The Downtown Line (DTL) will transit to version two of the New Rail Financing Framework (NRFF) from Jan 1, 2022, the Land Transport Authority (LTA) said on Thursday (Nov 11).
This comes after a financial sustainability review conducted by both the LTA and transport operator SBS Transit (SBST).
The DTL has been using the first version of the NRFF since 2011, while the majority of other train lines used the updated framework between 2016 and 2018 onwards.
New Rail Financing Framework (NRFF)
What is the New Rail Financing Framework?
The NRFF allows the government to decide on the capacity expansion (procuring new trains) and asset renewal (upgrading of systems) in a more timely manner.
With that, LTA takes ownership of all operating assets for a train line, such as its trains and systems, whilst the rail operator focuses on delivering reliable train service for commuters.
Comparing both NRFF Version 1 and NRFF Version 2
The first version of the NRFF had a significant commercial risk for the rail operator, as there is no mechanism for the co-sharing of a fare revenue shortfall.
Currently, the LTA charges rail operator SBST a fixed licence charge regardless of its fare revenue and profitability of the DTL.
When the DTL is updated to use the second version of the NRFF, the LTA will charge SBST a variable licence charge depending on fare revenue and profitability. SBST will benefit from this update as it will co-share the risk for revenue losses together with LTA.
When the DTL outperforms its projected revenue, LTA will increase the licence charge where the monies will be channelled into the ‘Railway Sinking Fund’ for the funding of the replacement and upgrading of the train line’s operating assets.
To summarise the similarities and differences between both frameworks
|NRFF Version 1||NRFF Version 2|
|LTA owns all operating assets for the train line, such as its trains and systems|
|Operator is responsible for the operation and maintenance of the operating assets, with the aim to deliver reliable train service for commuters|
|Operator pays LTA a fixed licence charge, regardless of fare revenue and profitability||Operator pays LTA a variable licence charge, depending on fare revenue and profitability|
|Operator is fully responsible for all revenue profit and losses||Operator pays LTA a higher licence charge if revenue outperforms projected revenue|
|Operator co-shares risk for revenue losses with LTA if actual revenue underperforms projected revenue|
Shifting the Downtown Line to NRFF Version 2
Downtown Line to be consolidated into a single licence
LTA said that as part of the transition for the DTL to use the second version of NRFF, the DTL will be consolidated under a single licence, along with other rail lines such as the North East Line (NEL), and the Sengkang LRT (SKLRT) and Punggol LRT (PGLRT).
This gives rail operator SBST the licence to operate the DTL, NEL and SPLRT for a term of 11 years, commencing from Jan 1, 2022, to Dec 31, 2032.
It added that this transition “will reduce commercial volatility and improve the financial sustainability of the DTL, and ensure that SBST continues to focus on its core role of delivering reliable train services for commuters.”
Handing over of rail advertising business & revision of existing bus contracts
As part of the agreement, SBST will hand over its rail advertising business to LTA from 2024 onwards.
Prior to this date, LTA will review the arrangements and may consider requiring SBST to pay a concession fee to continue operating the rail advertising business from 2024 instead.
The concession fee for the continuation of operating the rail advertising business from 2024 will be set by LTA with the consultation of SBST.
In addition, LTA and SBST have reviewed the service fee of five existing bus contracts and has agreed to a revised rate that is lower than the current, benchmarked against recent tenders.
The five bus contracts will be extended by an average of three years at these revised rates.
Safe, reliable and financially sustainable operations
Chief Executive Officer of LTA, Ng Lang, said that “LTA has a responsibility to ensure that commuters are well-served by public transport companies with safe, reliable and financially sustainable operations.”
He added that the transition of DTL to NRFF version two is “timely, given the significant changes in rail operating context since DTL was first placed on NRFF ten years ago.”
“This transition will improve the financial sustainability of the line and allow SBST to continue to focus on serving commuters well,” he said.
Downtown Line – SGTrains
North East Line – SGTrains
Sengkang LRT – SGTrains
Punggol LRT – SGTrains
Transition of Downtown Line to New Rail Financing Framework Version Two – LTA [Accessed 12 Nov 2021]
New Rail Financing Framework – LTA [Accessed 12 Nov 2021]
6 things you need to know about the New Rail Financing Framework – MOT/gov.sg [Accessed 12 Nov 2021]
Downtown Line To Transition To New Rail Financing Framework (Version Two) For Long Term Sustainability – SBS Transit [Accessed 12 Nov 2021]
Downtown Line to transition to new rail financing framework from January 2022 – The Straits Times [Accessed 12 Nov 2021]
New rail financing framework: 9 things to know about agreement between SMRT and Govt – The Straits Times [Accessed 12 Nov 2021]
Images from SGTrains File Photo and credits to MOT/gov.sg