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Commuter fares can’t foot train service costs - report
Passengers take a train ride from Kampala to Namanve on May 2, 2024. PHOTO/ STEPHEN OTAGE
What you need to know:
- During the period ended June, Uganda Railways Corporation failed to meet targets under commuter and cargo freight services.
A report by Auditor General Edward Akol indicates that a comparison of passenger revenue and input costs makes Uganda Railways Corporation (URC)operate commuter services at loss.
In details contained in the Annual Auditor General’s report for December 2024, Mr Akol indicated that the variance in revenue and the unit cost on passengers had, therefore, during the period ended June, seen URC’s passenger service section post a revenue loss of Shs1.17b.
The Auditor General also indicated that URC had largely failed to realise targeted commuter numbers in the three years to June 2024, realising only 837,528 passengers - a significant performance gap of 2.34m or 73.6 percent - out of the more than 3.17m targeted passengers.
The report also reveals that although URC had in the three years budgeted to transport 1.31m tonnes of cargo freight, only 689,908 was transported, “despite availability of demand, which illustrated “URC's inability to fulfil the entire demand for import and export freight services” due to the breakdown in its infrastructure under which, out of 1,420 wagons, only 646 were fit for use.
The report further reveals that out of the 51 locomotives owned by URC, only 11 were active.
The failure to meet targets, therefore, put the company in a complicated financial position with the balance sheet further deteriorating on key audit fundamentals.
For instance, the Auditor General noted that URC’s financial position, as a whole, had deteriorated with more decline in operating margins, which had stretched its capacity to cover operating costs, posing a risk to its financial stability and challenges in reinvestment for growth.
The Auditor General also indicated that the company’s return on investment had dropped to -0.83 percent, an indication that URC was noting sufficiently using its assets to generate revenue, while on the other hand, the company’s ability to meet short-term financial obligations, which is measured as a ratio of current assets and current liabilities, further deteriorated to 0.99, way below the desired 1.5 percent.
The deteriorations, therefore, impacted URC’s profit position, which in the period remained in the red zone, with the company’s loss expanding by 9.2 percent or Shs1.16b to Shs36.34b from Shs35.17b in the year ended June 2023.
Government has prioritised development of the railway infrastructure to reduce transport costs, enhance connectivity, and support growth.
However, the railway network remains largely undeveloped with only 269 kilometres, which represents 21 percent, of the 1,266 kilometres operational. URC also continues to struggle with underfunding amid an increase in cost needs and priority investments.
For instance, the Auditor General indicated that out of the approved budget of Shs354.2b for the 2023/24 financial year, only Shs91.5b or 26 percent was released, with significant shortfalls in internally generated revenue, government development funding, and exceptional income.
Mr David Musoke, the URC acting managing director, yesterday said URC was improving given that the assets that it had inherited after government cancelled the Rift Valley Railways concession about five years ago, had been found in a very bad state.
“URC is under performing for known reasons. It was privatised up to 2018. The private operator was supposed to do some investments such as wagons, and railway tracks but were not done. We are being rated with railways that are more than 20 years. World over if your network is less than 1,000 kilometres, you cannot break even. Ours is just 250 kilometres meaning we cannot meet the operating cost,” he said.
