Mr BAYLEY - Minister, the Rail Company Act 2009 established TasRail and articulates a number of objectives, including to operate a rail business in Tasmania effectively and efficiently, to operate its activities in accordance with sound commercial practice and to maximise its sustainable returns to its members. There have been ongoing operational losses within the company and significant reliance on federal and state funding. Do you consider that paragraphs (b) and (c) are being fulfilled, that it is operating its activities in accordance with sound commercial practice and is maximising sustainable return to its shareholders? In the longer term, is it the Government's position that TasRail remains a subsidised service or will it move towards a full-cost recovery model over time?
Mr FERGUSON - Certainly, with something of the order of half a billion dollars of infrastructure investment to really upgrade and then make resilient the overall network, which includes the ship loader for Burnie, the intention is to set up the company for future success.
From an accounting treatment point of view, the above-rail and below-rail operational results do not show a profit, but that is not an expectation the Government has in this financial year, noting that the above-rail profit was budgeted for 437 prior to the October disruption. In previous years we have seen a small profitable outcome. While modest, nonetheless it is always desirable to do better than breaking even, as we continue to invest in below-rail so we have the physical asset upon which to run the business. Those are the decisions that have been very carefully made by both state and federal governments since 2009, in particular since, gosh, when did Phase One begin?
Mr DIETRICH - We had Nation Building, and then it became Infrastructure Investment Program transformation in about 2012.
Mr FERGUSON - Since those times, we have seen what started out as $100 million investments has actually become $500 million, I think around $510 million. It really is investing in the asset that we fully intend will be with us for a very long time. The profit and loss outcomes disguise the impact were the rail asset not to exist, because of the impact on the road network and road safety, as well as the depreciation on the road and highway fabric. We feel comfortable with the economics around the IIP, the revitalisation program.
The operational nature of this business is growing. Customers are choosing TasRail now. Some of TasRail's biggest customers are road transport operators. It is a really interesting time for us across a range of commodities. I invite the chair and CEO to add to my answer, by all means.
Mr BAYLEY - Particularly around that point on full-cost recovery, is there capacity within TasRail to start moving towards that model. I appreciate there is some huge capital expenditure involved and accounting can disguise the value. Do you have capacity on an annual basis to move to full-cost recovery?
Mr CANTWELL - The only railways around the world that deliver a full-cost recovery are the very intensive, heavy haul freight railways. The iron ore and coal railways on the east coast of Australia are examples of those. The investment that the Deputy Premier refers to has come on the back of an enormous effort by the TasRail team in responding to the funding program of the commonwealth and the state in bringing forward credible investment propositions. Since that first IIP program to which the CEO referred, which started in 2012, every dollar of investment has been able to be demonstrated to have delivered the outcome that was suggested in the proposal. The Deputy Premier spoke before about the equivalent B-double movements off the road.
In the intermodal freight space alone, the volume of containers now transported annually by TasRail sees the removal of about 180 000 B-double truck movements off the road a year. I'm not sure how a state values that in terms of the safety amenity, but regarding carbon reduction outcomes, by the most modest evaluation, a container of freight on a TasRail train is four times less impactful than a container of freight on the most modern, emissions-controlled road vehicle.
There is a pathway to above-rail gross profit. That will be delivered through additional business being brought to rail. As the CEO talked about earlier, there is significant effort within the pipeline to capture more forestry business, to capture more minerals business. Our estimate is that we currently have about 70 per cent of the intermodal task on rail here in Tasmania, which compares to mainland volumes on the most rail friendly corridors at around 20 per cent. TasRail has been much more successful at capturing volume-to-rail than its mainland counterparts.
Mr BAYLEY - Is the issue in price, then? What's the comparison between a container on the road to the north and a container on the train?
Mr CANTWELL - Very good question. Our rates are competitive. A difference between TasRail and, say, the rail operators that haul freight between Perth and Melbourne is that we are aggressively competing with the road transport sector here. We are not setters of price; it is the road transport industry that are setters of the price. If we can meet that market and make an above-rail surplus, then we are making a significant contribution to the amenity of Tasmanians.
