The railway reform: Re-organisation and re-distribution of responsibilities will ensure a better transport future for rail commuters and freight transporters

These were the words of Minister of Transport and Communications Ketil Solvik-Olsen when the government on May 12^th presented the white paper “On the right track. Reform of the railway sector” to the Norwegian Parliament, Stortinget. The government and its co-operating political partners are in agreement on the main elements of the white paper. 

The railway sector to be strengthened
The government is investing in the railway system. Since the change of government in 2013, the Norwegian National Rail Administration’s budget, which includes funding for maintenance and new construction, has increased by approximately 50 percent. In 2015 the maintenance backlog will be reduced for the first time in many decades due to higher grants.

“A successful reform of the railways will result in more and better rail services per krone spent. The railways are a key element in achieving important environmental and transport goals. The aim is to strengthen the railways by increasing efficiency and organisation at all levels. Greater emphasis will be placed on the needs of the customer. Railway customers will experience greatly improved services. In addition the administration of the sector will be improved by the political establishment stipulating clear and well-defined objectives for long-term development, while the operative units will have more responsibility for the details”, says the Minister.

A number of challenges make reform necessary
“The major players in the railway sector have requested a new organisation and distribution of responsibilities for a long time. This emphasises the need for systemic change. I am very pleased with the substantial and positive engagement shown by the participants in connection with developing the reform”, says Solvik-Olsen.

The sector is facing a number of challenges. One example is that the responsibility for railway property is currently shared between the Norwegian National Rail Administration and the major train operator NSB’s real estate subsidiary Rom Eiendom. This creates unclear areas of responsibility, for example in the development of transportation hubs.

There are also weak economic incentives in the Norwegian railway sector. The current form of organisation does not result in satisfactory focus on customer and supplier relations to ensure that rail traffic is expedited as planned and scheduled.

The railway sector fails to exploit the benefits of competition. Competition is a spur to efficiency and innovation.

There is potential to improve the co-ordination between rail traffic and other forms of public transport. In addition to the above, development plans must have a longer term perspective and take into account the travel and transport needs of the future.

Several state tasks incorporated under a new Railway Directorate
The government bases the reform on state ownership of the railway infrastructure. The Ministry of Transport and Communications will remain the highest authority in the sector with overall responsibility for stipulating the long-term objectives and strategic course, stipulating framework terms, preparing budgets and with overall authority and responsibility for legislation and regulations.  

One of the measures in the reform is to gather more governmental responsibilities in one state controlled body that does not have production tasks. The government will retain parts of the Norwegian National Rail Administration as a smaller Railway Directorate, which will report directly to the Ministry of Transport and Communications. The Railway Directorate will amongst other tasks conduct long-term planning and have the role of co-ordinator of the sector’s participants and towards other forms of public transport.

The Railway Directorate will take over or have increased responsibility for a number of tasks that are carried out by the Ministry of Transport and Communications today. The Railway Directorate will assume responsibility for state procurement of passenger train services. The Railway Directorate will also be responsible for the planning and development of rail passenger and goods services, the opening of passenger train services to competition and the planning and development of new railway infrastructure.

As a step in the further work on the reform, the Ministry of Transport and Communications will evaluate a number of potential alternative models for an overall transport directorate incorporating both roads and railways.  

A state-owned infrastructure enterprise with responsibility for the railway network and property
The government plans to establish a state-owned enterprise with the main tasks of operating, maintaining and constructing railways, as well as expediting trains. Parts of the Norwegian National Rail Administration will therefore continue as the new infrastructure enterprise, which will report directly to the Ministry of Transport and Communications. The state-owned enterprise will have a clearly-defined role as the supplier of a fully-functioning railway infrastructure.

“The road sector has been characterized by developing new road projects in smaller pieces at the time. Similarly the development and maintenance of the railways have suffered from many of the same failings. In order to work in a more cohesive and long-term manner, the government intends to enter into financial agreements that will run over several years with the infrastructure enterprise”, says the Minister.

A business relationship will be established between the infrastructure enterprise and the train operators that will result in a more professional customer and supplier relationship. This will contribute to ensuring that rail traffic is expedited in accordance with the planned schedules.

To date the ownership of railway property has been divided between NSB AS and the Norwegian National Rail Administration. With the reform all the property will be gathered in the infrastructure enterprise. This means that Rom Eiendom will be transferred from NSB to the state enterprise. Amongst other objectives is the wish to achieve an improved and more efficient development of stations and public transport hubs.

