Sun | Sep 23, 2018

Highway concession not a roadblock to Kingston rail service - DBJ

Published:Friday | October 17, 2014 | 12:00 AM
Disabled assets of Jamaica Railway Corporation in downtown Kingston.

Avia Collinder, Business Reporter

A contractual agreement with Highway 2000 operators that Kingston cannot expand beyond its single rail line will not impact current efforts to find an investor willing to redevelop the defunct lines into a viable business, the Development Bank of Jamaica insists.

"There are no undertakings which have been given to the operators of the highway which would prevent the redevelopment of the railway," said the bank, which is handling the privatisation of the service on behalf of the transport ministry.

"Any prospective developer of the railway would be free to refurbish the existing single track between Kingston, Spanish Town and Williamsfield, and Spanish Town to Ewarton, as it was operating before the closure of the railway."

Section 25.8 of the concession agreement between NROCC and French-owned TransJamaican Highway Limited notes that the highway developer would have to be compensated were the rail service to compete for passenger traffic via a Spanish Town to Kingston rail link.

The DBJ says this will not be a stumbling block for future rail operators.

"Based on the DBJ's assessment and legal advice received, there are no provisions contained in the Highway 2000 concession agreement that would conflict with either the GOJ's planned privatisation of the Jamaica Railway Corporation (JRC) or the value of the railway's assets," said the bank in written responses to Financial Gleaner queries.

DBJ was responsible for the conceptualisa-tion of the Highway 2000 project and negotiating the concession agreement.

Section 25.8 of the concession does not preclude refurbishment of the existing single-track passenger rail link between Kingston, Spanish Town and Williamsfield, and Spanish Town and Ewarton, to the level operating before the closure of the rail link for the carriage of passengers, the DBJ said.

The rail system, as it existed up until 1992, accumulated losses year after year as bauxite freight dwindled. Passenger fares were insufficient to cover the cost of the operation.

Any new element introduced for rail which results in reduction of highway revenues, the concession agreement states, will trigger compensation at levels to be determined by an independent traffic adviser mutually agreed between NROCC and TransJamaican.

"If no agreement can be reached on the appointment of the independent traffic adviser, either party may request the president of the International Chamber of Commerce to appoint the independent traffic adviser," it stated. The international Chamber is based in Paris, France.

At its peak, the rail system carried more than one million passengers regularly in the 1970s. Cutbacks in service due to the unavailability of diesel fuel, however, led to reduced usage.

Public railway tracks belonging to the JRC span 335 kilometres across Jamaica, traversing nine of the 14 parishes.

Successive administrations have been plotting revival of the rail service, but talks over the years, including with potential Indian investors, all fizzled.

In 2011, the JRC relaunched rail passenger services under a test programme on the Spanish Town-Charlemont route in St Catherine. It locked down the service after a year, in August 2012, having disclosed losses of about $2 million monthly.

In its current effort to divest the service, the Government of Jamaica is guided by a central principle - scoring a deal that does not require any financial input from the State.

The divestment committee is weighing whether to divest to a preferred bidder or breaking up and selling the assets of JRC, the company's chairman said in September.

Three expressions of interest are currently being scrutinised, the DBJ said last month, two of which have been identified as coming from Herzog Contracting Corporation and Railmark Holdings Limited.