State railway: No subsidies, must break even

State Railway must prove it can operate red line without losing money. What to do with Makkasan issue raised again.

TRANSPORTATION

State railway: No subsidies, must break even

Finance Ministry baulks at subsidy plan
30/01/2017
Wichit Chantanusornsiri

The Finance Ministry has brushed aside a State Railway of Thailand (SRT) request to receive subsidies for operating the Red Line electric railway, says a senior finance official.

The SRT had insisted that it should be the operator of the Red Line in a proposal submitted earlier to the Finance Ministry.

STATE RAILWAY: IF WE LOSE MONEY, MUST GIVE US MORE MONEY

The plan asked for help in guaranteeing 3 billion baht worth of loans that the SRT says it needs for working capital to operate the Red Line.

The SRT also asked for the condition that if after five years of operation the Red Line were still running at a loss, the Finance Minister would subsidise it with further capital of 5.6 billion baht.

THREE YEARS TO SHOW IT CAN RUN RAILWAY WITHOUT LOSING MONEY

Amnuay Preemonwong, the deputy permanent finance secretary, said the conditions as stated were unreasonable.

He said that while the ministry would be willing to act as loan guarantor, the second condition of further subsidies was unacceptable.

Also, the SRT has just three years to prove its ability to run the new rail route profitably, Mr Amnuay said.

IF THEY CAN'T BREAK EVEN, MUST HAND IT OVER TO A PRIVATE COMPANY

The SRT has struggled with heavy debts for decades.

"If the SRT still insists on operating this line, it must agree to these conditions," Mr Amnuay said.

"After three years of operation, if they fail to operate it profitably, the SRT must give up the operational right to a private company."

WHERE WILL THE RED LINE GO?

The Red Line will consist of two lines (see here).

The Dark Red Line will run from Thammasat University's Rangsit campus to Maha Chai in Samut Sakhon province.

The Light Red Line will run from Salaya in Nakhon Pathom Province to Hua Mak in Bangkok.

Both lines will pass through through Bang Sue Grand Station, the new main railway station for Bangkok that will act as a connecting hub for the MRT system.

It is also worth noting that the Red Lines run roughly along the route of the infamous failed Hopewell Project (see here & here).

RED LINE: DECISION ON WHO WILL OPERATE YET TO BE MADE

The Red Line is a wholly owned investment of the Thai government.

Operations are scheduled to commence in 2020.

The government has yet to decide who will operate the project.

The SRT, a state enterprise, suffers from a lack of trust after years of burdening the government budget.

STATE RAILWAY: AIRPORT RAIL LINK & OTHER BUSINESSES RUN AT A LOSS

The Airport Rail Link, an SRT project from the beginning, is run at a loss, in common with other businesses managed by the SRT.

"Given its [the SRT's] poor record, the ministry disagrees with leaving another huge investment in the SRT's hands, and we would prefer to see a private company operate" such projects, Mr Amnuay said.

Therefore, if the SRT insists on operating the Red Line, the Finance Ministry will put in writing that the enterprise has three years to prove itself -- and if it fails, it will forfeit the venture.

STATE RAILWAY CONTROLS HUGE AMOUNTS OF LAND

Then there is the issue of the huge amoounts of land across Thailand that the State Railway controls.

Is this land being put to productive uses?

Does this land generate market-going rental rates for the government? Do long-term leasees of government land at low rates make big profits by sub-leasing it at the market rate even? 

The SRT has a countrywide total of 39,000 rai of land in its possession, including 23,000 rai of vacant land.

Mr Amnuay said the Finance Ministry will have to consider whether it should set up a subsidiary to operate the SRT land bank.

The SRT holds as many as 15,000 land rental contracts, of which 50% are invalid and contract renewal has not taken place.

497-RAI MAKKASAN GREEN AREA IN DOWNTOWN BANGKOK  

The huge Makkasan green area located smack in the center of downtown Bangkok is a quite a hot potatoe of an issue (see here).

On the one hand, many Bangkok residents would like to see it developed into a park that would value to Bangkok as a whole for its residents and the millions of tourists that pass through Thailand every year.

They argue that yet another mall or shopping center will add little to Bangkok.

They call for public hearings and public participation in the decision-making regarding Makkasan, after all, they say, the public land ultimately belongs to the people who should decide what to do with it.

MAKKASAN COMMERCIAL DEVELOPMENT

On the other hand, there are commercial interests and government bureaucrats who are more concerned about putting the land to commercial and business uses and generating money for government coffers.

One issue between the Finance Ministry and the SRT is commercial development of one of the SRT's most valuable land banks, the 497-rai Makkasan property.

Mr Amnuay said the ministry will submit a development plan to the State Enterprise Policy Commission (superboard) for approval.

In addition, the ministry has insisted that revenue from the Makkasan project must be used to repay the SRT's enormous debt.

The ministry will not make a move on Makkasan without seeking advice from a professional real estate consultant to work out the details, he said.

http://www.bangkokpost.com/news/transport/1189297/srt-hits-resistance-on-red-line

http://www.bangkokpost.com/learning/work/850488/makkasan-green-areas-parks-or-malls

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