The Taiwan Railways Administration (TRA) has accumulated operational deficits of NT$111.1 billion (US$3.66 billion), a Legislative Yuan Budget Center report said, adding that the government failed to come up with effective solutions to address the financial problems facing the nation’s five major railway operators.
The operators are TRA, Taiwan High Speed Rail Corp (THSRC), Taipei Rapid Transit Corp (TRTC), Kaohsiung Rapid Transit Corp (KRTC) and Taoyuan Metro Corp.
The report, which evaluated how the government has enforced its budget plan, included scrutiny of the budget allocated for building and operating railway systems.
The TRA has accumulated massive financial losses, which could “affect the soundness of the agency’s capital structure,” the report said.
The TRA has a price cap on its tickets and bears huge personnel costs, including the pension fund for retired employees, it said, adding that part of the agency’s budget is to be spent on meeting the government’s policy objectives, which are mostly profitless operations.
Although the TRA has managed to reduce its operational deficits over the years thanks to a more flexible use of its assets and more efficient operations, the agency had accumulated a loss of NT$111.1 billion by the end of last year, or 70 percent of its capital, it said.
The agency’s losses were mainly debt from the pension fund system for retired employees that was enforced before 1999, TRA Director-General Jason Lu (鹿潔身) said, adding that it does not mean that the agency is running its business badly.
The government’s Forward-looking Infrastructure Development Program, which includes large railway projects, would only deteriorate the TRA’s financial situation, former minister of transportation and communications Yeh Kuang-shih (葉匡時) said on Facebook.
“If the government is really serious about investing in railway infrastructure, its priority should be to address the TRA’s financial problems. The longer it waits to address those problems, the tougher it gets to solve them,” Yeh said.
The transportation ministry had stipulated plans to address the problems during the administration of former president Ma Ying-jeou (馬英九), including development of properties belonging to the old Taipei Railway Workshop, Yeh said, adding that the plan was canceled after the entire workshop was designated a national historic site.
The TRA was not the only railway operator that has financial problems, according to the report.
Although THSRC and KRTC have succeeded in restructuring their finances to eliminate debt, their debt-paying ability in the long term remains questionable if there are no significant changes in their operations, the report said.
“Both companies were financed using the build-operate-transfer model. Their severe financial losses were caused by long-term interest expenses accrued through the loans they secured to build the railway systems, amortization of fixed assets and other non-cash expenses. They will soon face problems caused by a shortage in capital and zero net worth,” the report said.
The KRTC’s working capital ratio was 35.8 percent, which showed it lacks the ability to pay short-term debts, it said.
The THSRC has a debt asset ratio of 86.8 percent and its interest expenses account for 20 percent of its operating revenue, it added.
Regarding TRTC, the report said that the company’s net income between 2012 and last year was NT$450 million to NT$1.26 billion, but its average profit ratio was about 4.6 percent, which shows that the company’s profitability was low and needs to be improved.
The firm’s competitive edge is declining due to its rise in funding for system replacement and diminishing investment efficiency for the continual expansion of the MRT system, it added.
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