Indonesian Rail Masterplan Market Assessment


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  • Implications for masterplan/demand assessment Approach to be followed Identify rail services that have a role in transport system – can recoup their costs For other services initiate development of exit strategies
  • Very preliminary simple approach Key aspects Investment in rail has very long life and can not be moved Institutional transformation Potential and performance is impacted by government investment and pricing policies competition of other modes Essential for Government to get it right – policies & infrastr investment
  • Focus of market assessment 4 main lines of business General approach to be followed Identify services that cover costs and can play a role in transport system Focus for transport tasks that do not cover costs exit strategies how to serve transport needs at lower cost
  • Executive yields 307 distance 434 Business yields 188 distance 389 Economy yields 64 distance 414 Local yields 41 distance 62
  • Yield distance Commercial 250 37 Economy AC 167 32 Economy 43 30
  • If siding to siding transport, rail is only lower cost at 5 million tonnes If pick up and delivery cost, road remains lower cost even at 5 million tonnes
  • Sector policies Price regulation Subsidies for economy passengers Indirectly capacity limitations on economy Market entry Infrastructure charging Relationship between government and railway company Policies on grounds of external costs of transport European studies suggest upper limit for increase in cost ~ 25 % Impact of policies on modal shares Need for level playing field Important question. Will policies change in future
  • Objective of market assessment Java passenger & freight services basis for investment in infrastructure by Govt/infrastructure operator At level of individual facility At level of corridor At level of subsystem or total system Basis for investment in rolling stock and planning of operations by PTKA/train operator Basis for coordination between infrastructure operator and train operator
  • Context Railway is essentially a mining railway For historical reasons vertically separated Traffic (million tonnes/km): 1991: 1,873; 2008: 3,800 In principle easier than Java passenger & freight In practice appears to be not so simple – transaction costs 3 parties
  • Indonesian Rail Masterplan Market Assessment

    1. 1. Indonesian Rail Masterplan Market Assessment The role of rail in the Indonesian transport system
    2. 2. Outline <ul><li>Background/setting </li></ul><ul><ul><li>The role of rail in transport system </li></ul></ul><ul><ul><li>Overview of performance </li></ul></ul><ul><ul><li>Strengths of rail </li></ul></ul><ul><ul><li>Impact of sector policies </li></ul></ul><ul><li>Implications for market assessment </li></ul><ul><ul><li>Java main line passenger </li></ul></ul><ul><ul><li>Jabotabek passenger </li></ul></ul><ul><ul><li>Java freight </li></ul></ul><ul><ul><li>South Sumatra Coal </li></ul></ul><ul><ul><li>New coal lines </li></ul></ul>
    3. 3. Approach to Market Assessment <ul><li>Key principles </li></ul><ul><ul><li>price: impossible to assess demand without considering price and competition </li></ul></ul><ul><ul><li>cost: impossible to consider price without considering cost </li></ul></ul><ul><ul><li>Here: economic cost not financial cost. Because point of view </li></ul></ul><ul><ul><ul><li>Government </li></ul></ul></ul><ul><ul><ul><li>economic efficiency </li></ul></ul></ul><ul><li>Questions </li></ul><ul><ul><li>Strengths of rail : what is role of rail in transport system </li></ul></ul><ul><ul><li>demand for rail in the transport markets considering cost and price </li></ul></ul>
    4. 4. The role of rail in the transport system <ul><li>2 approaches to identify role of rail </li></ul><ul><li>Performance in market </li></ul><ul><ul><li>By main tasks/lines of business </li></ul></ul><ul><ul><ul><li>Based on revenues </li></ul></ul></ul><ul><ul><li>Growth of passenger/km, tonne/km </li></ul></ul><ul><li>Comparison of costs for different tasks </li></ul><ul><ul><li>Scenario analysis </li></ul></ul><ul><ul><li>Tonne/km cost of rail versus road </li></ul></ul>
