Railway Revenue

Sun (Auckland), Volume III, Issue 870, 14 January 1930, Page 8

Railway Revenue

Prospects for New Lines

“THERE are many advocates of tlie principle that it is not 1 necessary for a State railway to pay its way. I doubt if any economist of note would support this view which, evidently, is based on the fallacy that the development value is always sufficient to cover any losses that may occur. ’ This is one of the paragraphs contained in a recent paper by Mr. P. J. Jones, late chairman of the Railway Board —a paper lent especial interest at present by the Government’s policy of pushing ahead with its construction plans.

Mr. Jones contends that there is no apparent reason why some simple formula should not be evolved by which the value of railway construction to the country as a whole might be closely approximated. Actual revenue, he thinks, should be at least equal to all charges on the expenditure side, including cost of working and interest on capital. “The information required to analyse the business aspect of a railway is of a comparatively simple character,” he continues. “It embraces interest and other costs a mile per annum, ratio of working expenditure to revenue, probable revenue per mile per annum, and developmental value per mile per annum. “The capital cost per mile of line, though by no means the only criterion of stable finance, is of major importance in considering the question of economical value.” Figures quoted by Mr. Jones show average track mile costs of railways in some English-speaking communities. New Zealand is set down at £15,545, South Africa at £9,500, New South Wales at £16,200, Queensland at £8,672, Victoria at £13,900, the Canadian Pacific at £9,500, 'the Canadian National at £22,600, the United States at £15,500, and the English railways from £19,500 to £28,250. COSTS IN NEW ZEALAND The costs of various lines in New Zealand have risen enormously. The following table showing early and modern lines illustrates the swift upward trend: £ Oxford and Eyreton branches .. 2,300 Rakaia-Methven 3,300 Southbridge branch 3,600 Morrinsville-Rotorua 5,600 Frankton-Thames .. .. .. 6,000 Nelson-Glenhope .. 6,600 Foxton-New Plymouth .. 8,000 Palmerston North-Napier 8,300 Otago Central Railway 9,786 Catlins River branch 10,800 Marton-Te Awamutu .. 13,700 Kaikohe-Okaihau 24,000 Waihi-Taneatua .. ... .. .. .. .. 25,000 Glenhope-Kawatiri .. .. 34,000 Ranganui-Portland .. .. 41,300 Kohuratahi-Tahora .. .. 47,000 Waiotira-Kirikoponui 75,000 A high unit cost a mile is not necessarily an over-capitalisation, says Mr. Jones. The amount of revenue a mile and percentage cost of working enter into the problem so largely that it may be said of certain traffic that the line would be overcapitalised were it built for nothin? The effect of over-capitalisation is well exemplified by a comparison be-

tween, the Canadian Pacific and Canadian National Railways figures for 1926. TELLING COMPARISON The revenue a mile per annum was fairly even —£2/750 for the Canadian Pacific, with a percentage of working to revenue of 77.3, and £2,240 for the Canadian National, with a corresponding percentage of 82.5. The total annual revenue for the Canadian Pacific was £40,000,000, and for the Canadian National £55,000,000. The net revenue was £9,000,000 for the Canadian Pacific and £9,500,000 for the Canadian National. In spite of these conditions the Canadian Pacific paid a dividend of 10 per cent., while the Canadian National made a loss of close on £6,000,000, the explanation being that the former was capitalised at £9,500 a mile and the latter at £22,600 a mile. It was announced recently that the Canadian Government had decided to relieve the Canadian National Railways of its funded debt and thus reduce its capitalisation to an amount more nearly comparable with that of the Canadian Pacific Railway. In Great Britain the railways, capitalised at £22,000 a track mile, and with a revenue of nearly £B,OOO a mile a year—a total of £170,000,000 —only managed a dividend of just over 2 per cent, in 1926. The anticipated revenue a mile of a new line is generally overestimated, asserts Mr. Jones. In New Zealand, according to the railways statement of 1928, the revenues a mile are shown as follow: £ For the whole system .. . • .. 2,310 For the Kaihu section 277 For the Gisborne section .. .. 567 For the Westport section .. .. 3,203 For the Nelson section- 335 For the Picton section . . .. 676 For the North Island main line and connected branches .. 3,289 For the North Island main line excluding subsidised branches 3,678 For the South Island main line and connected branches .. 1,721 For the South Island main line, excluding 22 subsidised - branches 2,650 The table relative to subsidised branch lines shows £325 for six North Island lines and £392 for 22 South Island lines. “The figures available,” adds Mr. Jones, “are sufficient to enable an approximation as to the probable revenues to be expected on the various projected lines.”