Modeling track access charge to enhance railway industry performance Mohammed Ali Berawi, Perdana Miraj, Abdur Rohim Boy Berawi, Bambang Susantono, Pekka Leviakangas, and Hendra Radiansyah
Citation: AIP Conference Proceedings 1903, 060001 (2017); View online: https://doi.org/10.1063/1.5011555 View Table of Contents: http://aip.scitation.org/toc/apc/1903/1 Published by the American Institute of Physics
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Modeling Track Access Charge to Enhance Railway Industry Performance Mohammed Ali Berawi1, a), Perdana Miraj2, 3, b), Abdur Rohim Boy Berawi3, Bambang Susantono3, Pekka Leviakangas4 and Hendra Radiansyah3 1
Department of Civil Engineering, Faculty of Engineering, Universitas Indonesia, Depok, 16424, Indonesia Department of Civil Engineering, Faculty of Engineering, Universitas Pancasila, Jakarta, 12640, Indonesia 3 Center for Sustainable Infrastructure Development, Faculty of Engineering, Universitas Indonesia, Depok, 16424, Indonesia 4 Department of Industrial Engineering and Management, University of Oulu, Pentti Kaiteran katu 1, 90014 Oulu, Finland 2
a)
Corresponding author:
[email protected] b)
[email protected]
Abstract. Indonesia attempts to improve nation’s competitiveness by increasing the quality and the availability of railway network. However, the infrastructure improperly managed by the operator in terms of the technical issue. One of the reasons for this problem is an unbalanced value of infrastructure charge. In 2000’s track access charge and infrastructure maintenance and operation for Indonesia railways are equal and despite current formula of the infrastructure charge, issues of transparency and accountability still in question. This research aims to produce an alternative scheme of track access charge by considering marginal cost plus markup (MC+) approach. The research combines qualitative and quantitative method through an in-depth interview and financial analysis. The result will generate alternative formula of infrastructure charge in Indonesia’s railway industry. The simulation also conducted to estimate track access charge for the operator and to forecast government support in terms of subsidy. The result is expected to enhance railway industry performance and competitiveness.
INTRODUCTION Indonesian railway argued as one of the oldest railway networks in Asia Pacific and substantially contributes to the economic development of the country in the past century [1]. Despite the prolonged existence of this industry, the development in terms of network expansion remains limited [2]. From the total length of railway track estimated for about 6,811 km, only 40% of them are operated, and the rest were shut down due to various circumstances such as technical and financial consideration. In contrast, other countries such as China, India, and the member of European countries progressing their railway network expansion to cope with population, economic development, and sustainability issues. China for instance, during sixty years of the period from 1949 has been expanded their railway track from only 21,000 km becomes six – fold into more than 100,000 km [3]. According to the similar source, Germany with the area, only 3.72% of China has been successfully developed their railway network for more than 40,000 km. As the population in the country rises exponentially and road construction no longer able to accommodate automobiles purchased by the people, railway development plays crucial as means of alternative transportation for commuting [4]. PT Kereta Api Indonesia as a state-owned enterprise which operates most of the railway network in Indonesia has been an attempt to improve the service for users in terms of its quality and quantity of the infrastructure. However, the performance still far from the satisfactory level from regulatory and users. Many defects were demonstrated from railway track degradation, signaling a failure to comfort disruption from travelers.
Proceedings of the 3rd International Conference on Construction and Building Engineering (ICONBUILD) 2017 AIP Conf. Proc. 1903, 060001-1–060001-6; https://doi.org/10.1063/1.5011555 Published by AIP Publishing. 978-0-7354-1591-1/$30.00
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This situation argued as the result of an unbalanced infrastructure maintenance and operation (IMO) and track access charge (TAC). IMO is a government support for state enterprise which responsible for maintaining the condition and the function of infrastructure. Meanwhile, TAC is operator(s) responsibility for consequences in using the railway infrastructure to generate profit. During the period of the 2000s, TAC mostly equal to IMO thus makes PT.KAI to substitute their profit to cover IMO budget. In a longer term, the company requires prioritizing the needs in maintaining and renewing infrastructure and rolling stock which therefore leads to an occurrence of various accidents during operational. The responsibility of above-mentioned condition also pointed out to the government. As the regulator, it’s expected to propose better formulation to the use of infrastructure and related railway components. In other developed countries such as members of European Union has been implementing access charge through several approaches such as full cost (FC-), marginal cost plus markup (MC+) and social marginal cost (SMC). This study will evaluate the use of the MC+ approach to creating an alternative formulation which may improve Indonesia's railway services. The result also anticipated can be used to develop rigorous policy and regulation by related stakeholders.
