Logistics News

Cross-subsidies at question in Melbourne rail plan

Importers’ cash for exporters and road freight paying for rail a concern


Busy Victorian ports and freight minister Melissa Horne has approved a Port of Melbourne (POM) proposal that aims to develop a new on-dock rail terminal at Swanson Dock East.

The move is a key element of the Port Rail Transformation Project (PTRP) and the announcement comes as POM releases its Our Plan for Rail 2020 document.

Locating this new rail terminal next to the Swanson Dock East International Container Terminal is expected to provide a lower cost transfer of containers between rail and ships.

“On-dock rail will make rail transport more competitive, cut the high cost of the ‘last mile’ and reduce truck congestion at the port gate,” the state government says.

“It will also allow importers to use rail to move containers to distribution centres around Melbourne efficiently.

“To make on-dock rail possible, the Port of Melbourne will introduce a $9.75 per twenty-foot equivalent unit charge on imported containers.

“The funds raised from the charge will directly deliver new sidings and connections for the rail project.

“The charge keeps the port competitive with Port Botany and won’t apply to exporters from the port.”

It is expecting the move to see an investment of $125 million in new rail infrastructure.

“The Port of Melbourne is a vital part of our multi-billion dollar export sector and agriculture supply chain and on-dock rail will make its operations more efficient for Victorian exporters – removing congestion at the port gate,” Horne says.

“This will cut costs for regional exporters and increase the competitiveness of Victorian industry – creating local jobs.”

Port rail shuttle trains will have a capacity of 84 twenty-foot equivalent units (TEU) containers, in comparison to a B-double truck having a capacity of three TEU.

“This project also supports regional exports by taking cost out of the rail supply chain,” POM CEO Brendan Bourke says.

“The port’s rail solution is a vital piece of infrastructure delivered with no cost to taxpayers. Our export market, especially farmers, will benefit from this project.

“The project is more than an infrastructure project; it also provides industry reform and drives efficiency in the rail supply chain. It is the result of significant engagement with industry.”

Read about the POM’s 30-year development strategy, here

However, the mechanism has its critics and tensions about how state government is going about this sort of funding was revealed at yesterday’s ports industry roundtable meeting that also discussed the Deloitte container access and port pricing review draft.

While the government representatives extended an opportunity for direct engagement in the development of policy to deliver export growth, a sidelight opened on the matter of cross-subsidisation.

Representatives of the Freight & Trade Alliance (FTA), Australian Peak Shippers Association (APSA) and Container Transport Alliance of Australia (CTAA) raised the issues of imports cross-subsidising exports, and all road users cross-subsidising rail users, plus the fact that initial benefits associated with the location of the on-dock rail will significantly benefit some stevedore operations over others.

One unnamed “major importer member” is quoted as saying: “Why I am paying this significant fee only to fund operational benefits to my competitors?”

“While a reduction in the fee structure as announced yesterday is welcomed – now $9.75 per TEU as against the originally estimated cost of $15 per TEU – the FTA / APSA position to the POM and Victorian Government remains that any fee increase must now be offset elsewhere to maintain the port’s competitiveness – the introduction of the new tariff only adds to the need for regulation to wind back the stevedore administered Infrastructure Surcharges and Vehicle Booking System (VBS) fees,” FTA director Paul Zalai says.

Of the broader rail initiative, the Australian Logistics Council (ALC) was supportive, seeing it as “welcome recognition of industry’s efforts to reduce road congestion around major port precincts and improve the efficiency of supply chains”.

“Moving more freight by rail can deliver a range of potential benefits for industry participants, for exporters and for local communities,” ALC CEO Kirk Coningham says.

“The development of a new on-dock rail terminal at Swanson Dock East will help make that potential a reality.

“The PRTP will help to alleviate road congestion around the Port of Melbourne, which is critical for logistics companies moving freight into and out of the port, and also for improving the liveability of residential communities near the port.”

“Reducing road congestion also delivers safety benefits for all road users, puts downward pressure on road maintenance costs, and promotes enhanced environmental outcomes critical to maintaining the amenity of major cities.

“The PRTP will also help agricultural exporters moving their goods through the Port of Melbourne by reducing their ‘last mile’ costs.

“ALC also welcomes the Victorian government’s commitment to the further development of the Port Rail Shuttle Network, planned new intermodal facilities at Truganina and Beveridge, and its investment in new automated signalling to improve the efficiency of rail freight to GeelongPort.

“As ALC has previously noted, it will be crucial for the Federal and Victorian Governments to work cooperatively to preserve corridors and make investments that will also permit Webb Dock to be connected to Victoria’s rail freight network.

“Investment in on-dock rail solutions is critical to building the capacity of Australia’s freight networks. This announcement by the Port of Melbourne is a welcome contribution to nation-wide efforts to boost on-dock rail, including the investment made by NSW Ports and Patrick Terminals in enhanced on-dock rail infrastructure at Port Botany.”


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