How Bangladesh Railway can cut its losses by a fifth

The Bangladesh Railway is one of the biggest loss-making organisations of the Bangladesh government. 

Although the Railway has yet to publish its financial statements for the last two fiscal years, in the five years before that, it has lost around Tk1,308 crore ($152.41 million), on average, every year. 

While in  FY 2014-15, it lost Tk872.84 crore ($101.71 million), the loss went up to Tk1,734.37 crore ($202.09 million) in 2018-19.

And yet, ironically, the Railway is the largest landowner — owning 61,860 acres of land — in a country where land prices are comparable to those in developed countries. 

The chief of Bangladesh Railway, the Railway Minister and its secretary were not available for comment on this despite several attempts over phone and text. 

Even by nominal calculations, the Railway could make up as much as a fifth of its losses by effectively using the land in its possession. 

At present, the Railway uses about half of its land for operating the railways. Around 23 per cent has been leased out, which earns the organisation around Tk65 crore, while the rest remains illegally occupied. 

Specifically, Bangladesh Railway leases out commercial land at Tk150 ($1.75) per square foot and agricultural land at Tk6,000 ($69.91) per acre on yearly contracts. According to current and former officials, the agency could easily double the money it earns from leasing out real estate by simply extending the tenure of the lease contracts.

A one-year contract usually discourages leaseholders from making long-term investments in the property. 

Furthermore, if steps are taken to recover and lease out the lands currently in illegal possession, the Railway could be looking at around an additional Tk 260 crore ($30.30 million) in annual earnings.  

"The lease price, at least for property in Dhaka, can easily be doubled or tripled simply by extending the lease period in the contract," a retired chief of Bangladesh Railway said on condition of anonymity. Even outside of Dhaka, railway-owned properties are generally in prime locations simply because cities and towns around the country have developed around railway stations.

According to the former railways chief, not only is the lease duration a hindrance but there are also many difficult conditions attached to the lease document, such as not allowing a concrete structure on the premises and requiring leaseholders to have their structural designs get approved by the Railway. 

"If these are removed, leaseholders will be able to make long-term investments," he added. 

The logic behind the short lease contracts, presumably, is to allow the Railways the freedom to reclaim the land if and when it is required for its own expansion. 

"To be able to lease out our land for a period of five to 10 years we will first have to create a land-use plan and segregate the land we will not need for immediate use," says a top official of the Railways on condition of anonymity because he is not authorised to speak on the topic. 

Every year, the Bangladesh Railway sets ambitious targets for earning from its land. However, it invariably falls short of its target. According to officials, its land offices are heavily understaffed. 

According to experts, the Railway can turn its non-performing capital into performing capital fairly easily. 

"Bangladesh Railway can make the railways profitable simply by using its land," says M Shamsul Hoque, Professor of Civil Engineering of Bangladesh University of Engineering and Technology. "It can reclaim its unused and illegally occupied land to generate revenue". 

South Korea has set an example in this regard. In South Korea, they are using railway's land in Public-Private Partnership projects. 

"Bangladesh can also use its land for public-private partnership projects," said Shamsul Hoque. 

Neighbouring India has statutory authority in this regard — the Rail Land Development Authority (RLDA) — under the Railway Ministry for the development of railway land. The main tasks of the authority are to formulate its development plan — leasing commercial sites, colony redevelopment, station redevelopment and multi-functional complexes.

At present, the RLDA is working on many projects for commercial and residential development on vacant lands. This includes multifunctional complexes next to railway stations and redevelopment of railway colonies. 

Indian Railway, which is also the largest landowner in India with 7,23,771 acres of land, has taken the initiative to utilise the surplus land of the railway to generate revenue as well as to create value to railways assets. Of the land it owns, only 1,06,255 acres is vacant or available for commercial, industrial as well as residential purposes. 

But we do not have a separate authority like this in Bangladesh. 

Hoque said many good investors in the country are not finding land for expanding their businesses and industries, especially in Dhaka city, one of the most densely populated cities in the world.