What\'s to do with the Railway?

The Bangladesh Railway is losing due to competition from other modes of transport, especially from those on roads and waterways.
Railway was an efficient mode of transport for human beings and movement of physical goods in this part of the world. But now the Bangladesh Railway seems to be in a state of decay from which there is a slim chance of recovery.
The British Raj laid the railway network almost throughout the Indian subcontinent in the late 19th century - nearly at the same time as in England. The railway had been the largest public sector company in the subcontinent and employed the largest number of people compared to any other company that existed in the British-ruled India. Then, in 1947, the Railway was divided with the division of the subcontinent on political lines.
The railway establishment that fell in the area of the eastern part of erstwhile Pakistan was renamed as the East Pakistan Railway. But, if our memory does not fail us, the East Pakistan Railway did not change the inherited company structure. Even in the early period of independent Bangladesh, the Railway was an entity like a company run by a Board and was headquartered in Chittagong. Then sometimes in late eighties or early nineties, the railway headquarters were shifted to Dhaka and put directly under the Ministry of Railway. Then, the Railway turned to be a government enterprise just like any other concern under the public sector. Thus, it lost all its glory, wore a dilapidated outlook - and nobody was taking interest of the Bangladesh Railway.
The government has, from time to time, tried to add some shines to it by procuring and adding new engines and new compartments but failed to reinstate even partly its past glory. The Bangladesh Railway lost business in freights of goods to the private sector operating through other modes of transport on roads and waterways. Though the Bangladesh Railway is still, to an extent, popular with passengers going from one place to another on safety and comfort grounds, there too it lost in competition to land routes and waterways being operated by the private sector. As more and better roads are being constructed throughout the country, the Bangladesh Railway will face a difficult time to compete for passengers and freight of goods against  alternative modes of transportation. But the Railway is taking up a large number of development projects by spending money to the extent of $20 billion in the next few years.
From all sources of finance like the Asian Development Bank (ADB) and the World Bank, the Bangladesh Railway is taking money as credit for its expansion and modernisation. The suppliers of credit only see whether borrowers can repay the credit as per the agreement, and as the Bangladesh government is the borrower and guarantor of the loans, the creditors are very happy to provide Bangladesh with as much loan as it asks for. The lending agencies know Bangladesh can repay any amount of loan in foreign currencies when the loans fall due for repayment and that is why they are now very eager to give credit to Bangladesh whenever it asks for. But the debt burden is ultimately to be underwritten by the people of the country. They are to pay taxes to service any debt the government incurs.
We do not know whether the Bangladesh Railway undertook any cost-benefit study before it undertook so many projects. In the past also, a huge amount of money was spent for the same purpose, but those money could not put the Railway on a survival footing in a free market framework. The Railway could have survived until now because of government subsidy to its operation by pumping taxpayers' money. On any commercial criterion, the Bangladesh Railway should have been closed down by now. What economic theory says is that an organisation which cannot cover its current expenditure from the operational income should be closed. The Bangladesh Railway failed for years to cover its running cost from the revenues it was earning from its operation. Should the Railway be run simply because it is providing some public services?
 Is the Bangladesh Railway so essential that it will have to be run up to the end by state subsidy? If the government decides that the Railway services are essential at the cost of taxpayers' money, then, too, at a point, either it should be narrowed down in structure or at least, it can partly be run on a no-loss, no-profit basis. But if the government really wants the Railway's expansion and modernisation, then its whole operational structure should be put to market test. Market test is nothing but putting the Bangladesh Railway to compete with other modes of transport operating on commercial basis. If the Railway can earn money or so to say, make profit against the investment the government has made in it, then only it deserves to be funded at taxpayers' money. Otherwise, this white elephant should be allowed to die under its own weight of accumulated loss. If the government wants the Railway running, then the organisation should, at least, be partly privatised. Its management and catering system should be handed over to the private sector. The government should also consider conversion  of the Railway  into a company. The main lines should be put to market test so that money earned as profit from commercially viable areas can be spent on the branch lines as complementary cost.
The writer is Professor of Economics University of Dhaka.
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