Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

Railway Reform: Toolkit for Improving Rail Sector Performance
9. Setting the Regulatory Framework
this. The simplest solution may be to have a concession and compensate for gaps
in the concession contract by making provision for dispute resolution.
9.4.3 Concessions
Key elements of concessioning
Concessioning differs from outright sale of the entire business and is commonly
used to introduce competition for the right to serve the market, not competition
within the market. 100 Normally, government retains infrastructure ownership and
the concessionaire has the rights of use for the contract duration. 101 Concessioning
is a form of regulation, but additional discretionary regulation may be required.
Concession design depends on the rights that are being contracted for, which
could range from the right to operate a few services, to the right to construct and
operate an entire national or international railway. The concession could be:
• A negative concession (usually for loss-making passenger services) where
tariffs and services are normally regulated and the government pays the concessionaire;
• A commercial concession-operators pay government for operating rights,
usually for freight, without rates or services regulations;
• A combination of these two.
A guide to a commercial concession contract is set out in Annex 4.
Regulation under concessioning
Under concessioning, regulation can be as simple as contract enforcement. 102 Alternatively,
regulatory responsibilities can be divided between the concessionmonitoring
body (either government or a government agency) and an independent
regulator. The independent regulator may give the private investor more confidence
by providing a check on government, or preventing a concessionmonitoring
agency from terminating a contract before the concessionaire has an
opportunity to rectify any problems. This arrangement should command better
concession prices from bidders because it lowers their perceived regulatory risks.
Box 9.7 describes experience with rail concessioning and regulation in Argentina.
100 J. A. Gomez-Ibanez, Regulating Infrastructure: Monopoly, Contracts and Discretion,
(Cambridge, Mass. Harvard University Press, 2003).
101 In the case of new infrastructure, ownership can either revert to the government at
the end of the concession or can be transferred to government on commissioning with
the concessionaire having permission to use the facilities.
102 Estache and de Rus, Privatizing and Regulation of Transport Infrastructure, (World
Bank Institute Development Studies, 2000).
The World Bank Page 144