High-speed rail ticket prices could drop by 10 percent if the company’s concession to operate the service could be extended further Taiwan High Speed Rail Corp (THSRC) chairman Ou Chin-der (歐晉德) said yesterday.
Based on a build-operate-transfer contract with the government, the high-speed rail company has exclusive rights to operate the system for 35 years, from 1998 to 2033.
The Ministry of Transportation and Communications has yet to respond to the corporation’s request that the concession period be extended from 35 years to 99 years.
Ou repeated the request when he attended a fund-raising event jointly hosted by the corporation and the Eden Social Welfare Foundation yesterday.
“If we can have 50 to 100 years to amortize our construction and operational costs, we can definitely lower ticket prices,” Ou said. “We should actively pursue this course of action. If there is a more reasonable mechanism to re-evaluate the concession period, passengers would benefit because we could then spend less on amortization. The ticket price could be lowered by at least 10 percent.”
Ou said the construction costs for the rail service were about NT$500 billion (US$16.7 billion), it has accumulated approximately NT$60 billion in debt and 35 percent of its revenue has been used for amortization since it began operations in 2007.
Ou added that the rail infrastructure should last 70 to 80 years, but the company could only use it for 26 more years before ownership was transferred to the government. He said that revenue is generated primarily through ticket sales and it is unreasonable to charge passengers higher prices.
Aside from the amortization, Ou said the company has paid more than NT$100 billion in interest to the banks since the service was launched almost seven years ago.
The company also has to bear the cost of discounted tickets for elderly and disabled people, which is about NT$100 million per month and should be paid by the government’s social welfare budget, Ou said.
The corporation is also obligated to pay a feedback fund to the government, he said.
In response, Minister in full Yeh Kuang-shih (葉匡時) said the corporation should first remove NT$60 billion in debt by asking its investors to reduce their capital investment and then increase it later.
“Then the company’s concession can be extended, which would help reduce ticket prices,” Yeh said. “All these factors have to be in place before we can talk about the extension of the concession period. Otherwise, we would be accused of letting the corporation’s investors make gains from such a move.”
Ou said the five largest investors have agreed to reduce their capital investment, but the exact percentages are yet to be negotiated.
A source has informed the Taipei Times that some THRSC directors have suggested that the corporation could increase the feedback fund to the government if its concession is extended.