Skytrain, Subway To Merge.

[Highwayman]

GOVT ACQUISITION: Skytrain, subway deal ‘next month’

Published on Aug 24, 2004

Bt75-bn takeover, ‘then Bt15 fares’

The Transport Ministry has announced it expects to conclude its purchase of shares in the subway and skytrain operators – Bangkok Metropolitan (BMCL) and Bangkok Mass Transit System (BTS) – by next month.

“Following the share restructuring, both systems will be merged and a new single flat fare will be introduced. Then all passengers will pay a single fare of Bt15,” Transport Minister Suriya Jungrungreangkit said.

The ministry expects to spend Bt75 billion to acquire both companies, according to a paper Suriya presented at a logistics-related Cabinet conference in Hua Hin last weekend.

In the paper, compiled by the Transport and Traffic Policy and Planning Office, the Mass Rapid Transit Authority of Thailand (MRTA), which is in charge of subway development, is expected to require a total of Bt521.6 billion to complete a 291-kilometre subway extension in Bangkok and peripheral provinces.

A number of financial sources are named in the paper to finance the extension and the share acquisition, worth a total of Bt597 billion. Most of the financing is expected to come from the government, for both infrastructure and the rail system. The rail system is projected to cost Bt210 billion, with Bt82 billion coming from the government and Bt128 billion from supplier credit. The infrastructure costs of the project have been put at Bt387 billion – Bt200 billion from the central budget and Bt187 billion from a number of state agencies such as the Bangkok Metropolitan Administration and the Energy Fund.

According to Suriya, the committee, chaired by deputy permanent secretary for finance Uthit Thamvathin, expects the share price of both companies to be lower than proposed. “After negotiations are completed, we will start working on project financing as well as cutting fares to draw more passengers to the service,” the minister said.

At present, BTS fares range from Bt10 to Bt40 while BMCL charges between Bt12 and Bt31.

The proposed flat fare of Bt15 is based upon the mass transit system in Seoul. The Korean subway charges a flat rate equivalent to Bt20 per passenger, which has attracted a high level of passengers. “The purchasing power of Thai passengers is lower than that of Koreans, so the fare should be lower,” Suriya said.

He noted that existing fare structures charged by both Thai companies have proven unattractive. BMCL witnessed a 50 per cent decrease in passengers immediately after it raised fares on August 13, from a flat fare of Bt10 offered during July, up until August 12.

He said lower fares would not eat into company earnings. “Compensating for the lower fare price is the higher number of passengers. No matter how many passengers they accommodate, fixed costs remain the same.” The government has sought to encourage Bangkok commuters to rely more on public transport to help reduce oil consumption since world oil prices started rising.

Watcharapong Thongrung

The Nation

[Up2U]

What is the time-line? Both for the proposed purchase and for the extension phases?

Seems a colossal investment for the future, but maybe a good one.

Remeber that the London subway system has taken well over 100 years to develop.

[plachon]

Ay, what's this? One minute the govt. are chanting the mantras of privatisation, the next minute they want to spend vast amount of taxpayers money (not yet earned no doubt) to privatise a working public transport system.

The consistency of logical applied thinking is ............... amazing!

[Dancali]

I love how the government continues to justify its position of lowering fares by saying it won't cut into revenue since it will simply mean more passengers.

I suppose the people who are running it now are just too dumb to figure out this basic business principle and it takes a forced government takeover to bring this fact to bare.

Or perhaps it's not as they say and is similar to coke dropping the price per can to 1 baht since, after all, it won't cut into revenues as the volume increases.

Seems to me to be pure government bs.