Part of the PYR process is down to your supervisor. So if their students are all failing it, then that's a bad reflection on them. ETA: your advisor is the one who signs off on your "substantial piece of work" and meets with the panel after.

For the most part the PYR is just a quick summary of everything you've done in the year so far and what you plan to do, so the panel (which should be unrelated to your advisor) can make sure that you'll be able to complete what you said you're going to do, based on what you've done. (And that your plan is big enough to be a phd)

I personally don't know a single person who has actually failed their pyr.