I am from Kumta, KA & regular observe this train. Demand is so much. Train almost gets fool at Kumta/Honnavar itself, remember there are still big towns like Udupi, Byndoor, Bhatkal, Kundapur, Murudeshwar, Surathkal ahead.

As per Railway rules, Originating station gets General Quota, they can't do away with it & give other quotas. The quotas you mentioned are applicable from Intermediate stations.
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Also there is cold war issue of revenue sharing between Zones. Train originating stations get higher revenue, followed by terminating zone. Intermediate/Passing zones get less.
When introduced in hurry burry, Train was running as UR Special between Karwar - Vasco - Karwar, as at that time there were new platforms at Madgaon works yet to complete. KR also gets some kind of revenue for Maintaining/Cleaning/Watering/Fuelling & other maintenance. If in any case it gets extended to Vasco, KR would lose that terminating revenue + other. So KR too reluctant to send to VSG,SWR.
Same holds true for Mangalore-Madgaon Passenger, Mangalore-Madgaon VB or the erstwhile Mangalore-Madgaon Intercity. They never extend it even if they is no single train from Vasco towards Mangalore or South.

On the other end, VSG, UBL Div, SWR is too reluctant to accept as they have loads of Freight running from or For Murmagao Harbour & have their all lines always blocked.

Fact - 15-20 years back, When Madgaon had just 3 platforms they would find it difficult to handle trains at Afternoon. As Mangalore passenger, Janshatabdi would have arrived similar time & had their reversals. So KR just extended Mangalore passenger to Verna, a small wayside station on their own Jurisdiction instead of popular Vasco town.

The Already running UR Special between Karwar - Madgaon - Karwar has cause lot of damage to 16595/96 & affected permanent cancellation of another train too. Many do book online & travel till Karwar & changeover at Karwar. GS only 2 coaches, that gets full at Karwar +2 stations.

Like in every zones, there are some sections that are Neglected, Here too.
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sending it to Madgaon for watering/cleaning/fueling, Stabling., But they can't built One Stabling line at Karwar. Karwar had Watering facility, but that is abandoned long ago. One Stabling or platform line is need of hour at Karwar, as also Daily Night MEMU is stabled + 3 days a week 16515/16 Intercity + Once/twice a month Freight unloading.

On similar distance from Madgaon towards North, at Sawantwadi Road, 11003/04 Tutari Exp terminates, they constructed stabling line long ago for that & few years back constructed full fledged platform + watering facility + Another loop line too. Such is state of politics.

Sawantwadi Road is pen ultimate station of MH towards Goa, similar like Karwar of KA, towards Goa.