MTRC faces huge repair costs for old fleets

Railway operation costs are tremendous and MTR Corporation must spare resources in the coming years to replace and repair old fleets, Secretary for Transport and Logistics Lam Sai-hung said as he defended the decision to only link train fares with the operator's property profits.

Lam's comments came a day after a government announcement linking the MTR fare adjustment mechanism to the company's property profits, which may cut fare increases by 0.6 to 0.8 percentage points.

Speaking on the radio yesterday, Lam said authorities are aware of citizens' impressions that the MTRC is "earning big profits from selling flats" and therefore the railway operator tied its property earnings with fare adjustment.

Asked why railway profits are excluded in the formula, Lam said train services made little profits - even deficits in recent years - while being costly to run.

He said some of the city's railway links are decades old.

"Our oldest railway will have a history of 40 years, and most of the others also have a history of 20 to 30 years," Lam said. "For MTR, it has to put in more resources for maintenance, operating and renewal. There isn't much room for profit growth in this regard."

It would be simpler and clearer to link the firm's property development profits with fares while answering public demands, he added.

There are opinions that MTRC can control its property profits by manipulating its property sales timetable to keep the rate at 0.6 percentage points by not exceeding the HK$5 billion profit.

Lam believed it would not be a problem, saying "every property project has its timetable including procedures like getting the occupation permits."

"The government will keep an eye on its property developments, such as when to sell flats and when the company will start getting profits. As a listed company, [MTRC] does not have much room to make changes,."

MTRC has recorded property profits under HK$5 billion in eight of the past 11 years and Lam said people will at least see a 0.6 percentage point reduction in fare adjustment.

Jeny Yeung Mei-chun, MTRC's transport services director, told a radio program that the rail company has answered people's expectation to include property profits in the fare adjustment formula.

Yeung said it would be difficult for the MTRC to forecast its profits from properties.

Lawmaker Gary Zhang Xinyu of New Prospect for Hong Kong, a former MTRC engineer, welcomed the new fare adjustment scheme but warned passengers not to expect fares to fall.

"I think the direction is correct to link the profits of the MTR company to fare increases but the percentage is too low...If the percentage could be set at 0.6 percent to 1.2 percent, that would be more reasonable," Zhang said.

Roundtable lawmaker Michael Tien Puk-sun said that though looking new, the mechanism actually remained unchanged, which he likened to "a gift box that has perfect packaging but only a few sweets inside."

He said the mechanism should include MTRC's other recurrent profits from sources like rent and advertisement.