    5. 5. <ul><li>PTKA revenues by main line of business 2008 </li></ul>Overview of performance Line of business % of revenues Java main line passenger services 45 South Sumatra Coal 27 Jabotabek passenger services 9 Java freight 8 Java local passenger services 4 Other 7 Total 100
    6. 6. Java main line passenger passenger/km and yield <ul><li>Overall decline of 3% p/y since 2000 </li></ul><ul><ul><li>Traffic declined sharply early 2000s but is recovering since 2004 </li></ul></ul><ul><li>Highlights 2000 - 2008 </li></ul><ul><ul><li>executive: + 0.7 % and yields and distances are good </li></ul></ul><ul><ul><li>business: - 4.4 % and lower yields </li></ul></ul><ul><ul><li>economy: -3.8 % low yields are topped up by PSO </li></ul></ul><ul><ul><li>local: + 7.2 % low yields are topped up by PSO </li></ul></ul><ul><ul><li>Conclusion: loss of market share – except for local </li></ul></ul><ul><li>This requires in-depth analysis – market research </li></ul><ul><ul><li>When was high point reached </li></ul></ul><ul><ul><li>What was impact of deregulation in competing modes </li></ul></ul><ul><ul><li>What was impact of aggressive performance competition </li></ul></ul><ul><ul><li>What was impact of economic crisis </li></ul></ul><ul><ul><li>Other factors ??? </li></ul></ul>
    7. 7. Jabotabek passenger services passenger/km and yield <ul><li>1981 – 2008 : </li></ul><ul><ul><li>overall steady growth 7.1 % p/y </li></ul></ul><ul><ul><li>but 2.8 % since 2000 </li></ul></ul><ul><li>Highlights 2000 -2008 </li></ul><ul><ul><li>economy: slight decline of 0.3 % p/y - very low yield compensated by PSO </li></ul></ul><ul><ul><li>decline compensated by introduction of A/C and commercial </li></ul></ul><ul><ul><li>much better yields for commercial and economy A/C </li></ul></ul><ul><ul><li>commercial approach by PTKA </li></ul></ul><ul><li>Jabotabek market segment also requires careful analysis </li></ul><ul><ul><li>Scope for further service differentiation - higher yields </li></ul></ul><ul><ul><ul><li>Commercial 250 Rp/pass/km compared to 43 Rp/pass/km for economy </li></ul></ul></ul><ul><ul><li>Scope for developing new markets in context of suburban rail transit development integrated with urban development </li></ul></ul>
    8. 8. Java freight services <ul><li>Highlights </li></ul><ul><ul><li>Java freight = 8 % of PTKA revenues </li></ul></ul><ul><ul><li>Peak probably in 1996: 1,440 tonnes/km </li></ul></ul><ul><ul><li>Since 1996: traffic - 2.1 % p/y </li></ul></ul><ul><ul><li>Traffic composition has changed considerably </li></ul></ul><ul><ul><li>Yield per tonne/km: Rp. 254 </li></ul></ul><ul><ul><li>Cost per tonne/km: Rp 500 ? Rp 600 ? </li></ul></ul><ul><ul><li>Loss per tonne/km: Rp. 250 ? Rp 350 ? </li></ul></ul><ul><li>Question: Which cargo has future </li></ul><ul><ul><li>Need for detailed traffic costing </li></ul></ul><ul><ul><li>Focus on profitable services </li></ul></ul><ul><ul><li>Exit strategies for unprofitable services </li></ul></ul>
    9. 9. South Sumatra coal traffic <ul><li>Highlights </li></ul><ul><ul><li>2008: 10.5 million tonnes – 4.4% p/y since 1991 </li></ul></ul><ul><ul><li>Coal traffic = 27 % of revenues of PTKA </li></ul></ul><ul><ul><li>Coal > than 91 % of freight revenues of SS Railway </li></ul></ul><ul><ul><li>yield Rp/tonne/km: Suralaya: 250; Kertapati 313 </li></ul></ul><ul><ul><li>Haul distance (km): 409 162 </li></ul></ul><ul><li>Question: why vertical separation </li></ul>
