Freight trains could make up for the railway's losses. But the lossmaker keeps neglecting its golden goose
Bangladesh Railway lost more than Tk20 billion in 2019-20. Freight trains could help subsidise the losses but the authority is neither focused on freight services nor on generating revenue
Did you know that once upon a time, Bangladesh's freight trains produced more than 55 percent of the total railway revenues? Or that once the average speed of these trains was above 17km per hour? Or even that during 1969-70 the railway actually netted profits?
If you are struggling to comprehend these numbers, the latest railway data shows that, at present, freight trains contribute only 21 percent of the total revenues while their average speed has reduced to 12km per hour.
The comparison of the country's freight train service with pre-independence data may sound a little out of place. But the assessment is necessary because while the railways of the leading economies around the world are profiting from their freight train services, Bangladesh's Railway (BR) authority has lost more than Tk20 billion in 2019-20; and losing such hefty amounts has been a regular occurrence in the last decade.
Bangladesh as a country has progressed in every sector since its independence. But if you compare some basic data of the railway's freight train services including freight trains run, coverage, speed, revenue percentage, etc with the 1969-1970's, you will be disappointed.
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The freight train earnings, despite showing a somewhat rising trend in the last few years, (Tk290 crore in 2018-19 for example), again fell to Tk245 crore in 2019-20.
Again, these numbers are only about 20 percent of the overall railway revenues which usually are thousands of crores in deficit.
In a conversation with The Business Standard, experts, including a former railway Director-General, said Bangladesh Railway could recover its overall losses with the profits it generates from the freight train services, if the authority focused on this sector properly.
But the authority is not focused because they lack the proper mindset, attitude and have an absence of cargo-focused policy.
The Business Standard also approached Dhirendra Nath Mazumder, current Director-General of Bangladesh Railway, but he did not respond to our questions. Instead, he texted back saying, "The question is little but the answer is big. Our response will be given later."
What is failing the freights?
Comparing the present data of overall freight train services with the 1969-1970's, Bangladesh Railway's former Director-General Tafazzal Hossain said "Bangladesh doesn't even run (many) freight trains now."
"You see the speed has reduced. Why? Because they are all passenger trains," he said. "We don't run (many) freights because there is not enough space to run them.
There is a term called Line Capacity. It determines how many trains you can run on a single line on a particular day. Suppose you run 20-25 trains a day on a single line. We already have 25 passenger trains on that line!"
However, experts like M Shamsul Hoque, Professor of Civil Engineering of Bangladesh University of Engineering and Technology, attribute our Railway's issues to a lack of interest within the railway authority.
"Actually the railway has no cargo-focused interest. The authority has no plans involving the railway in a way that can contribute to the economic development of the country," said Shamsul Hoque.
The Professor said that there are demands for freight trains, but there is not enough infrastructure present to use them. "The freight trains cannot run even 20 km per hour. What does that mean? You will see that they use the oldest engines and locomotives for the freights.
They could extend lines to where the government has EPZs. It could have been good for the overall economy; a large amount of railway subsidy could come from here.
Also, Kamalapur ICD's (Inland Container Depot) capacity is extremely low. A corporation has been formed to improve the function of the containers. But that is also not functional. It shows they are not focusing on freights institutionally, and depriving the country of a lot," Shamsul Hoque added.
Leading logistician Syed Ershad Ahmed, managing director of Expeditors (Bangladesh) Ltd and President of American Chamber of Commerce in Bangladesh also attributes the issues to a lack of interest within the authority.
"The railway doesn't even think it could actually be profitable. They don't do any research on the matter," Syed Ershad said.
A few of the major issues he mentioned include lack of focus and attitude – neither the government nor the businessmen have the right mindset. They would rather use trucks than bring the freights on rails.
"Both Ishwardi and Saidpur are important railway stations and there are EPZs in those areas. If we could build ICDs there – products from North and West Bengal could get into Dhaka on freight trains, and we could transport it to Chattogram. We never tried to explore these opportunities," he added.
Bangabandhu bridge does not have the capacity to run freight trains and as a result, the EPZs in Ishwardi and Uttara remain disconnected. The construction of an alternative rail bridge that could connect freight trains with these EPZs is currently in progress.
The wasted potential of the freights
Former Director-General Tafazzal Hossain said that if, for example, a passenger train between Dhaka-Chattagram can earn Tk3 lakh, then a freight train could earn Tk6 lakh. So, the railway loses about Tk2 for every Tk1 it earns.
"The government sees that we lose Tk2 to earn Tk1 but they still don't take any action. Why? Because the focus is on the passenger trains. For BR, profit is not the main issue here, it is about benefiting the people," the former DG said.
