BERL awaits government response
The BERL independent review of a KiwiRail report used to justify closing the Gisborne to Napier line has been released. The key overall finding is that, “The Napier to Gisborne rail decision is a national one”. The decision requires evidence which is broader in economic scope than the commercial financial analysis in the KiwiRail report presently available to government. A comprehensive Cost Benefit Analysis would provide the evidence for a sound decision.
The response to this review has come only from KiwiRail. The decision is clearly one involving national and regional interests, so we look forward to seeing central government’s response.
BERL comments on points raised by KiwiRail
Funding ‘deferred maintenance’ and capital costs. BERL’s section 7 Long term capital for part of the national network says that this rail line is part of New Zealand’s core infrastructure, and the provision of that capital is for the government. It does not need to return a full commercial rate of return to the SOE KiwiRail.
KiwiRail appear to agree with BERL, saying “even if the capital requirement is at the lower end of our estimate, it would still need to be funded as the margins are not enough to cover the capital that would need to be spent.” The implication being presumably that the funding must come from elsewhere, e.g. central government.
The need for a comprehensive Cost Benefit Study. Kiwirail says, “We have always said that a more detailed assessment would be required so that the full risk is understood before more money is committed, but we won’t be doing further work on this unless the funding becomes available.” BERL agrees and finds that such a study is the preserve of central government, preferably involving other stakeholders.
Revenue per tonne or per tonne kilometre. KiwiRail says, quite correctly that comparison based on revenue per tonne is flawed, and that revenue per net tonne kilometre (NTK) is a more accurate indicator. BERL devotes section 1.4 Projections of revenue per tonne to analysing the revenue per 100 NTKs of hauls of varying distance in New Zealand. This is applied to the Gisborne rail analysis.
The possibility of forestry freight. KiwiRail agree that this forest freight has promise, but “we have not been able to gain any commercial agreement that would deliver on that promise.” Given the range of economic development and transport benefits, BERL states that “there is a very strong case for national and regional governments to take some responsibility for restoring the capital which was run down..and .. for investigating the feasibility and costs of achieving effective rail access to the northern Hawke’s Bay forests and the Napier processing plants and port.” If this is not done there will be an additional 83 trucks per day on this section of SH2, an increase by over 33 percent.
The potential impacts on transport and efficiency in the export industries, and on regional economies calls for a response from central government.