Road study faults rail service

By PAM GRAHAM

Tranz Rail had lost out to road transport operators because of poor service, not price, says a study by economic consultancy Infometrics, commissioned by the Road Transport Forum.

The study found rail did not offer a commercially attractive alternative to road transport and sometimes offered no service at all.

One unnamed firm with millions of dollars worth of rail handling facilities was told to buy its own rolling stock. Tranz Rail never gave it a chance to pay a higher price to maintain access to rail.

"We were significant users of rail and would have increased our rail volumes by another 30 per cent had the service been better. But now we are unable to send any product by rail," the customer said.

The study found "the problem with rail is not its relative cost, but its inability to provide reliable delivery and its relative inflexibility".

Tranz Rail managing director Michael Beard said about half his company's business was contestable and price was an issue.

In the past 12 months Tranz Rail had grown its domestic freight market position by more than 20 per cent, on-time performance was up to 85 per cent from 40 per cent, and the company had a 78 per cent customer satisfaction approval rating, up from 32 per cent three years ago.

Beard said Tranz Rail would report record freight volumes this year and had recovered from the loss of newsprint and tissue contracts. "This is hardly a company that is failing, at least in this area."

The study comes as Tranz Rail's shareholders consider a Government plan to bail it out and buy the track back. The plan estimates that there will be a $20 million rail subsidy in the future and the Government will invest $100 million over five years in upgrading the network.

Tranz Rail argues that road user charges are not high enough and the system has cross-subsidies, because trucks using hilly sections of road do not pay all the costs of those particular roads.

Infometrics examined regional economies and said they would be adversely affected if there was a rise in the relative cost of road transport.

For Southland's forest sector, road transport accounted for 13.2 per cent of all costs, compared with a national average of 1.4 per cent.

It found transport had outpaced gross domestic product for the past decade and road transport costs were more stable than other transport costs. Rail's limited network meant goods had to be double-handled, increasing costs.