    10. 10. New coal railway lines <ul><li>Several studies and proposals for new lines </li></ul><ul><li>Sumatra: </li></ul><ul><ul><li>objective: to enable increase in production </li></ul></ul><ul><ul><li>part of new logistics chain from mine to a vessel loading point </li></ul></ul><ul><ul><li>example: new line to transport Bukit Assam coal to new deep water port at Tanjung Api Api, also involving construction of a bridge across Musi river: 3 major investments ! </li></ul></ul><ul><li>Kalimantan: </li></ul><ul><ul><li>part of logistics chain for a new mine (or group of new mines) to a vessel loading point. </li></ul></ul><ul><ul><li>example: proposals for Kalimantan lines. </li></ul></ul><ul><li>Feasibility is dependent on outlook in coal markets and ability to obtain firm purchase agreements </li></ul><ul><li>Challenges impeding realization </li></ul><ul><ul><li>all elements of logistics chain need to be developed </li></ul></ul><ul><ul><li>approvals of many central and local govt agencies </li></ul></ul>
    11. 11. Strengths of rail compared to road Impact of volume and distance <ul><li>Rail - total operating costs </li></ul><ul><ul><li>Java freight: Rp/t/km ?? </li></ul></ul><ul><ul><li>ESS coal: Rp/t/km ?? </li></ul></ul><ul><li>Why is cost Java more than 2 times higher ? </li></ul>Total volume (Million tonnes 2008) Hauling distance (km) Java (mix of general cargo) 4.3 258 Suralaya coa l (block train) 8.5 405
    12. 13. Rail versus road - impact of volume 500 km haul - Rp/tonne/km <ul><li>Scenario analysis – rail versus road </li></ul><ul><ul><li>Road is lower cost at low volumes </li></ul></ul><ul><ul><li>As volume increases, unit cost of rail declines </li></ul></ul><ul><li>Rail: siding to siding </li></ul><ul><ul><li>rail is only lower cost than new road at 5 million tonnes </li></ul></ul><ul><li>Rail: pick up and delivery cost </li></ul><ul><ul><li>road remains lower cost even at 5 million tonnes </li></ul></ul>
    13. 15. Road versus rail - impact of distance 250 km haul - Rp/tonne/km <ul><li>Scenario analy sis </li></ul><ul><ul><li>When pick up and delivery costs </li></ul></ul><ul><ul><ul><li>rail can not compete with road at 5 million tonnes </li></ul></ul></ul><ul><li>Java freight – typical conditions </li></ul><ul><ul><li>250 km typical hauling distance </li></ul></ul><ul><ul><li>total volume < 5 million tonnes – and mixed cargo ! </li></ul></ul><ul><ul><li>large proportion of cargo requires pick up and deliver y </li></ul></ul><ul><li>Outlook for rail ? ? </li></ul><ul><ul><li>need to be very selective </li></ul></ul>
    14. 16. Theory and reality why is rail carrying traffic that would be lower cost by road ? <ul><li>Combination of factors </li></ul><ul><li>No charging for infrastructure </li></ul><ul><ul><li>rail and road are competing on basis of their operating costs </li></ul></ul><ul><ul><li>higher rail infrastructure cost are not recovered </li></ul></ul><ul><li>No detailed traffic costing </li></ul><ul><ul><li>rail may not be fully aware of the real costs of some traffics - multi-product enterprise </li></ul></ul><ul><ul><li>depreciation on basis of historical cost </li></ul></ul><ul><ul><li>Govt. contributions in kind in the past </li></ul></ul><ul><li>business as usual – legacy of past </li></ul><ul><ul><li>is not sustainable. </li></ul></ul><ul><ul><li>“ above rail” costs are probably not recovered </li></ul></ul>
    15. 17. How to ensure that rail plays its role performs the tasks for which it is best suited <ul><li>Context - market economy </li></ul><ul><ul><li>Private sector firms in other modes constantly innovate and reduce costs </li></ul></ul><ul><ul><li>passengers and cargo owners make choices </li></ul></ul><ul><li>Easiest if prices/tariffs reflect economic costs </li></ul><ul><ul><li>Including external costs </li></ul></ul><ul><li>Ultimately largely an issue of sector policies </li></ul><ul><ul><li>Infrastructure investment </li></ul></ul><ul><ul><li>Infrastructure pricing – level playing field </li></ul></ul><ul><ul><li>Price/tariff regulations </li></ul></ul><ul><ul><li>Entry and exit regulations - all modes </li></ul></ul><ul><li>Policies affect modal shares </li></ul>
