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Jakarta Post

Govt told to limit operator rights in rail concession

  • Farida Susanty

    The Jakarta Post

Jakarta   /   Sat, February 6, 2016   /  05:03 pm

Following a proposal that exclusive rights be awarded to the contractor of the US$5.5 billion Jakarta-Bandung high-speed rail project, pundits have raised concerns over the possible impact on customers.

Indonesian Consumer Foundation (YLKI) chairman Tulus Abadi highlighted possible fare and service uncertainty stemming from PT Kereta Cepat Indonesia China (KCIC)'€™s monopoly. '€œThere won'€™t be room for any other service. [KCIC] will be able to unilaterally decide the level of fare and service,'€ he said on Friday.

He added that the situation would be worsened if the government did not set any limits. '€œThen it really would all depend on the operator,'€ he added.

The firm proposed the exclusive right as a part of the concession agreement now being negotiated with the government.

Indonesian Transportation Society (MTI) chairman Danang Parikesit voiced the same concern, stating that an the exclusive right would expose the public to monopoly practices, which could impact rail fares.

'€œIf they want an exclusive right, the price should also be reasonable. In monopolies, there'€™s always a tendency to exploit exclusive rights. It has to be controlled,'€ Danang said.

He proposed that the government set a price ceiling for the operator of the high-speed railway, as applies with air fares.

'€œThe government should step in as a regulator. There also needs to be a system or an agency to maintain railway projects run by private operators,'€ he said, pointing to the system applied by the Toll Road Regulatory Agency (BPJT), which manages toll roads under the Public Works and Public Housing Ministry.

KCIC has predicted that fares for the high-speed railway will reach around Rp 200,000 (US$14.68), with an expected 28,000 passengers on 50 daily trips.

Based on KCIC'€™s calculations, the company will reach break-even point (BEP) in 40 years, hence the concession period of 50 years.

KCIC president director Hanggoro Budi Wiryawan added that ticket sales would not be enough to reach BEP, which would require support from the transit-oriented development (TOD) planned for the areas surrounding the rail link.

The 142.3-kilometer railway will serve four stations, namely Halim, Karawang, Walini and Tegalluar.

The development will be mostly financed by the loans from the China Development Bank, with the rest sourced from KCIC'€™s capital.

The firm itself consists of an Indonesian consortium formed by four state enterprises holding 60 percent of the shares, as well as a Chinese consortium led by the China Railway Corporation holding 40 percent of the shares.

KCIC expects construction to start this year, with operation hoped to begin by 2019.

However, while groundbreaking was held last month, challenges to the development have surfaced, including questions over permits and environmental studies.

The Transportation Ministry has not yet signed a concession agreement or issued building and railway infrastructure operational permits because of disagreements including over the exclusive right.

The ministry has proposed a buffer zone of 10 km between the project and any future high-speed rail project

The ministry'€™s director general for railways, Hermanto Dwiatmoko, previously said that the measure was intended to secure the ministry in building a planned high-speed rail link connecting Jakarta and Surabaya, East Java, and which was slated to be built alongside the Jakarta-Bandung railway.

KCIC and the ministry have still to reach an agreement, including the starting point of the concession; the firm has demanded it begin from the issuance of the operational permit, rather than from the signing.

Public policy expert Agus Pambagio said that exclusivity was not likely to be given by the government, as doing so would violate the Railway Law, which states that a rail track may be used by several operators.

'€œIt can'€™t be exclusive, anyone can build around it,'€ he said.


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