The Press WEDNESDAY, AUGUST 3, 1966. The Railways

Press, Volume CVI, Issue 31128, 3 August 1966, Page 16

The Press WEDNESDAY, AUGUST 3, 1966. The Railways

A marked improvement in the financial results from the South Island part of the railway system is noteworthy in the report of the Railways Department for the year ended March 31, 1966. While no great satisfaction can be taken in a deficit of £1,789,694 (compared with a surplus of £2,552,023 on the North Island part of the system), progress is being made. The South Island showed an increase in revenue of £115,250 and a reduction in expenditure of £191,406 —still a net loss but a loss smaller by £316,656 than in the previous year. The main contributors to this result were increased long-haul business and changed arrangements for the employment of waterside labour. Railway economics in the South Island will be helped by the closing of the uneconomic Waimate and Seaward Bush branch lines last March; but it is necessary to look only at the progress towards haulage by diesel power in the respective islands to find a main reason for the discrepancy in the economics of the two parts of the system. The proportion of gross ton-miles (excluding railcars, electric locomotives, and multiple units) in the North Island hauled by diesel locomotives was 88.4 per cent, and in the South Island 28.3 per cent. The corresponding percentages in the previous year were 82.3 and 26.1 The national policy of supporting the coal industry has lain heavily on railway economics in the South Island. But as steam rolling stock is worn out, its replacement by the much more efficient diesel traction is inevitable. The South Island railway system should benefit greatly from a £25 million rolling stock re-equipment programme which will be partly financed by a loan of £l5 million arranged with the International Bank for Reconstruction and Development.

Until this year, a large amount of unpaid interest was a feature of annual Railways Department reports. The amount was £6,979,916 last year. A reconstruction of the department’s accounts has relieved the department of the need to display year after year such an embarrassing figure. Last year the Government decided to reduce the department’s capital by £7O million. However, when further thought was given to this proposal it was found that such a reduction of capital, matched by a writing down of railway assets, would have seriously distorted asset values in the balance sheet. It was decided to retain assets at their book value but to make £7O million of National Development Loan capital non-interest-bearing and non-repayable, thereby creating a capital reserve of this amount. At the same time the balance of the National Development Loan capital will be converted to equity capital which will be serviced from revenue. The capital reserve will be used for writing off assets such as closed branch lines. This neat piece of bookkeeping should certainly be “a “ step towards making the Railways Department a “ financially viable organisation ”. A lopger step will be the rail-road ferry service which, though in effect a bridge linking the two islands, has proved a moneyspinner for the Railways Department. Last year a net profit of £912,257 was earned by the Aramoana on an expenditure of £980,090. Care should be taken that the service, which should be still more remunerative with two ferries, is not used to subsidise the ordinary .railway system. The ferries handsomely support the railways’ traffic—and the Nelson-Blenheim “ notional railway ”, which the Railways Department banished from its report a few years ago. Financial responsibility for this “ notional “ railway ”, which is run by the Railways Department, is now taken by the Interim! Affairs Department, which last year included in its accounts a subsidy of £172,283 for the service.

The recent increases in overseas freight rates underline the importance of expeditious and orderly internal transport to and from the ports; and the railways, of course, play the dominant part in providing this service. It is satisfactory, therefore, to notice the department’s determination to press on with a programme to modernise the system, to increase its efficiency and capacity, and generally to make the railways a viable concern.