    16. 21. Information about shipment      Ship Carrier: UPS Tracking Number: 1ZY3759X0359299933 Status: Delivered Location: Porch Order #: 104-7638357-7363431 Shipment Date: December 5, 2009 Destination: BETHESDA, MD, US Track your package      Date Time Location Event Details December 8, 2009 05:12:00 PM Burtonsville - Montg MD US Delivered December 8, 2009 01:56:00 AM Burtonsville MD US Arrival Scan December 8, 2009 01:46:00 AM Laurel MD US Out for delivery December 8, 2009 01:46:00 AM Burtonsville MD US Arrival Scan December 7, 2009 09:32:00 PM Laurel MD US Arrival Scan December 7, 2009 07:42:00 PM Harrisburg PA US Departure Scan December 6, 2009 01:42:00 PM Harrisburg PA US Shipment received by carrier December 5, 2009 01:12:27 PM Lewisberry PA US Shipment has left seller facility and is in transit
    17. 22. Java commercial passenger services <ul><li>Approach to forecasting demand - micro </li></ul><ul><ul><li>market by market – service by service – OD </li></ul></ul><ul><ul><li>what is competition doing </li></ul></ul><ul><ul><li>relative prices – quality of service </li></ul></ul><ul><ul><li>elasticity measures </li></ul></ul><ul><ul><li>understanding shifts in demand </li></ul></ul><ul><li>Implications </li></ul><ul><ul><li>Lead role – PTKA/train operator </li></ul></ul><ul><ul><li>Need for accurate cost data for business unit/service </li></ul></ul><ul><ul><li>Need for coordination between infrastructure and operations </li></ul></ul><ul><ul><li>Focus on capacity requirements at the level of facility and corridor </li></ul></ul>
    18. 25. Java economy passenger services <ul><li>Approach to forecasting demand - micro </li></ul><ul><ul><li>BUT </li></ul></ul><ul><ul><li>Demand depends on fare </li></ul></ul><ul><ul><li>Fare depends on cost and PSO subsidy </li></ul></ul><ul><li>Implications </li></ul><ul><ul><li>Need for stable agreement between government and PTKA/train operator on level of subsidy (PSO) </li></ul></ul><ul><ul><li>Need for traffic costing data by business unit/service </li></ul></ul><ul><ul><li>Government/MOT to develop concept of: (i) target population; (ii) level of support justified; (iii) mechanism for PSO delivery </li></ul></ul><ul><ul><li>Need for coordination between infrastructure and operations </li></ul></ul><ul><ul><li>Focus on capacity at level of facility & corridor </li></ul></ul>
    19. 26. Java freight services <ul><li>Approach to forecasting demand - micro </li></ul><ul><ul><li>market by market, service by service, OD </li></ul></ul><ul><ul><li>knowledge of: competition, door-to-door costs, quality of service, initiatives by competition </li></ul></ul><ul><ul><li>changing industrial location </li></ul></ul><ul><li>Implications </li></ul><ul><ul><li>Lead role – PTKA/train operator </li></ul></ul><ul><ul><li>Need for accurate cost data by business unit/service to support decision to produce & pricing strategy </li></ul></ul><ul><ul><li>Need for coordination between infrastructure and train operations </li></ul></ul><ul><ul><li>Focus on capacity requirements at the level of facility and corridor – eliminate bottlenecks </li></ul></ul>
    20. 27. Jabotabek passenger services suburban commuter rail <ul><li>Requirements for efficient metropolitan transport </li></ul><ul><ul><li>integrated multimodal system </li></ul></ul><ul><ul><li>based on complementarity between modes </li></ul></ul><ul><ul><li>need for metropolitan entity </li></ul></ul><ul><ul><ul><li>(1) prepare a coordinated metropolitan transport plan; (2) deliver integrated system; (3) providing integrated services </li></ul></ul></ul><ul><li>Role of Jabotabek rail in metropolitan transport </li></ul><ul><ul><li>providing high volume suburban commuter transport </li></ul></ul><ul><li>Issues </li></ul><ul><ul><li>Commuter rail is very costly – how to optimize its role </li></ul></ul><ul><ul><li>experience shows that fare box can not cover operating costs </li></ul></ul><ul><ul><ul><li>Financing has to be supplemented with other metropolitan income ideally from those who benefit from the economies of agglomeration </li></ul></ul></ul>
