on these 32 locomotives as they are rotting in Railways sheds in Karachi and Lahore. Purchase of 69 sub-standard locomotives from China by spending billions of rupees was one of the initial mega corruption scandals against General Pervez Musharraf and his team.
However, vested interests succeeded to even get the present government fall in line and to award the contract of another 75 locomotives from the same Chinese company. “12 locomotives of 2,000 HP and 20 locomotives of 3,000 HP, all under warranty, have now been totally scrapped. There is no way that these could be used and a great loss has been inflicted on the national exchequer,” GM Shahid said.
He added: “The total cost of these locomotives has proved to be very high as these outdated engines have a very high maintenance cost. Whenever we want to change a very important device in the engine, a turbo super charger, it become out of order within two to three months because of inferior quality of the engine and causes unbearable loss to the locomotive itself.”
The senior Railways official revealed that 15 per cent advance amount has already been paid to the Chinese company and now a letter has been sent to them seeking a reply within 14 days regarding complete breakdown of the 32 locomotives costing Pakistan billions of rupees.
He said after receiving the reply of this letter proceedings to get back 15 per cent advance amount would be initiated. He said the Pakistan Railways needs sturdy and tough diesel engines as it runs services on long routes from Karachi to Peshawar which also include hilly areas.
The GM said the Pakistan Railways is in dire need of the engines otherwise the whole railway system was going to collapse. The Pakistan Railways procured 69 locomotives from China in 2001 which were technically approved by the then management of Pakistan Railways in spite of excessive axle load. These locomotives did not perform very well and had developed lot of major faults that caused huge revenue losses. The cracking of underframe of more than 9 locomotives of 3,000 HP in 2005 is one example.
The Railways officials say in spite of this bad performance the previous Railways administration committed serious violations of tender conditions, PPRA Rules and international competitive bidding procedures and awarded the contract of another 75 locomotives to China. The recommendations of technical committee were ignored wherein they had disqualified the Chinese proposal thrice due to non-compliance of relevant clauses.