Located between the fast paced growing public sector railways of China and India, Pakistan Railways has been on the decline. Demand is not deficient as indicated by relatively growing passenger and freight kilometers yet it had to face stiff competition from road transport, which received official patronage. A government failing to meet its deficit by collecting taxes has cut investment in this sector drastically over the years. This paper analyses performance in terms of development and efficiency of Pakistan Railways in holistic terms in a multistage framework that has four dimensions – input conditions, output, earnings and government policy. For this study, Data Envelopment Analysis is used to estimate product efficiency, earning effectiveness and financial efficiency to understand the reasons of decline of Pakistan Railways compared to China and India.

The results show that Pakistan Railway is product inefficient in the usage of inputs that led to financial inefficiency as costs, unrelated to service delivery rose sharply while the same service had to be performed with fewer inputs. On the other hand, Chinese railways is productive and financially efficient, which has led to earning efficiency. Indian railways is product efficient but struggling with earning and financial efficiency. In this cross-comparison the lesson drawn for Pakistan is that product efficiency can lead to other efficiencies and railway development can be sustained by managerial autonomy and steady public investment.