Parts of operation and maintainance of the infrastructure network is being tendered in the market with positive experiences. The government intends that more of operation and maintenance tasks gradually will be tendered in the marked. The state will continue to have overall responsibility for all maintenance.

Competition for improved rail services
“The driving force behind the reform is the strong political aim to give the railway’s customers better, improved rail services. Norway already has experience with competition in passenger rail transport. The tendering of the right to operate the Gjøvik line in 2004 has amongst other things resulted in a satisfactory increase in the number of passengers, and high customer satisfaction. The freight transport sector on rail is also fully liberalised since 2007. The government will bring the positive elements of competition into the railway sector to a higher degree with the aim of improving vitality, efficiency and innovation”, says Solvik-Olsen.

Competition in the railway sector will be under state control. Various train operators will compete for the right to operate within defined geographic areas. NSB, the incumbent, will be able to compete on equal terms. The plan is to allow train operators to compete for the operation of services on the various lines by agreement with the government. The state will pay the train operators to ensure socially desirable services on lines that are not necessarily economically viable, in the same way as today.     

“The aim is not to save money by allowing the train operators to compete on the basis of the lowest possible payroll and pension costs. The aim is to create an attractive sector, where the participants have the necessary incentives to create the best possible solutions, and where employees have the potential for personal development and interesting tasks. Neither does an increase in the number of train operators mean that passengers will face a more complicated travel system on a daily basis. There must be developed solutions that make it easy to purchase a rail journey where there is a change of train, even if this entails that the passenger will be travelling with two different train operators”, says the Minister.    

The government’s plan is that the passenger rail market in Norway will be divided into an estimated six to eight franchises. The franchises will for the most part cover defined geographic areas. The first tender will be announced after the Railways Directorate has been established, possibly in 2016/2017. The plan is to first invite bids to operate passenger trains in the Southern Norway/Stavanger region.

Competition – changes for NSB and Flytoget
In order to prepare the ground for competition on an equal footing, workshops, rolling stock and the maintenance company will be transferred from NSB AS. These operational and service elements will be placed under state control.

NSB will continue as a state-owned transport company, consisting of NSB Persontog, CargoNet, Tågkompaniet, Nettbuss and NSB Gjøvikbanen (Gjøvik Line). The Ministry of Transport and Communications will seek to ensure that the changes in NSB AS will not result in unnecessary challenges in the company’s operations.

Flytoget AS will be able to decide for itself if the company wishes to participate in future tenders for passenger rail franchises. The government wants to expose the airport express service to Oslo Airport, currently operated by Flytoget, to competition. The government will come back with a concrete proposal to Stortinget as to how this can be accomplished at a later date.

The white paper on railway reform does not take a position on whether the state will sell its shares in Flytoget. The government will return to this question at a later date.

The Norwegian Railway Authority and the Accident Investigation Board Norway
The reform does not include proposed changes to the Norwegian Railway Authority or to the Accident Investigation Board Norway.  

Future train services
The reform does not include plans for how the rail network or train services should be developed in the coming ahead. As a consequence of this, the reform does not include proposals on the closure of current or establishment of new train services. These questions will remain part of the four-year cycle with the National Transport Plan.

Regard for railway sector employees
The employees in the sector are the single most important resource in ensuring a successful transition in the railway sector. The government will place emphasis on running an inclusive and predictable process of implementation that will ensure that the employees are heard. The employees’ organisations have been informed of the main features of the planned changes and the main aspects of the reform.

The government has no plans to introduce alterations to pension schemes that are established in existing state-owned companies.

The Railways Act include provisions that entail that the Working Environment Act applies for rail passenger tenders, given the activity after the tender is being operated by the same mode of transport.

The timetable – introduction of the reform measures
The work of implementing the reform will be well planned and executed. The work included in the reform will require the use of considerable resources. The gains and advantages that can be achieved through the implementation of the reform are nonetheless deemed to far outweigh the costs.

Out of consideration for the players, employees and passengers, it is desirable to implement the reform as soon as possible. Progress must however be adapted to accommodate for safety of operations.

The Ministry of Transport and Communications will commence the work of implementing the reform when Stortinget has considered the white paper. Stortinget will be kept fully updated of progress, and is invited to adopt the necessary resolutions in the relevant parliamentary documents.

The major structural and organisational changes in the sector will be implemented as the first phase of the reform.

Organisation chart – the railways sector
The figure below shows the current and future organisation of the railway sector after the implementation of the railway reform.