Rail freight operators should not be subsidised
Tuesday, 14 August 2007
Tuesday, 14 August 2007
State subsidies for individual operators should be removed. Subsidies buffer the industry from the realities of the market: they may be harsh realities but they are the very ingredients necessary to stimulate change, innovation, competitiveness and sustainability.
What is needed is competition - the driving force behind innovation, efficiency and productivity gains. To enter the market requires fair rights of access to the network, equal treatment on access charges, necessary infrastructure capacity to accommodate growth and protection against unfair practices. There is, therefore, a role for the state to play:
1) ensure an institutional and procedural framework that allows more market entry and encourages competition
2) prevent incumbent rail operators from attempting to block new independent operators from accessing the network to provide competing services
3) increase the status of rail freight compared with passenger services
There is also a valid role for the state to play in financing (in part with the private sector, or in whole) the infrastructure required to meet the demands from industry. Whether in the development of dedicated rail freight corridors or simply enhancing the existing network to accommodate new freight services the costs are high. Business risks increase the costs for those attempting to finance these schemes using private capital. In order to prevent cutting corners that could compromise safety or much needed capacity, state funding or financial underwriting is essential.
However, the state should stay clear of any direct involvement in the management of the networks in case any ideological prejudice results in special favours and access to incumbent national operators where historic ties may still exist. There should, however, be an independent but state funded ombudsman that oversees the management of the network and prevents anti competitive practices taking hold.
Furthermore, such a body would also oversee the performance, budgets, access charges and legal compliance of the rail network management. In this way, investors, public and private can be reassured that their money is being well spent, efficiency and productivity targets are being met, and there is appropriate forward investment in new and enhanced infrastructure to allow for growth of rail freight traffic.
The ingredients for a successful rail freight industry that will finally prosper and deliver the efficient and competitive services industry needs are:
1) Public-private finance for the infrastructure
2) No state management of the infrastructure
3) A state-funded but independent ombudsman
4) No state-owned or subsidised rail freight operators
Is any of this likely or will rail freight continue its general spiral into decline?
What is needed is competition - the driving force behind innovation, efficiency and productivity gains. To enter the market requires fair rights of access to the network, equal treatment on access charges, necessary infrastructure capacity to accommodate growth and protection against unfair practices. There is, therefore, a role for the state to play:
1) ensure an institutional and procedural framework that allows more market entry and encourages competition
2) prevent incumbent rail operators from attempting to block new independent operators from accessing the network to provide competing services
3) increase the status of rail freight compared with passenger services
There is also a valid role for the state to play in financing (in part with the private sector, or in whole) the infrastructure required to meet the demands from industry. Whether in the development of dedicated rail freight corridors or simply enhancing the existing network to accommodate new freight services the costs are high. Business risks increase the costs for those attempting to finance these schemes using private capital. In order to prevent cutting corners that could compromise safety or much needed capacity, state funding or financial underwriting is essential.
However, the state should stay clear of any direct involvement in the management of the networks in case any ideological prejudice results in special favours and access to incumbent national operators where historic ties may still exist. There should, however, be an independent but state funded ombudsman that oversees the management of the network and prevents anti competitive practices taking hold.
Furthermore, such a body would also oversee the performance, budgets, access charges and legal compliance of the rail network management. In this way, investors, public and private can be reassured that their money is being well spent, efficiency and productivity targets are being met, and there is appropriate forward investment in new and enhanced infrastructure to allow for growth of rail freight traffic.
The ingredients for a successful rail freight industry that will finally prosper and deliver the efficient and competitive services industry needs are:
1) Public-private finance for the infrastructure
2) No state management of the infrastructure
3) A state-funded but independent ombudsman
4) No state-owned or subsidised rail freight operators
Is any of this likely or will rail freight continue its general spiral into decline?
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The difficulty with rail freight is often caused by the attitudes of those employed within that sector. To explain, if something goes wrong (which unfortunately it often does) there does not seem to be the urgency to do anything about it.
Attention to customer service and service performance often leaves a lot to be desired. Of course, by having better infrastructure will mean that excuse for poor performance is removed, but one is still left with the same people with the same old attitudes and approach to service for their customers. The only thing that will correct this is more competition, with the best performing operators being the ones that employ the right people with the right approach and who will deliver this at the most competitive prices: the contracts will be their's for the taking!
Attention to customer service and service performance often leaves a lot to be desired. Of course, by having better infrastructure will mean that excuse for poor performance is removed, but one is still left with the same people with the same old attitudes and approach to service for their customers. The only thing that will correct this is more competition, with the best performing operators being the ones that employ the right people with the right approach and who will deliver this at the most competitive prices: the contracts will be their's for the taking!
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