In a legalised corruption arrangement between the government and state-owned corporation SBS Transit, Singaporean taxes will have to pay the Temasek Holdings-owned company S$30.8 million for the exorbitant depreciating assets like trains, signalling and power systems. The New Rail Financing Framework (NRFF) previously saw the government handing over S$1.06 billion to SMRT in 2016.
The profitable portion of railway operations will be handed in a 20-year contract to SBS Transit, with a clause stating that SBS Transit will be reimbursed if they make any losses:
“In addition, new regulatory changes imposed by the LTA – resulting in higher operating costs or revenue loss – may see the authority reimbursing SBS Transit.”
During the 20-year contract, SBS Transit need only pay an undisclosed portion of their profits to the government Land Transport Authority (LTA). State media Straits Times wrote that the money goes to a secret sinking fund, whose value is also hidden from the public:
“As part of the arrangement, SBS Transit will have to pay LTA an annual licence fee to continue operating and earning revenue from the two lines. However, both parties declined to disclose the amount that will be paid. The fee, which varies according to SBS Transit’s profitability, will go into a sinking fund for asset replacement.”
SBS Transit is projected to save over S$100 million in maintenance fees each year after handing over the depreciating assets to the government. Former army general SBS Transit CEO Gan Juay Kiat commented:
“It relieves us of the cost of asset renewal and upgrade, and of procuring additional operating assets when ridership demand increases, in order to meet service level and reliability standards set by the LTA.”