Sardar Shahadat Ali, Bangladesh Railway's Addl. Director General (OP), also told a local media in January that, "Whether railways around the world make profits or not is not important for Bangladesh."
From the various comments made by the Bangladesh Railway authority, it becomes clear they are neither focused on freight trains nor on generating revenues.
In the United States, transport, specifically railroads, stands at a 50.93 percent profit margin. It has an $80 billion freight rail industry. If we look a little closer to home, the freight rails in India are also subsidising their overall railway losses.
According to a Times of India (TOI) report, Indian freight trains revenues had grown 47.1 percent from Rs91,570 crore in the Financial Year of 2014 to Rs134,733 crore in FY20. The TOI also mentions that in 2017-18, India's freight trains profit was Rs45,923 crore against the passenger trains' Rs46,024 crore losses.
But the railway authority in Bangladesh does not seem to be interested in the global data of railways' success. Instead, they consider their losses as proof of their 'service' to the citizens.
Professor Shamsul Hoque labels such comments as "blanket coverage and silly talking." He further added, "When you can get away with citizens' money this easily, something is wrong."
He also said that BR does not operate in a way that would build a sustainable and substantial economy. And that out of the containers handled in Chattogram port in a year, the freight train services only provide about six to seven percent.
Shamsul Hoque believes that there is a huge opportunity for the railway to provide subsidy-less services to the passengers if the focus is put on the freight services. "You need to engage enough people at the port to adjust railway services, increase train frequency, get the freight trains new engines and locomotives, speed up and get the
Pangaon Inland Container Terminal (PICT) in good shape.
The flowery speeches about building so and so many ICDs [Inland Container Depot] without actual result doesn't help," he added.
Can freight trains subsidise railway losses?
According to insiders at the Bangladesh Railway and cargo truck businessmen TBS interviewed, while the freight train costs around Tk9,000 per 20ft loaded container, and Tk16,000 for 40ft loaded container, a 20ft loaded container on trucks may cost from Tk15,000 to Tk20,000 depending on demands, while 40ft containers may cost way more than Tk30,000.
"Sometimes businessmen feel discouraged to use the train because of the lack of facilities. But most importantly, it is up to the seller to sell, right? It is the only way to get the attention of the buyer. If the railway authority doesn't explore this, if they don't want to make revenues, how else can they get rid of loss?" Syed Ershad said.
However, the railway authority has plans involving freight trains, but as of now, they are only on paper.
The Railway Master Plan June 2016-June 2045, targeted potential container traffic by 2020 to be 1,25,459 in a conservative estimation; 3,76,376 in realistic and 7,52,130 in the optimistic estimation.
But in reality, they handled only 87,449 containers (of around three million TEUs of containers handled at Chattogram port) in 2019-20, which was far below the conservative target of the master plan.
"The targets cannot be reached because the projects that were supposed to be implemented already are still far from being completed," said Tafazzal Hossain.
"For example, the Mongla project (rail connection with the port) work began when I was Director-General. I retired seven years ago and this will still take a few more years to complete. So while the target may be three years but it is actually taking 10 years. Railway should complete the work of Khulna Mongla rail line soon," he added.
The experts said rail connection with Mongla port will not only enhance freight capacities within Bangladesh, but it could also connect us with Nepal and Bhutan. "The western rail has a connection with these two countries," the former DG said.
He also recommended establishing rail connection with Payra and Sonadia ports. These lines (rail connection with Mongla, Chattogram, Payra and Sonadia ports) could increase freight revenues by "four times." These lines with ports and western lines connecting the EPZs could subsidise the railway losses in their entirety, said Tafazzal Hossain.
Secondly, due to the complexities in facilitating interchangeability of the Metre Gauge (MG) and Broad Gauge (BG) line differences, freights cannot be operated in all areas.
Suppose you are based in the Rajbari district, and you have ten cars in the Chattogram port. If you want to bring them on the train, it will not directly get you to Rajbari because you have a BG line back home and a large part of Chattogram lines is MG. You have to get them on a truck again from Kamalapur ICD.
"Many traders don't want this complexity in transportation. Bangladesh railway should speed up converting the MG lines into BG lines," Tafazzal Hossain said.
The container trains wait up to five to seven hours due to a lack of lines. The Railway can run only four of the six freight trains scheduled for Chattogram port every day.
So, the former DG recommended developing multiple lines.
"You cannot profit by carrying passengers. With freight, yes, if the current freight services can be increased to three times, if the lines and other issues are solved, the earnings will increase; it will make up for the losses," concluded Tafazzal Hossain.
