Thursday, April 2, 2009

Railways Act Bill 2008 - Who is winning?

The current review of the Railways Act aimed at encouraging private sector participation in the nation’s rail system is unlikely to achieve much in terms of private investment. The proposals contained in the bill are totally at odds with the original intent of the Bureau of Public Enterprise (BPE) to remove the ‘inherent conflict of interest’ in the current Railways Act 1955 - which vests regulation and provision of rail services solely on Nigeria Railway Corporation (NRC). As part of the privatization programme started by the Obasanjo regime, BPE did propose to separate the railway function into three separate entities, National Rail Development Authority; Rail Regulator, and Concessionaire (operations).

However, except for the amendment to the legislation with regards to, granting of track access to private operators through concessions, everything else in the proposed bill promotes the ‘status quo’. Although NRC will not continue to remain a monopoly service provider, it will still be solely responsible for rail development and regulation.

Under the proposed legislation, NRC will be the rail regulator, a service operator, grant concessions to private companies, retain ownership of the rail infrastructure and also be responsible for strategic rail development. This arrangement known as ‘vertical integration concession’ model, creates a conflict of interest and unlikely to yield any positive result.

What makes anyone think the NRC can perform these functions effectively considering its current deficiency in skills and history of mismanagement? How can the same organisation responsible for providing services regulate itself? Let’s assume the proposed change to the legislation achieves its objective and we have private operators competing with NRC. Are you telling me that NRC will certify its locomotives to be unsafe but certify that of its competitor to be safe? What skills does the NRC have in strategic railway planning? I think Honourable members of the Senate need to be educated in the difference between rail engineering and rail planning. You need to have identified the need for a rail line through rigorous planning techniques (demand forecasting, patronage modelling, origin/destination analysis, cost benefit analysis) before you start the ‘engineering’.

In Australia, the Queensland railway network is also managed through a ‘vertical integration concession model. Queensland Rail (govt-owned agency, similar to NRC) is responsible for the operation of services and ownership/maintenance of tracks. However, the regulation of rail services in terms of fares/subsidy and safety is undertaken by the State Government through the Department of Transport. The Dept of Transport is also responsible for all aspects of rail planning, and preservation of future rail corridors.

The Australian model is slightly different because the provision of passenger services is regulated by the state government. Whereas, passenger service operations is proposed to be deregulated in Nigeria. The Nigeria government will however need to subsidise these services because, if the actual cost is charged by the concessionaire it will be unbearable for commuters.

In the Nigerian context, there are two options available under the ‘vertical integration model’. The first option is, NRC to retain ownership of rail tracks, maintain rail tracks and set up delivery mechanism for new rail lines. Private companies to be responsible for provision rail services. Under this option, NRC will not be involved in operation of rail services. The Ministry of Transport will be responsible for negotiating rail concession contracts, and payment of subsidies to private rail operators.

The second option is, NRC continues to operate rail services but will have to compete with other private sector operators. It will also retain ownership of all tracks and maintain tracks on which it runs its services. Private sector operators will also be responsible for maintaining tracks in their concession areas. The govt through the Ministry of Transport will still be responsible for negotiating concession contracts/subsidies.

Under the two scenarios, the strategic long term planning for railways should either by undertaken the Ministry of Transport or a Strategic Rail Authority, but not NRC. The safety regulation of railways should also be undertaken by the MoT. NRC cannot be the safety regulator due to its interest in the ownership and maintenance of tracks. To have NRC undertake inspection or issue licence for rail inspectors on the rail track it owns will be a serious conflict of interest.

I’m sceptical about the intent of the proposed changes to Railways Act. It wouldn’t surprise me that the cabals that have profited from the inefficiencies and failure of the rail system are still at work. I also don’t think the Senate President was telling us anything new when you said “there are all sorts of interest groups that have now found themselves in the railway system. People who did not want the railway to work because they are benefitting from the failure of the railway at the moment”.

In actual fact, we can say the same about all sectors of our economy. As I wrote in my last piece, we are now a nation of Oligarchs. You will agree with me that, there are few individuals in Nigeria who have made colossal amount of money from the inefficiencies of the government. Where should we start, is it the failed railways, and road haulage cartel? or power generation and generator importers? or failed refineries and the petroleum products importers?. The list is endless. And when government-owned corporations that are set up to provide such services are put up for sale, they are sold to these same individuals under the guise of ‘privatisation’. Unfortunately, this is the product of ‘government failure’.

So tell me, who is winning?


Anonymous said...

There are several railway professionals of Nigerian origin operating within the UK railway industry. individuals within the group have sufficient expertise in all areas, including rail planning, engineering, operations and maintenance, to make Nigerian railway the envy of Africa.
There are even Nigerians capable of accessing funding for major rail contracts, from international financiers, who consider Nigeria a strategic market. Provided a business case can be made.
Therein lies the tragedy of the Nigerian railway situation.


Thanks for visitng.

I totally agree with that we have a enough Nigerians in diaspora who can help turn our railway around. The problem we have is political will.

Having said that, we now have a new MD at the Nigeria Railways Corporation. And I want to give him the benefit of the doubt.