The Queensland Competition Authority

Transcription

1 Joint Submission by Asciano, Aurizon and the Australian Rail Track Corporation To The Queensland Competition Authority In response to the Draft Report on Industry Assistance in Queensland July 2015

2 Joint Submission in response to the QCA s Draft Report on Industry Assistance in Queensland This joint submission is made on behalf of Asciano, Aurizon and the Australian Rail Track Corporation. Details of the three companies are provided in Attachment 1. The companies welcome the opportunity to make a submission to the Queensland Competition Authority (QCA) in response to the QCA s Draft Report on Industry Assistance in Queensland. Note that Asciano, Aurizon and the Australian Rail Track Corporation may all make additional separate submissions on the Draft Report. Background: QCA Draft Report This submission primarily addresses sections and of the Draft Report and the associated Draft Recommendation These sections of the Draft Report address issues relating to rail infrastructure financing and road freight subsidies and externalities. The discussion in the Draft Report focuses on rail subsidies and industry assistance; and while the Draft Report appears to recognise the existence of road subsidies, it only discusses these road subsidies in the context of rail subsidies and industry assistance. The Draft Report makes a Draft Recommendation 12.3 that the Queensland Government undertakes a broad inquiry into the transport sector which considers the significant assistance provided to transport modes and freight customers, with a view to identifying efficiency improvements. Response to the Draft Report and Recommendation In discussing industry assistance in Queensland the Draft Report (Volume 1: page 189) notes that the government owned Queensland Rail network is estimated to provide assistance to the freight industry and its end users of $1,100 million over 5 years. The Draft Report (Volume 1: page 206) notes that an argument put forward to support this industry assistance is the existence of assistance to the road freight industry through road user charges which are not cost reflective. The Draft Report (Volume 1: pages ) appears to accept that a road subsidy may exist but the Draft Report does not seek to quantify the subsidy or address the issue of a road freight subsidy or road freight industry assistance as an issue separate to industry assistance to rail freight. We submit that government subsidies for road freight are substantial. State governments and the Commonwealth government invest substantial amounts of capital in road infrastructure which then substantially benefit the road freight industry, but the road freight industry does not pay an adequate price for the use of these assets. This comes about due to inherent flaws in the operation of the current heavy vehicle road charging mechanism, inadequate allocation of costs between heavy and light vehicles, and cross-subsidies within and between classes of heavy vehicle.

3 In the Heavy Vehicle Charges Review Discussion Paper published by the National Transport Commission in 2013, the following limitations regarding the current charging methodology were highlighted: there are multiple levels of averaging used in determining charging recommendations because disaggregated data is not available; the input data is survey based, as opposed to actual usage data; and the NTC s recommendations are non-binding on governments 1. Furthermore, the charging recommendations are made using an average of past spending by governments on road infrastructure, and take no account of forward investment planning and future infrastructure requirements. The three companies believe that only considering road subsidies in the context of rail subsidies misses the point that road subsidies are industry assistance in their own right and any investigation should identify and quantify these road subsidies. This would be consistent with the inquiry s terms of reference which has been defined to include subsidised access to assets. There are important potential benefits for freight customers and for the Queensland and Australian economies that have informed this position. We submit that heavy vehicle pricing and investment policies should be reformed in order to enable productivity gains to be realised for the benefit of freight customers, and to contribute to improving the efficiency and competitiveness of Queensland s freight supply chains. Productivity benefits would be achieved from improvements to the efficiency of infrastructure investment and maintenance, with infrastructure investment linked to revenue from direct heavy vehicle charging. This would involve revenue being hypothecated to the infrastructure provider for investment back into freight infrastructure. Significant benefits would also be gained from more productive use of the transport infrastructure by freight operators who will respond to the introduction of price signals that would result from direct, cost reflective, user charges. Furthermore, road freight and rail freight infrastructure pricing should be determined in a consistent and competitively neutral manner. Thus any recommendation in the QCA s final report to re-consider the fundamental approach to subsidies to Queensland rail infrastructure should also consider subsidies to freight companies using Queensland road infrastructure. We also suggest that, consistent with an approach that is based on competitive neutrality, the focus should be on major freight roads, i.e. national highways and state arterial roads. The three companies support the intent and direction of Draft Recommendation 12.3, which recommends that the Queensland Government undertakes a broad inquiry into the transport sector which considers the significant assistance provided to transport modes and freight customers, with a view to identifying efficiency improvements. In supporting this draft recommendation the three companies strongly believe that for such an inquiry to produce efficient policy outcomes it must explicitly include in its terms of reference the investigation of cost reflective road pricing for heavy vehicles on major freight routes, i.e. national highways and state arterial roads. 1 National Transport Commission, Heavy Vehicle Charges Review Discussion Paper, March 2013, pages iv and v.

