The Rift Valley Railways, which is charging two-way ticket between Nairobi and Mombasa at Sh8,810 (first class), Sh6,770 second class and Sh1,360 third class, has seen passenger volumes dwindle to record lows.
The Treasury needs to find a different way of raising money to repay the Chinese.
Forget about the deafening political party nominations for a while. The plan to launch standard gauge railway (SGR) by June 1 is certainly the big news of the moment.
The Chinese gave us feasibility study, loan, design, engineers and rail material. Come the launch day, Chinese locomotives, wagons and coaches will be the first to roll on the Mombasa-Nairobi track.
The part that concerns us most, the commuter and cargo tariffs, however remains obscure. And so we ask, what should be the cost elements?
The Aarvee of India, a firm hired by Kenya Railways to draw a price list is expected to design a tariff structure that covers both the capital expenditure and a profit margin for rail operators.
A word of caution follows. One of the reasons private sector investors are likely to shun calls to put money in the SGR rolling stock is because they think public transport is unprofitable.
Just like fuel and utilities such as electricity and water, the government of the day will always exert pressure on transporters to keep charges down lest inflation runs wild.
Beyond that, competition is always there to put in check whatever slips through State control. Being a late entrant, SGR will have to take on existing trains, buses, trucks and airlines on reliability and price.
The result: a transport service with price-sensitive demand. That doesn’t feel like the best place to load up the SGR infrastructure cost.
Here is a basketful of sobering lessons. Kenya Railway’s Syokimau line, upgraded at a cost of Sh3.2 billion, is eternally on life-support. It is being sustained by subsidy after users shunned its two-way fares of Sh300 for motorists and Sh200 for commuters. Why would they pay when passenger service vehicles have two-way off-peak charges as low as Sh100?
Similarly, the Rift Valley Railways, which is charging two-way ticket between Nairobi and Mombasa at Sh8,810 (first class), Sh6,770 second class and Sh1,360 third class, has seen passenger volumes dwindle to record lows. It simply can’t beat buses on price, reliability and speed.
The Treasury needs to find a different way of raising money to repay the Chinese.
The same way it has been charging a uniform railway development levy on all importers irrespective of who uses the train, so it should think of special levy instead of pushing users away by high tariffs.
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Note: The results are not exact but very close to the actual.
