THE REAGAN administration's proposal to sell Conrail or to dismember it and sell off the parts is a lovely dream. Either version would eliminate a steady drain on the federal Treasury and further the administration's plan to make all modes of transportation self-sustaining. But no one in his right mind is likely to buy all or any major part of Conrail as it stands.

This unique, semi-public corporation was created a few years ago by Congress to salvage the Northeast's railroad network in the wake of the Penn Central bankruptcy. It has been and continues to be an expensive salvage operation made necessary by the essential service this primarily freight network provides.

The trouble with Conrail, financially at least, is that it operates too many unprofitable lines and is addled with a set of expensive labor protection arrangements. Add the fact that Conrail has the physical plant and equipment to handle far more freight than its shippers now generate, and you have a corporation ready for bankruptcy soon after the government stops picking up its deficits.

Conrail's chairman, L. Stanley Crane, told Congress last week that he doesn't think other railroads would buy any of Conrail's routes if they have to assume those labor arrangements and the commuter service the railroad now provides into some cities. His estimate is that if those two items were eliminated and Conrail dismembered, the purchasing railroads would abandon about half of the existing track network, eliminate about 40 percent of the freight service and displace about 40,000 freight employees.

Even if his scenario is far off the mark, the administration's proposal to sell Conrail had best be regarded as an opening ploy in a complex operation designed to make the Northeast's rail network once again economically sound, either in Conrail's hands or someone else's. The next round has to focus on those labor arrangements -- they were mandated by Congress when Conrail was created -- and on the abandonment of underused track.

Only then will it be possible to make a rational judgment about whether it makes more sense to break Conrail up than to feed it a little longer in the hope that it will finally become the self-supporting railroad it was designed to be.