Rep. James Florio (D-N.J.) yesterday called on Norfolk Southern Corp. and Morgan Stanley & Co. to raise their bids to buy Conrail, terming their $1.2 billion offers for the government-owned freight rail carrier "inadequate."

Florio, chairman of a House subcommittee reviewing the Conrail sale, said Conrail's continuing profitability -- $210 million in profits in the first half of 1985 -- made it clear Conrail was worth more than $1.2 billion.

"After six days of subcommittee hearings, I am convinced more than ever that the $1.2 billion sale . . . is inadequate," Florio said at a hearing on the Conrail sale.

"I believe Norfolk Southern and Morgan Stanley should consider resubmitting a more realistic offer which better reflects Conrail's true value," he said. "It makes no sense to give the railroad away for a bargain-basement price."

Later in the hearing, Conrail Chairman Stanley Crane continued his battle against the Reagan administration's proposal to sell Conrail to Norfolk Southern.

Crane said Conrail is financially strong enough to remain independent and need not be merged with Norfolk Southern to ensure its viability, as the administration has argued.

He rejected administration arguments that Conrail might falter in a future economic downturn unless it had Norfolk Southern's "deep pockets" to sustain it.

"We proved in 1982, in the depth of the worst recession in 50 years, our ability to survive a severe cyclical downturn in the economy," Crane said.

He also cited an April 1985 study by the U.S. Railway Association, a federal agency that monitors Conrail, which found the railroad would earn more than $1 billion over the years 1984 through 1988.

"The USRA study is significant because it was based on the assumption of an economic recession during 1986-87, showing that Conrail could still maintain profitability," Crane added.

Crane also urged Congress yesterday not to leave the railroad in a state of limbo and expressed concern that managers could abandon it if its future remains uncertain.

"I think it's imperative that Congress come to a decision," he said. "The worst thing is to have a state of limbo."

The administration has urged Congress to approve Norfolk Southern's $1.2 billion bid for the government's 85 percent stock interest in Conrail. Conrail employes own the remaining 15 percent.

Administration officials and Norfolk Southern argue that Conrail could not survive a downturn in rail traffic in the Northeast and Midwest, as has been predicted by some transportation analysts.

They suggest a stand-alone Conrail might suffer the same fate as the Penn Central railroad, which collapsed in the mid-1970s, forcing the government to form Conrail to preserve freight rail service in the Northeast.

In another development yesterday, a group of Conrail employes said it had filed an appeal with the U.S. Supreme Court to prevent the government and Norfolk Southern from further negotiations for the sale of Conrail employes' 15 percent stock interest in Conrail.

The Special Railroad Court ruled against the employes July 9, saying Transportation Secretary Elizabeth Hanford Dole had not exceeded her authority because she had not negotiated the sale of the employes' stock.