New Rail Financing Framework
What is it about? How would this new framework help improve the reliability of trains in Singapore? Let’s find out.
Shortened Operating Licenses
Shortened from 30–40 years to 15 years with an additional bonus of 5 years, this improves competition in the rail network by allowing operators with unsatisfactory performance be switched after a shorter time. Excellent operators will be given a choice to extend the license up to 5 years.
Infrastructure and Operating Assets
There is no change in the control of assets, Land Transport Authority (LTA) which decides what tracks, tunnels and viaducts to build, replace and upgrade. The operator will then maintain it.
However, the operating assets, previously decided by the operator to build, replace, upgrade and maintain has been changed. It follows a similar fashion to infrastructural assets, where the LTA decides on building, replacing and upgrading operating assets whereas operators maintain it.
Advantages coming from this change would be that companies will not be pressured to make poor cost cutting decisions to generate more profits.
Maintenance Standards
Operators under the new framework will need to abide by the new Maintenance Performance Standards to improve maintenance performance and reliability of the train network.
This ensures that operators will have to carry a proper and thorough maintenance regime to ensure all assets and infrastructure will be in good working order by the given set of standards.
Profits and Risks
Before the change, rail operators bore the full revenue risks. This means during hard periods, they may get lesser profits and on the converse, get more profits when the economy is good. Rail operators also earn the full value of what commuters spend, every dollar spent on the network goes directly into the operators pocket.
After the change, rail operators have to pay a license charge for building, replacement and upgrading of operating assets, which is now decided by the LTA. However, risks are borne equally on both LTA and the operator. When operator earns more, LTA gets more for the network’s license charge, conversely, if the operator earns lesser, LTA will lessen the license charge.
This ensure that the market stays competitive and operator will not lose out due to the fluctuating market.
Lines under the NRFF Scheme
Currently, SMRT Train’s and Light Rail’s networks, North South Line, East West Line, Circle Line and Bukit Panjang LRT has been taken over by LTA on 1 October 2016 and expires in 2031 with an option for a 5 year extension.
SBS Transit’s Downtown Line has been launched with the scheme from start of operations and will expiry in the next decade (late-2020s)
LTA has been in talks to transition SBS Transit’s North East Line to the New Rail Financing Framework for North East Line and Sengkang Punggol LRT.
Exceptions to the scheme
Thomson East Coast Line (TEL) has also been awarded to SMRT Trains on an alternate scheme, shorter, nine year license with two years extension has been awarded due to the train line opening in five stages. This scheme, familiar to many like the Bus Contracting Model. It works by paying the operator a fixed amount of money to run the line, LTA bearing the full risk.
New standards will include incentives and penalties when performance is reached, which LTA says will be extended to other rail lines if effective and TEL will revert to the regular NRFF scheme when the contract ends.
Summary
Commuters stand to gain more from the NRFF scheme, which encourages operators to do good and do well, while enhancing and value-adding to commuter’s experiences. Operators will have to abide by the rule books to get their profits, if not, get cut for underperforming.
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