The government's plan to provide more money for KiwiRail has been greeted with caution by the shipping industry, which has raised concerns over the impact the funding might have on the business.Transport Minister Steven Joyce announced yesterday that taxp
The government’s plan to provide more money for KiwiRail has been greeted with caution by the shipping industry, which has raised concerns over the impact the funding might have on the business.
Transport Minister Steven Joyce announced yesterday that taxpayers will provide a further $250 million to KiwiRail as part of a $4.6 billion turnaround plan for the ailing rail business.
Unsurprisingly, the announcement has caused concern in those businesses that compete with rail freight, especially when the impact of the increased funding on local shipping services is still not known.
Shipping Federation executive director Sam Buckle said the new funding only created more uncertainty over important freight market issues.
He said the “surprisingly large commitment” towards KiwiRail had the potential to have a serious impact on the future of local shipping services, especially if the money is used to effectively subsidise rail services that compete with shipping operators.
Despite this, Mr Buckle said there was no sign of that potential impact being addressed in the documents that accompanied the announcement, even though the impact on the trucking industry was examined.
"I hope the impact on shipping hasn't been overlooked, given shipping carries 30% of domestic freight by volume in this country and competes directly with rail in respect to some long haul and bulk services.”
Mr Buckle said the funding announcement also raised further uncertainty over issues such as how and where the rail money will be invested.
"Will funding be available, whether for capital or operations, where there are commercial shipping alternatives that don’t require public subsidy? How will we manage the risk that public subsidies are used to operate contestable services at a loss, thereby squeezing out competitors?
"The long timeframe KiwiRail has been granted to find its commercial feet accentuates the uncertainty. We are going to drag these issues out for a decade if we are not careful to design a funding framework that manages these risks."
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