TRACK ACCESS CHARGE IN OTHER COUNTRIES In general, infrastructure charging comprises of two approaches from Full cost (FC-) method and Marginal cost plus markup (MC+) method. When FC- approach uses a simple charge per train kilometer, MC+ method offers more diverse calculation. In some cases, the charges use train-km while others use path-km or gross ton-km. The detail of charging structure in European countries can be seen in Table 1. TABLE 1. Charging structure in European countries Full cost method Marginal Cost method
Germany Estonia Hungary Italy Latvia Poland Romania Slovenia
Austria Bulgaria Czech Denmark Finland France Netherland Portugal
Sweden Switzerland UK
Adopted from: [5]
There is no typical charging in MC+ approach based on the countries in Europe that have been implementing this concept. It will depend on national policy, historical railway and many other reasons of track access charge development. MC+ has been developed particularly in the western part of Europe such as United Kingdom (UK) and France [5]. UK has been separate their railway industry into operator and infrastructure manager (IM) which managed by Network Rail (NR). IM acts as the government extension which may own and collects charges from the operator(s). The revenue and charge of Network Rail shown in table 2. In the UK, network rail is the owner and infrastructure manager of most of the rail network in England, Scotland, and Wales. Revenue of Network rail is from four elements; the highest contributor namely Network grant with 63%, followed by TAC charge (28%), station charge (6%) and others (3%). The TAC consists of several components from the fixed charge, variable usage charge, traction electricity charge, capacity charge and others [7]. Variable usage charge covers operating, maintenance and renewals cost from the various traffic of railway track expressed by shortrun incremental cost. Operators have to pay for this cost and distinguished by rolling stock deterioration to the track [6]. Passengers train classified based on its class and freight train divided into its commodity. On the other hand, the capacity charge is part of variable charge where the additional cost will be subjected to the operator due to increased density in railway network. The charge uses geographical consideration and cost per train mile. Furthermore, traction electricity charge is a concept towards an environmental friendly to the industry where the train with diesel will be subjected to a higher cost than the electric train [8]. Infrastructure charge in France regulated through Decree No. 97-446 of 5 May 1997. It aims to reduce discrimination among operators and to improve transparency and accountability [9]. The charging scheme was categorized according to the railway network type. There are four basic categories from suburban lines, main intercity lines, high-speed lines and other lines. Those categories also have subcategories with the total for about eighteen items.
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Moreover, the component that forms infrastructure charge consists of several items such as the charge for the minimum services, charge for additional services, charge for ancillary services, and charge for basic services [10]. TABLE 2. Network rail revenue and charge Purpose of Charge
Actual Income (£ million)
Percentage (%)
Recovers maintenance and renewal cost that varies with traffic
182
3.36
226
4.18
162
3.00
912
16.86
13
0.24
135
2.50
3,779
69.87
5,409
100
Charge
Variable usage charge - Passenger - Freight - Open access Traction electricity charge (passenger and freight) Capacity charge (passenger and freight) Fixed TAC (passenger and freight) Other (electrification asset usage charge; coal spillage charge) Station long term charge Network grant
Recovers the costs of providing electricity for traction purposes Recovers the increased costs incurred by Network Rail as a result of increased traffic on the network Determined by Network Rail’s total revenue requirement Recovers associated costs Recovers station maintenance, repair, and renewal Paid directly by government instead of fixed charge TOTAL
Source: [7]
Charge for minimum service almost similar to variable usage charge and fixed charge in the UK. It consists of reservation charge, train running charge and access charge. Reservation charge subjected for passengers both conventional and high-speed lines, and freight train using price per kilometer excluding VAT multiply by adjusting factors. The train is running charge divided into passengers (regional and high-speed train) and the freight train. Last, access charge is a fixed charge for the operator that has a transport organizing authority (AOT) contract. Unlike the UK, France implementing two structure of charge not only train-km (train running charge) but also path-km (charge for minimum service). Charge for additional services consist of charge for opening lines, and signal boxed not kept permanently open and charge for IS (information systems) services. Meanwhile, charges for ancillary services comprises of charges for conducting feasibility studies (excluding Super Jumbo trains) and conducting studies into exceptional consignments before the ATE request. Last, charge for basic services based on the charge for the use of electric traction installations (RCE), charges for use sidings and charges for marshaling yards.
TRACK ACCESS CHARGE IN INDONESIA TAC calculation has been regulated in Minister of Transportation Decree No 62, 2013. It contains components for infrastructure charge such as operational and maintenance; the quality of the infrastructure, and operator capability. The formula is shown as follows:
TAC = (IO + IM + Depreciation) × f Where: TAC IO IM f
= Railway Infrastructure Charge = Infrastructure Operation cost = Infrastructure Maintenance cost = Coefficient
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(1)
Infrastructure depreciation expressed by an annualized life cycle. On the other hand, Coefficient (f) was determined according to the government policy for basic use of infrastructure. Passengers and freight share different weighting of the coefficient. Economic class is about 0.6, business class is about 0.7, and executive class is about 0.9 of the coefficient. Freight train only has one coefficient as 0.9 without any classification according to its weighting factor.
