It is sent to Madgaon for Coach water filling, Coach cleaning & Diesel Refuelling of EOG as well as LOCO.

KR is almost like Public Private Partnership organisation. They don't get various benefits provided by Railways during budgets & all. They need to manage things within the revenue they generate. To overcome unwanted expenses & cost cutting they do various things like this.
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Karwar needs additional line & platform from long back, but due to budget constraints & internal politics, they never have provided.

They need to hire Seperate Agency for Housekeeping if needs to be done at Karwar also Watering needs to been done. Watering facility is abandoned long back at Karwar. Madgaon has round the clock Housekeeping staff hence sent there. Also Diesel refueling is not possible at Karwar.

Panchaganga is only overnight train serving Coastal KA districts of Karwar & Udupi to state capital Bangalore & always sees high waiting list. Extending & terminating at Madgaon or Vasco would make KA coastal districts loose General quota.

During starting of this train, It was proposed by SWR & KR to terminate at Karwar & sent to Madgaon for Watering, Cleaning & Fueling. As additional loop line & platform work was in progress at Madgaon, KR requested SWR to take up watering, cleaning & Fueling till additional line work at Madgaon completes. Post completion, train started going only till Madgaon as decided Earlier.

Regarding Extension of this train to Madgaon/Vasco - Direct or Indirect would result in Coastal KA people loose General quota seats for their lone train to...
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State capital. As mentioned, this train sees high waiting list.

Yes Connectivity between Vasco to Karwar,Udupi, Mangalore & vice-versa is need of hour, but this train may not suit criteria. Either Passenger, DEMU (not resumed yet) or erstwhile Intercity which is permanently cancelled by KR or any new service should be started/worked upon.