    21. 28. Jabotabek passenger services <ul><li>Approach to forecasting demand </li></ul><ul><ul><li>Identify role of suburban rail in overall transportation system </li></ul></ul><ul><ul><ul><li>based on relative costs of modes </li></ul></ul></ul><ul><ul><li>Macro modeling approach </li></ul></ul><ul><ul><ul><li>based on O-D and modal split is preferred </li></ul></ul></ul><ul><ul><li>Planning work has already been done </li></ul></ul><ul><ul><ul><li>The Study on Integrated Transportation Masterplan for Jabodetabek </li></ul></ul></ul><ul><ul><ul><li>detailed recommendations on investments & actions </li></ul></ul></ul><ul><li>Implications </li></ul><ul><ul><li>need for separate business unit for Jabotabek train operations – operational and financial autonomy </li></ul></ul><ul><ul><li>client of business unit = metropolitan transport entity </li></ul></ul><ul><ul><li>strong focus on traffic costing to underpin level of subsidy </li></ul></ul><ul><ul><li>stable pool of funds from various sources/modes </li></ul></ul>
    22. 29. Integrated land use and transport planning <ul><li>Goal </li></ul><ul><ul><li>to enhance the role of rail in metropolitan transportation </li></ul></ul><ul><li>How </li></ul><ul><ul><li>Transit oriented urban/suburban development </li></ul></ul><ul><ul><li>Central concept: ACCESSIBILITY </li></ul></ul><ul><ul><li>Promotion of public transport </li></ul></ul><ul><li>In practice (Jabotabek Masterplan Study) </li></ul><ul><ul><li>Improve quality of rail services </li></ul></ul><ul><ul><li>Upgrade railway stations & intermodal connections </li></ul></ul><ul><ul><li>High density real estate development in vicinity of railway stations </li></ul></ul>
    23. 30. Concept for railway catchment area
    24. 31. South Sumatra coal <ul><li>Approach to forecasting – institutional status quo </li></ul><ul><li>Long term - only one major client </li></ul><ul><ul><li>ideally: long term contract </li></ul></ul><ul><ul><li>BUT: credibility of off-take commitments by mining company </li></ul></ul><ul><li>Medium term – coordination/synchronization </li></ul><ul><ul><li>Production planning of the mine </li></ul></ul><ul><ul><li>Transport capacity planning of railway </li></ul></ul><ul><ul><li>Agreement between 3 parties on </li></ul></ul><ul><ul><ul><li>Volumes </li></ul></ul></ul><ul><ul><ul><li>Operating procedures at transhipment points </li></ul></ul></ul><ul><ul><ul><li>Operating indicators </li></ul></ul></ul><ul><ul><ul><li>Cost sharing on rolling stock </li></ul></ul></ul>
    25. 32. Kalimantan new (coal) railway lines (1) <ul><li>Obstacles to implementation in past </li></ul><ul><ul><li>short distances </li></ul></ul><ul><ul><li>collaboration between mining companies for minimum volumes </li></ul></ul><ul><ul><li>coordinated development of ENTIRE logistics chain: challenge </li></ul></ul><ul><ul><li>lack of legal and regulatory framework for private sector financing </li></ul></ul><ul><li>Principles </li></ul><ul><ul><li>integral part of mining scheme (mining permit includes transport) </li></ul></ul><ul><ul><li>mining company fully responsible for </li></ul></ul><ul><ul><ul><li>identifying least cost logistics chain </li></ul></ul></ul><ul><ul><ul><li>developing, financing and operating all elements of the logistics chain </li></ul></ul></ul><ul><ul><li>Government = facilitator </li></ul></ul>
    26. 33. New (coal) railway lines (2) <ul><li>Outlook has now improved </li></ul><ul><ul><li>Minimum volumes (5-10 million tonnes) </li></ul></ul><ul><ul><ul><li>available in principle in Kalimantan </li></ul></ul></ul><ul><ul><ul><li>In Sumatra if major increase in output at existing location </li></ul></ul></ul><ul><ul><li>Legal framework available </li></ul></ul><ul><li>Remaining issues/challenges </li></ul><ul><ul><li>Implementing regulations to be developed </li></ul></ul><ul><ul><li>Collaboration for minimum off-take commitments </li></ul></ul><ul><ul><li>Government facilitation and coordination during development stage </li></ul></ul><ul><ul><ul><li>One stop shop </li></ul></ul></ul>