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Department of Infrastructure and Regional Development secretary Mark Mrdak has faced a barrage of questions over the viability of the Inland Rail project, while calls grow for the project to extend double-stacking to the Port of Brisbane.
The Inland Rail project, between Brisbane and Melbourne via regional Queensland, NSW and Victoria, is being delivered by the Commonwealth Government through an $8.4 billion equity investment in the Australian Rail Track Commission, announced in the May 9 Federal Budget.
Mrdak, whose department will oversee the spending, fronted up to a post-Budget Senate estimates hearing on Monday, where he and other representatives were questioned over the alignment, cost, and other details surrounding the massive project.
He was forced to concede that while the project is estimated to cost $10 billion, and has secured the Government’s $8.4 billion equity investment, the overall cost of the project is yet to be determined.
Questioned over the commercial viability of the rail line by Labor senator Malarndirri McCarthy, who represents the Northern Territory, Mrdak also confirmed the assertion that the rail line was not a viable investment for a private sector developer.
“It is clear that the project would not meet commercial rates of return,” Mrdak said, “and such a large railtrack investment can only meet the ARTC rates of return, which are lower than commercial rates of return.”
Inland Rail is forecast to achieve a rate of return of between 5% and 5.5% from the start of operations in FY25. Mrdak estimates the private sector would not invest in a greenfield project like Inland Rail for anything less than an 11% rate of return.
“In the absence of the ARTC, it is very difficult to see that anyone would be investing in an interstate rail network,” he said. “Only government has the resources and, effectively, the patient equity to invest in long-term assets like this. The private sector, as we have seen globally, finds it hard to generate the rates of return on rail track for purely private sector investment.”
The estimates committee also questioned Inland Rail’s position on Infrastructure Australia’s Infrastructure Priority List, where it appears as one of 11 ‘priority’ projects, below the 7 ‘high priority’ projects.
“So it is in the second tranche,” remarked Senator Glenn Sterle, who represents Western Australia.
“It is coming off the bench,” quipped Senator Chris Back, also from WA.
“When you are playing footy, you don’t want to hear that,” Sterle added.
Determined to justify the project, ARTC chief executive John Fullerton explained to the panel that Inland Rail would provide efficiencies from day one, and would allow for future growth to be catered for with longer trains.
“I think the most important thing…” Fullerton said, “is that the project is cash flow positive from day one in terms of the revenue earned and the cost incurred to maintain the network.
“ARTC will take benefit from Inland Rail from the point of view of the additional freight that will operate on that new rail track, as well as the additional freight that will flow between Brisbane and Perth and between Brisbane and Adelaide because of the improved service linkages between those capital cities and also the fact that you can run trains similar to what runs to Perth today – double-stacked long trains.
“So, from day one, it is cash flow positive to us. We earn that revenue through access charges that we charge the rail operators who use our corridor.”
The tough questioning over Inland Rail came days after Port of Brisbane chief executive Roy Cummins was quoted in the AFR pushing for the addition of a new freight line to the port, from the planned terminus of Inland Rail at Acacia Ridge.
Without a dedicated line, goods on double-stacked trains will need to be unloaded at Acacia Ridge, and reloaded to complete their journey to the Port of Brisbane via trucks or the electrified passenger network, which doesn’t allow double stacking.
The dedicated line would add an estimated extra cost of $2.5 billion to the Inland Rail plan.
“Inland Rail proposes the movement of double-stacked containers, as well as increased volumes of resources and agriculture products. If that is the objective, then a dedicated connection to the Port of Brisbane is imperative,” Cummins was quoted as saying.
Cummins reportedly believes construction of this 38-kilometre “missing link” should go to market as a PPP contract.
“We are willing to work with all stakeholders and all levels of government to get it done. Inland Rail without a port connection will be less appealing to any PPP case, but with a PPP it would be a more attractive proposition to market.”
Australian Logistics Council boss Michael Kilgariff echoed Cummins’ statements at a conference in Brisbane on Tuesday, saying work should begin immediately to preserve a corridor for a future Acacia Ridge-Port of Brisbane connection.
“It is estimated that the existing rail link to the Port of Brisbane can meet demand for the next decade, however we must start to plan beyond that now,” Kilgariff said. “It is very important that when we construct Inland Rail, key future freight corridors are protected and preserved, so that our freight infrastructure will be able to accommodate demand levels that will exist decades from now.”
This article first appeared on www.railexpress.com.au
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