PROPOSED TRACK ACCESS CHARGE DEVELOPMENT TAC development in Indonesia will evaluate Indonesia's rail charge by adopting principles and TAC formula in France. SNCF in France's railway network acts as sole operator and create the subsidiary to operate railway lines. It also occurs in Indonesia where PT. KAI and its subsidiary mostly operate the railway track. The component for TAC will consist of minimum access package, and track access to service facilities. Minimum access package formed by a fixed charge, reservation charge and train running charge. The fixed charge is the basic charge of infrastructure maintenance and operation cost. In this study, France consideration that uses path train-km will be excluded and replaced by gross ton-km. It argued as the most suitable calculation due to a better deterioration weighting factor for the formula. Reservation Charge for Indonesia will use period factor that consists off-peak hours (HC), normal hours (HN), intermediate hours (HI), and peak hours (HP). The value divided progressively started from 0.5, 1.00, 1.25 and 1.50 respectively. As for train running charge considers the type of train from executive and business class with 1.20 of the weighting factor, followed by the economy class with 1.00 and the freight train with 0.82 (Muthohar, 2009). Freight train incurred lower factor than passenger train as a means to improve railway competitiveness than road transport. Minimum access package formula is shown as follows.
MAP = fixed charge x C1 x C4 Where: MAP Fixed charge C1 C4
(2)
= Minimum Access Package = Basic Cost from IMO = Time Value Factor from Reservation Charge = Type of Train Factor from Train Running Charge
According to France formula, there are three charge components in track access to services facilities namely fuel surcharge (based on charge/km), use of sidings (siding-km) and marshaling yards (per train entering marshaling yards). The fuel surcharge is the most feasible component to be applied on Indonesia's TAC. Since many of rolling stock mostly powered by diesel engine, the fuel surcharge will force the operator to use environmental friendly rolling stock. The charge is about 10% of diesel consumption per kilometer or equal to 1,350 rupiahs/km. Firstly, infrastructure maintenance and operation (IMO) shall be determined by considers three components namely maintenance cost, general cost and operation cost. Maintenance cost comprises of several items such as station, railway track, and fuels, bridges, signaling and telecommunication, planning and supervision. On the other hand, operating cost consists of personnel for maintenance and operation. General cost mostly related to Railway Company operational such as electricity cost, human resources, or even training. Indonesia consists of more than 17,000 islands. Thus the railway operation has to distribute into several operations to produce more efficient management. It comprises of nine area of operation (DAOP) and three regional division (DIVRE). Each of them will create IMO, and by considers its capacity and track length, the total IMO will then be produced which expressed by rupiah per gross ton-km. Minimum access package forecast IMO with time value factor from reservation charge (C1) and type of train factor from a train running charge (C4). Last, the minimum access package and fuel surcharge propose track access charge for Indonesia railway using the marginal cost approach. Fig.1 will summarize the use of Marginal Cost plus Markup (MC+) approach for Indonesia’s track access charge.
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FIGURE 1. Proposed TAC Flowchart
GOVERNMENT SUPPORT One of the crucial factors for the use of TAC is government support through a subsidy. It is considerably affected the ticket price and thus requires detailed investigation. This study uses a range value expressed by percentage for the government support. Lower limit assumed by available TAC on public records in 2011 and forecasted to date. The TAC equal to 1,601,573,470,701.79 rupiahs and IMO about 1,354,789,808,182.97 rupiahs. Thus, the subsidies were 246,783,662,518.83 rupiahs or 15.41%. On the other hand, upper limit considers France government subsidy to their railway infrastructure during 2003 – 2011 period were equal to 44.94%. The government of Indonesia published IMO equal to 1.47 trillion rupiahs in 2016. The TAC is about 1.73 trillion rupiahs and the subsidy should around 778.61 billion rupiahs, thus the operator have to pay for the TAC equal to 953.83 billion rupiahs.
CONCLUSION Marginal cost plus markup (MC+) is one of track access charge approach that may improve Indonesia's infrastructure charge shortly. This study considered France TAC formula and adjusted to the local context such as the use of train-path, fuel surcharge, and other related components. The TAC formula is formed by minimum access package (fixed charge, reservation factor, train running factor) and fuel surcharge. The TAC cost in 2016 using MC+ approach forecasted for about 1.73 trillion rupiahs and IMO value as much as 1.47 trillion rupiahs. This estimation of IMO – TAC shall be supported by government through a subsidy ranging from 15.41% to 44.94% for about 778.61 billion rupiahs. As the IMO calculation generates from secondary data, further research suggested examining detail components on maintenance and operation aspects.
ACKNOWLEDGEMENTS This research is fully supported by Ministry of Research and Higher Education, Republic of Indonesia and Universitas Indonesia
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