RVR passenger contract reduced to 12 months

[John Ashworth]

RVR contract reduced to 12 months as firm revamps schedule delays

By DAVID HERBLING
Business Daily
Posted Thursday, April 11 2013 at 19:43

IN SUMMARY

- The government has opted to offer the rail firm shorter one year contracts, which gives the state a window to consider new operators on board should it be dissatisfied with RVR.
- Kenya’s passenger rail services have not recorded any significant improvement.

The government has put Rift Valley Railways (RVR) on shorter yearly contracts in running the passenger business amid concerns that the firm is making little progress to revamp the regions rail travel.

RVR won a 25-year concession to run the 2,352km Kenya-Uganda railway in November 2006 and a five year contract for the passenger business whose tenure was extended by months in 2008.

The government has opted to offer the rail firm shorter one year contracts, which gives the state a window to consider new operators on board should it be dissatisfied with RVR, said a senior official at the Transport ministry.

“The concession deal ended in June last year,” said RVR executive vice-chairman Brown Ondego in an interview with Business Daily on Monday. “We now do year-to-year contract.”

Seven years since RVR won the concession, its performance has failed to live up to the expectations of the Kenya and Uganda governments.

Kenya’s passenger rail services have not recorded any significant improvement.

Official statistics show that the total kilometres covered by the operator dropped from 389 million in 2009 compared to last year’s 365 million kilometres.

Performance in the cargo business has also not been impressive with the volume transported from the Mombasa port growing only marginally from 1,060 million tonnes in 2009 to 1,135 million tonnes last year.

This is despite the cost benefits transporters stand to gain moving cargo by rail. The Kenya Railways Corporation, which oversees the concession on behalf the government, appears not satisfied with RVR’s progress.

The corporation reckons that the number of wagons available to RVR has dropped to less than 1,000 compared to 3,200 when the concession was awarded. It links the congestion of the Mombasa-Nairobi Road to the decline in performance of the railway.

The firm was expected to overhaul the dilapidated metre gauge track — the first such major investment on the permanent way in twenty years — repair wagons and overhaul locomotives after a receiving a Sh13.9 billion ($164 million) debt.

Mr Ondego blamed the delay in rolling out repairs and purchasing new carriages on late disbursements of loans by financiers, including the International Finance Corporation, the African Development Bank and Equity Bank. RVR shareholders Citadel Capital, Trans-Century and Bomi Holdings are also to inject $82-million (Sh7 billion) to bring the total to $287-million.

Analysts said that rehabilitation of the rail network is critical to expanding trade across the East Africa.

Mr Ondego said commuter rail service is not profitable in many parts of the world and needs to be subsidised by the government.

“World over, passenger rail services do not make profit, they are subsidised. Its only in India where the commuter rail business has begun making profit and this is largely due to the huge population there,” said Mr Ondego.