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Tuesday, April 16, 2013

UN ECONOMIC BRANCH LINES - An important question for IIIA examination - repeatedly asked


UNECONOMIC BRANCH LINES
1987,1988,1991 (with Books) & 1990,1992 (without Books)                                        5 Marks  - short notes question
                 
Ø  Definition of Branch Line: 

     All Narrow gauge lines and such lines that join the Main line net work at one end only are termed as branch lines ( based on the recommendation of Uneconomic branch lines committee, 1969)



     Definition of Uneconomic Branch Line:

Ø   The Branch lines which do not earn profits are termed as Uneconomic Branch Lines  or un remunerative Branch Lines  .

Ø  Assessment on territorial basis of the financial results of the branch lines indicates that some of them suffered a loss. The aggregate loss on these un remunerative branch lines amounts to Rs. 1366 cr in 2011-12 year.


Ø  Several high-level committees have unanimously recommended that all such uneconomic branch lines, where alternative modes of transport exist or can be developed, should be closed down so as to reduce, to the extent possible, the losses which accrue to the Railways, year after year. There is, however, reluctance on the part of state governments to close down such lines.

Ø  The Railway Reforms Committee in Part XI of their report on ‘Economies’ (October 1983) had recommended that (i) 40 such lines where adequate alternative road infrastructure are available & (ii) 17 such lines in Gujarat where alternative road infrastructure could be developed, should be closed down and in cases where the state governments do not agree for closure for their own reasons they should share the losses with the Railways on 50:50basis. Instructions have been issued for closure/dismantling of 21 uneconomic branch lines (15 out of 40 & 4 out of 17 referred to above and 2 other uneconomic branch lines).

Ø   In order to enable the state governments for closure of the remaining 36 lines, the Railways are ready to offer financial assistance as under:

(a)  On one time basis, the Railways may subsidize the procurement of additional buses required due to
closure of rail sections subject to the State Government agreeing for their permanent closure.

(b)  Again, on one time basis, Railways may offer financial assistance for
development/improvement of road infrastructure which will be a prerequisite for withdrawal of train services.

(c)  Offer of Railway embankments in respect of 13 lines in Gujarat for conversion into all
 weather metalled road.

2011-12 year data on uneconomic branch lines 

v  Total lines – 88 (BG -51, MG -19 and NG-18)
v  Total loss during that year – 1366 Crores. (excluding dividend on their account)


Ø  In spite of showing losses, these branch lines worked due to public pressure and opposition of State Government to close such lines.

Ø  The running of above lines as part of social service obligation on Indian Government Railways

Ø  The Dividend liability on these lines is subsidized from General Revenues .

Ø  Financial results of these lines will be worked out on marginal cost principle.  If any Branch line showing profits, then the dividend will be paid.

Ø  The Annual Statement  regarding the financial results of the “uneconomic branch lines  is submitted to the Railway Board in prescribed form.

Ø  This statement should also indicate the steps taken to improve the performances and reduce the working expenses.

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2 comments:

  1. What are the factors taken into consideration and how is the expenditure/earnings component calculated for a specific section of uneconomic branch line/New line

    Sushma

    ReplyDelete
  2. The question related to Traffic costing. I will be back with you, an appropriate answer. Thank you.

    ReplyDelete