KUALA LUMPUR (March 13): A serious rethink of the business model of the country's main rail operator Keretapi Tanah Melayu (KTM) is needed if it is going to survive as a going concern moving forward, says a local think tank.

In a recently-published study by the Penang Institute titled ‘The Future of KTM is bleak’, it suggested among others for the government to rethink the entire basis of the separation between rail asset ownership by the Railway Asset Corporation (RAC) and rail operations by KTM Bhd.

The report referred to the Railway Network Access Agreement (RNAA), an agreement between KTM Bhd and the RAC. It will see the ownership of all of KTM’s physical assets such as the stations, the trains, the track and staff quarters being transferred to the RAC, the think tank said. The exercise is understood to be completed sometime in 2018.

The RNAA will introduce more competition for KTM, especially in the cargo sector, which currently makes up 40% of KTM’s total revenues, the report said.

“At the same time, it is uncertain if the cost savings for KTM (derived from not having to pay for the maintenance of the tracks and stations) will make up for the increase in costs resulting from KTM having to pay RAC access charges for the use of the trains, the track and the stations. It is also uncertain if the debt totalling RM880 million incurred by KTM to procure 80 sets of Electric Multiple Unit (EMU) trains will also be transferred to the RAC,” said Dr Ong Kian Ming, Head of Penang Institute.

Ong went on to say a similar model had been tested out with the railway administration in the United Kingdom several years ago, with poor outcomes however.

“The possibility of recombining the asset ownership and operations should be studied and evaluated carefully, so as to allow KTM to monetize some of the physical assets such as land and stations to cover for its debt and operational losses. These assets could also be used to increase non-fare revenue in other areas such as retail and advertising,” Ong, who is also DAP MP for Serdang, said.

Additionally, there are concerns in the drop in ridership of the KTM Komuter, he added.

According to the think tank’s study, the train’s daily ridership had been falling, having peaked in the first quarter (Q1) of 2015 at 137,500 passengers, which then fell to 99,033 passengers by Q3, 2017.

“At the same time, yearly ridership for the KTM Intercity services has been steadily decreasing from 2010 to 2016. Going from 2.35 million passengers in 2010 to 618,000 passengers in 2016, there was a 73% drop in ridership over a 7-year period.

“Without such a serious rethink, it is likely that KTM will remain financially and operationally inefficient in years to come, and the amount of money which the government must pour into KTM will only continue to grow,” Ong said.