New Public Transport Policy of MRT Operations

Mr Gan Thiam Poh asked the Minister for Transport what will be the new model and public transport policy of MRT operations after the acquisition of SMRT's operating rail assets by LTA on 1 October 2016.

Mr Khaw Boon Wan: Under the previous financing framework, rail operators own the operating assets, such as the trains and the signalling system. They are hence responsible for the building up, replacing and upgrading of the operating assets. However, as operators bear the full financial risk, they may be too cautious to undertake these costly works. This can affect the capacity and reliability of train services.

That is why the Government implemented the New Rail Financing Framework, or the NRFF, in 2011 for the Downtown Line. Under the NRFF, the Government owns the operating assets and is responsible for expanding, replacing and upgrading them. The train operator pays an annual Licence Charge for the right to use these assets and to earn revenue from operating the line. The Licence Charge is paid into a Railway Sinking Fund to finance future build-up, replacement and upgrade of the operating assets.

Following Downtown Line, LTA began discussions with SMRT and SBST to transit the older lines to the NRFF. The discussions with SMRT have concluded. Subject to SMRT shareholders’ approval, the North-South and East-West Lines, the Circle Line, and the Bukit Panjang LRT, will be transited to the NRFF.

The transition will benefit commuters in the following ways. First, we will be able to respond to increased ridership, and replace and upgrade operating assets, in a more timely fashion. Second, the operator, having been relieved of heavy capital expenditure, can focus on providing reliable and well-maintained rail services for commuters. Third, we can shorten the licence tenure from 30 plus years to 15 years. The operator will need to perform well if they want to be reconsidered at the end of 15 years.

On top of this, to ensure that the Government’s assets are well maintained and operations are better run, SMRT Trains will be required to comply with a rigorous set of Maintenance Performance Standards, Asset Management Requirements and Codes of Practice. In particular, the Maintenance Performance Standards will regulate maintenance processes upstream to ensure that issues which may affect train reliability are pre-emptively identified.