SINGAPORE: Land Transport Authority and operator SBS Transit have reached agreement for the Downtown Line to transition to the second version of LTA’s New Rail Financing Framework from January 1 2022.
In 2011 DTL became the first line to use the original NRFF, whereby the operator collects the fare revenue and pays the government agency a fee for the use of assets such as trains and signalling. This exposed the operator to significant commercial risk, as there was no mechanism to share the pain of any revenue shortfall.
A second version of NRFF was therefore developed, incorporating a risk sharing mechanism to give the operators more certainty and stability. The revised model was rolled out on the North-South, East-West, Circle and Bukit Panjang LRT lines in 2016 and the North East, Sengkang LRT and Punggol LRT lines 2018.
Under the risk sharing arrangements, if ridership is lower than projected, LTA shares some of the revenue and profit shortfall. If profits are higher than expected, the operator pays an increased fee which is channelled into the Railway Sinking Fund to be used for the renewal of operating assets.
Announcing on November 11 that the DTL would switch to the second version of NRFF, LTA explained that ‘the operating context for our rail operators has changed significantly’ in the past 10 years. The network has expanded, while higher reliability standards have increased costs, but the coronavirus pandemic has caused a reduction in ridership and flexible working has changed travel patterns.
LTA said the transition would reduce commercial volatility and improve the financial sustainability of the DTL. This would ‘ensure that SBST continues to focus on its core role of delivering reliable train services for commuters.’
As part of the agreement, SBST will hand over its rail advertising business to LTA from January 1 2024. Alternatively, LTA may instead require it to pay a concession fee.
‘LTA has a responsibility to ensure that commuters are well-served by public transport companies with safe, reliable and financially sustainable operations’, said LTA Chief Executive Ng Lang. ‘This transition will improve the financial sustainability of the line and allow SBST to continue to focus on serving commuters well.’
