Shortly after the announcement in March that fuel excise duty and road user charges would be subsidised, Kiwirail wrote to the Transport Minister asking for a similar discount on its Track User Charges – despite these fees having nothing to do with oil prices.
However ministry officials told Michael Wood a reduction in the charges was unnecessary and inappropriate and advised against it.
“The Track User Charge is paid by Kiwirail’s rail freight business and is passed onto its commercial customers through a surcharge and is not in anyway related to fuel costs. KiwiRail pays the Track User Charge to ensure that it contributes in a fair and transparent way to the wear and tear its rail freight operation causes on the national rail network.”
“The reduction in fuel excise duty and Road User Charge is focused on reducing cost of living impacts on households, rather than subsiding the road freight industry.”
Officials said a reduction in the charges would result in up to $1.4 million being lost to National Land Transport Fund revenue.
A spokesperson for Wood’s office said the reduction was agreed to, against official advice, because of concerns companies would switch to using road freight during the discount period.
“The intention of the Road User Charge reduction was to support New Zealanders and the transport industry through the global energy crisis caused by the war in Ukraine. The transport industry plays a vital role in the supply of food and other essential goods across the country.
“To ensure this support didn’t unintentionally prioritise one transport mode over another, the Track User Charge was also reduced.”
The Budget confirmed an extended reduction in Road User Charge for July and August 2022 but despite earlier concerns about mode switching, the Track User Charge discount was not extended alongside it.
Kiwirail began paying the charges in November last year as part of a new planning and funding framework for the national rail network allowing it to access funding from the National Land Transport Fund.
Kiwirail will received a maximum allocation of $1.3 billion for the 2021-2024 period from the Land Transport Fund and the Track User Charge payments were estimated to pay in almost $45 million over the same period.
Kiwirail commercial general manager Alan Piper said the Track User Charge reductions had been passed on to commercial customers.
“The 36 percent discount currently in place reduces the Track User Charge rate paid by KiwiRail from $1.18 per 1,000 gross tonne kilometres to $0.75, plus a small administration charge… The intent of the reduction was to support households with the cost of living, and we have passed all of this reduction to our customers.”
One of Kiwirail’s largest customers, Fonterra, said it had received a discount due to the Track User Charge reduction, but would not confirm if this meant it would then offer a discount to its own customers, citing commercial sensitivity.
The Budget confirmed an extended reduction in Road User Charge for July and August 2022 but, despite earlier concerns about mode switching, the track charge was not discounted alongside.
KiwiRail does not pay Road User Charge on diesel used to fuel its locomotives or interisland vessel fleet.