Rail Concession And Matters Arising
BY FIDELIS UGBOMEH
Cynicism from Nigerian Union of Railway Workers (NURW), has dogged the concession agreement, reached between the Ministry of Transport and General Electric, GE on Nigeria’s railway infrastructure. While concession is believed can move the rail system forward, the union thinks the one reached with GE was an under-the-table deal that would yield no good. FIDELIS UGBOMEH writes.
oncession agreement is an agreement between the owner of a facility and the concession owners or concessionaires that grants the latter exclusive rights to operate a specified business in the facility under specified conditions. These agreements span a variety of industries and sizes, from mining concessions valued in the hundreds of millions to a small food and beverage concession in a movie theatre.
The terms of a concession agreement also depend on its desirability. For example, a popular concession in a sports stadium may not offer much to the concessionaire in terms of incentives. On the other hand, a government that wants to attract mining companies in an impoverished area may offer significant inducements, such as tax breaks and a lower royalty rate.
Regardless of the type of concession, the concessionaire usually has to pay the party that grants it the concession ongoing fees as identified in the contract.
Concession Agreements and Rail Track Usage
A common area for concession agreements between governments and private businesses include rights to use certain pieces of infrastructure, such as railways. Rights may be given to individual businesses, resulting in exclusive rights, or to multiple organizations. As part of the agreement, the government may have expectations regarding the maintenance and construction of the railways, as well as operational standards.
For example, a concession agreement exists between the governments of France and the United Kingdom and the Channel Tunnel Group Limited and France-Manche S.A. regarding operations through the Channel Tunnel. This tunnel connects the two countries under the English Channel.
Concession in Nigeria
The concession agreement that is currently subsistent in Nigeria is the concession agreement between Nigerian Ports Authority and port concessionaires. Since the concession agreement was entered into 10 years ago, there has been significant improvement in ship turnaround time and reduction in the number of days consignments spend at the port terminals before they are eventually cleared.
Similarly, managing director First Rit Nigeria Limited Mr. Eric Umezurike posited that the best thing that happened under the regime of former President Olusegun Obasanjo was the concession of the port terminals.
He said that security around the port environment has improved tremendously even as the terminals are currently wearing new looks compared to the past when the floors of the ports are reputed for carrying grease and oil. In the case of Nigeria Railway Corporation it was gathered that General Electric intends to invest $2billion on the country’s rail system.
The money according to a reliable source will be used for the procurement of locomotive engines and rolling stocks. Regarding the allegation that officials of General Motors are already on ground to acquire the fixed and moveable assets of the corporation, deputy director, public relations of the corporation Mr Yakub Mamood said that there was nothing wrong in officials of General Electric to inspect the facilities the organization it intends to partner with.
However Nigerian Union o Railway Workers (NURW) has said that the committee set up by the Vice President Yemi Osinbajo on August 12, last year to work out modalities for the concessioning of Nigerian Railway Corporation met only once after its inauguration adding that the transaction adviser has unilaterally handed over fixed and moveable assets of the corporation to officials of General Electric without any due process.
President general of the union Comrade Saidu Garuba who made this known in Lagos recently said that officials of General Electric are already inspecting the rail tracks without any consultation with the union.
He also said that efforts to meet with the minister of Transport, Chibuike Amaechi to sort out the grey areas in the concession plan on two occasions proved abortive as the minister failed to honour the meetings convened by him. Comrade Garuba wondered what will be the fate of the existing workers in the post-concession era as the steering committee and the minister have not met the union.
According to the Garuba, the bidding process for concessioning NRC was not transparent just as the preferred bidder; General Electric, has no track record of managing railway operations.
He also wondered how General Electric came up with an investment plan to pump $2billion investment into the corporation adding that one locomotive engine that was procured during the regime of late President Umaru Musa Yar Adua costs N500million.
He advised government to work out an investment plan for the corporation for the procurement of rolling stocks and maintenance of tracks instead of concessioning the corporation. He also averred that concession or privatization comes with job loss and other associated evils’
Comrade Garuba also pointed out that NRC is the oldest government parastatal that funded the establishment of NIPOST, NITEL, amongst others adding that government should not concession an organization that is older than Nigeria.
World Bank Position On Rail Concession
According to a World Bank account, based on projects recorded in its PPI database: ‘Concessions that are for managing and operating existing railways and involve major capital expenditure by private sponsors are the dominant form of contract for private participation in the rail sector, accounting for 21of the 37 projects (listed on the database).
Another World Bank study comments: “Few railways have been truly privatised, beyond such recent examples as New Zealand, Canadian National, East Japan, Conrail in the United States, and the infrastructure and freight services of the old British Rail. Instead, most governments have preferred to concession (franchise) their railways. Why concessioning is usually preferred to privatisation is probably that governments believe that concessioning offers them the best of both worlds: they retain ultimate control over the infrastructure (at least in the political sense), while the private sector carries out the operating functions and competes for customers.
“That explanation for concession being the leading form of railway privatisation is unconvincing. Certainly, by retaining ownership of infrastructure, governments are able to claim that they retain control. They are thus better able to sell the policy politically to sceptical voters and rail workers, by claiming that it does not facilitate re-colonisation of their countries’ assets and that they remain in command. “Some even maintain that concessions do not amount to privatisation at all, but rather to a partnership in which the advantages of state ownership can be combined optimally with those of the commercial incentives, access to investment capital and new technology, and management techniques of the private sector. However, another compelling reason for privatisation being accomplished through concessions could be that the private sector does not actually wish to take over ownership of the assets concerned.”
In Nigeria concession may be the best option if government insists that it cannot continue to subsidize railway operations. If the concessionaires have genuine intensions and truly invest in the rail system, then the trailers and oil tankers have no business dotting our roads.
Currently the poor state of our roads can be attributed to the heavy duty trucks plying the roads with containerized goods. A well-developed rail system will see most of the fuel tankers and trailers off the roads as the rail system will be readily available to convey bulky goods and fuel from the southern parts of the country to the Northern parts.