Revenue woes: Railway grapples with fiscal strain

The Bangladesh Railways is in dire financial straits, racking up a Tk1,117 crore operating loss in the first five months of the current fiscal year while generating only 15.78% of its targeted revenue, which experts blame on the mismatch between heavy investments in new lines and rolling stocks and stagnant revenue growth due to poor operational quality.

Public transportation experts also noted that the calculated loss does not incorporate the Tk3,876 crore development expenditure of the railway over the five months, nor does it account for the revenue expenditure of the Ministry of Railways.

The magnitude of the loss would be significantly higher when factoring in the development expenditure along with the salaries and allowances of the rail ministry's employees.

According to railway sources, the state-owned institution generated a revenue of Tk442 crore in July-November of FY24 against an annual target of Tk2,801 crore.

Officials say that, during the period, the railway incurred Tk3.53 in operational spending for every one taka earned.

Assessing the performance of the initial five months, the railway's revenue collection target for the current fiscal year is being decreased by around 24%, further intensifying the operational loss as operating expenses are slated to be reduced by only 2.29%, according to them.

The decision was reached in two separate meetings of the Budget Management Committee of the Ministry of Railways, one conducted in mid-December last year and the other in early January this year.

The meetings, chaired by Md Humayun Kabir, secretary of the Ministry of Railways, assessed the financial performance of all Bangladesh Railway zones. The evaluation disclosed that the Western zone achieved a mere 10% of the Tk1,485 crore revenue target in the past five months.

In response, the meetings recommended slashing the target by 47.45% to Tk780 crore, officials say.

Meanwhile, the Eastern zone reached around 19.49% of its revenue target during the same period and suggested a revised target 5% lower than the initial goal, taking current performance into account.

Claiming that the revenue of the railway has shown a consistent upward trend over the past few years, its director general Md Quamrul Ahsan told TBS that an exaggerated target had been set for the Western zone, and there is a proposal to adjust it to align with actual conditions. He clarified that the target for the eastern zone is not being significantly reduced.

He pointed out that a 25% reduction in passengers and freight transport is a key factor contributing to the lower revenue earnings in the Western zone.

Md Shamsul Hoque, director of the Accident Research Institute at Buet, told TBS that the lack of alignment between the railway's revenue growth and investment, attributed to lower operational efficiency, could impose a financial burden on the government.

He stressed the importance of enhancing operational efficiency in rail services, pointing out that the railways are incurring significant losses primarily due to inefficiencies in management.

Highlighting the profitability of railway operations in other countries, he emphasised the imperative to address operational inefficiencies for a more sustainable service in Bangladesh.

"In other countries, the government entrusts service management to the private sector after developing rail infrastructure. This approach eliminates the need for the government to handle the management of a large workforce," he said.

He further urged the government to enhance private sector involvement to make railway services profitable in Bangladesh and ensure accountability among officials concerned.

Mentioning that the railway is allocating over Tk1,000 crore annually for infrastructure development, experts urged the introduction and implementation of a comprehensive operational plan to mitigate losses by enhancing revenue.

Budget committee calls for boosting revenue

The minutes of the December meeting disclosed the rail ministry secretary's dissatisfaction with the sluggish progress in revenue earnings, emphasising the need for more effective efforts to achieve the proposed revised target. The secretary further suggested the introduction of unit-wise monthly meetings to expedite revenue generation.

During the meeting, top officials, including the secretary, sought justification for the lower revenue, especially in the Western zone, despite the introduction of several new trains, according to sources close to the railway.

The meeting underscored the significance of making concerted efforts to boost revenue in various sectors of the railways, not solely relying on increased earnings from passenger and goods transportation fares.

Discussions during the meeting highlighted the potential to generate over Tk100 crore annually from railway land with concerted effort from the relevant officials. High-ranking officials also emphasised the importance of establishing a realistic revenue target.

Development expenditure to shrink

The Budget Management Committee has recommended around 10% reduction in the development expenditure for the Bangladesh Railway in the current fiscal year, alongside decreases in the revenue expenditure.

The committee proposed allocating Tk13,131 crore for the implementation of the Annual Development Programme (ADP) for the railways ministry, down from the original Tk14,559 crore.

Officials from the railways said allocations for the Padma Bridge Rail Link project are to be reduced by around Tk700 crore, while the Bangabandhu Sheikh Mujib Rail Bridge allocation will see a decrease of Tk1,061 crore.

In total, the ADP allocation for the railway is set to be reduced by Tk1,428 crore, according to railway officials.