| Network Rail's funding could be cut in future |
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LONDON: Network Rail, Britain's state-backed train track operator, may face a cut in its funding , industry regulator Office of Rail Regulation said in a report on the company's revenue requirement.
The regulator, which carried out an assessment of Network Rail's business plan assumptions of future rail traffic, found that funding could be plugged at 17-20 billion pounds for the 2009-2014 control period, instead of the 22.7 billion pounds allowed in the current 2004-2009 period.
The government had set up Network Rail in 2002 as a not-for-dividend company to replace Railtrack.
The regulator feels that there is scope for cost reductions in the range of 2 per cent to 8 per cent a year over the five years to 2014. It has analysed Network Rail's requirements in terms of maintaining the serviceability and performance of the rail system, possible cost escalations in that work and assumptions on return on the group's capital.
Network Rail will come out with its medium term plan in June next year and the government will finalise the funding terms in early 2007. Network Rail in its interim results said its debts are of the order of 17 billion pounds.
Currently, the government supports the rail industry to the extent of around 4 billion pounds a year, of which at least half is provided as grants to Network Rail. In addition, the rail operator gets funds through train operating companies, which use government subsidies and fare income. The department for transport has said this amount could come down to 3 billion pounds in years ahead.
The regulator's chairman Chris Bolt said there is a fair degree of uncertainty about how much Network Rail would need and where it would come from. The train operators are now required to pay huge sums to the treasury for the right to operate franchises.
The regulator feels that Network Rail could raise its efficiency by 10 per cent to 34 per cent over the 2009-14 period on top of the 31 per cent improvement it has to achieve between 2004 and 2009. It said spending on renewals, which now account for about half of Network Rail's budget, could fall by between 6 per cent and 24 per cent.
Posted
on : Fri, 16 Dec 2005 14:05 GMT | General News
By : Pippa Fielding
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