4 Freight Market Considerations The three companies believe that cost reflective road infrastructure pricing for heavy vehicles and road infrastructure investment reform is essential. The lack of a transparent and cost reflective approach to road infrastructure pricing for heavy vehicles results in subsidies to heavy vehicle road freight operators which use roads for commercial purposes - with distortionary impacts on freight markets. This is because under subsidised pricing using a combination of fuel excise and registration, there is no price signal and thus there is no incentive to more efficiently use road infrastructure. The result is the distortion of choices between road and rail freight modes. We note that the final report of the Federal Government s Competition Policy Review stated that roads are the least reformed of all infrastructure sectors 2. Furthermore, one of the reasons given in the Competition Policy Review report as to why road infrastructure reform is necessary, is that the absence of reform is resulting in inefficient road investment and distorts choices between transport modes, particularly between road and rail freight 3. Consequently we support a move towards a more transparent road pricing regime which will provide clearer price signals to road freight operators. In particular we believe that the most effective approach to ensuring road subsidies are addressed equitably and efficiently is to focus on: introducing reforms to road pricing for heavy vehicles above 4.5 tonnes using national highways and state arterial roads as a first priority. Such an approach is consistent with a focus on industry assistance as heavy vehicles compete with rail freight on major freight routes, and are operated for commercial purposes; and fully cost reflective road pricing for heavy vehicles with a focus on appropriate allocations of costs between heavy vehicles and light vehicles where road pricing determinations are overseen by an independent economic regulator, such as the QCA. Conclusion The three companies submit that the approach outlined in the Draft Report would not enable the full extent and consequences of road freight subsidies in Queensland to be identified and addressed. In particular the Draft Report only discusses road subsidies in the context of rail subsidies. We submit that current road freight subsidies for heavy vehicles amount to industry assistance in their own right and a study of Queensland Government industry assistance should quantify these road subsidies focusing on the major freight routes, i.e. national highways and state arterial roads. The three companies support Draft Recommendation 12.3 but strongly believe that for the inquiry proposed by Draft Recommendation 12.3 to produce efficient policy outcomes it must explicitly include in its terms of reference the investigation of cost reflective road pricing for heavy vehicles that use major freight routes in Queensland. 2 The Australian Government Competition Policy Review, Final Report, March 2015, p Ibid. p. 38.

5 Reform of heavy vehicle pricing and investment policy settings should be undertaken in order to: ensure that there is competitive neutrality in the pricing and infrastructure investment policy settings that apply to road and rail freight; and enable productivity gains to be realised for the benefit of freight customers and contribute to improving the competitiveness of Queensland s freight supply chains. These productivity benefits would be achieved from improvements to the efficiency of infrastructure investment and maintenance, and from more productive use of the transport infrastructure by freight operators who would respond to the introduction of price signals based on direct, cost reflective, user charges.

6 Attachment A The companies making this Submission Asciano Australia's only combined rail freight and port operator, Asciano brings together Pacific National's rail operations and Patrick's ports and stevedoring businesses. Contact: Stuart Ronan, Manager Access and Regulation, Pacific National Phone: (02) Stuart_Ronan@asciano.com.au Aurizon Aurizon has rail and road-based freight and infrastructure operations across Australia. Aurizon operates rail freight services from Cairns through to Perth, including the Central Queensland Coal Network made up of approximately 2,670km of heavy haul rail infrastructure. Contact: Patrick Coleman, Manager, National Policy Phone: (07) Patrick.Coleman@aurizon.com.au Australian Rail Track Corporation (ARTC) The Australian Rail Track Corporation (ARTC) currently has responsibility for the management of over 8,500 route kilometres of standard gauge interstate track in South Australia, Victoria, Western Australia, Queensland and New South Wales. ARTC also manages the Hunter Valley coal rail network, and other regional rail links, in New South Wales. Contact: Derek Harris, General Manager Corporate Strategy Phone: (02) DHarris@ARTC.com.au