New Rail Financing Framework

One of the new trains at Tuas Depot in 2018

Under the New Rail Financing Framework (NRFF), LTA owns the rail operating assets. This allows us to ensure more timely investments in capacity expansion, replacement and upgrading the assets.

Besides the transfer of ownership of the assets previously held by Public Transport Operators to LTA, changes were also made to licence periods, profit and risk sharing arrangement and regulatory regime. The graphic below gives an overview of changes from the old financing framework to the new framework under NRFF:

An infographic on the National Rail Financing Framework

Image Credit: Ministry of Transport

All existing rail lines are now operating under the NRFF, which will allow the Government to plan the network holistically and improve rail capacity for Singaporeans in a timely manner. The only exception will be the Thomson-East Coast Line (TEL) which is operated on a model where the Government pays the successful tenderer a service fee to operate the line, while the Government collects fare revenue and bears fare revenue risk. Similar to the NRFF, the Government will own and be responsible for expanding, upgrading and renewing the TEL’s rail assets, while the Operator remains responsible for the operation and maintenance of the line.

To deliver reliable train services for commuters in a financially sustainable manner, LTA and SBS Transit (SBST) have concluded the review of the NRFF for the Downtown Line (DTL) . Since 1 January 2022 , DTL has transitioned to NRFF version two which is applied to the majority of other rail lines.

Under the NRFF version two, LTA strengthened both the profit and risk-sharing mechanisms to reduce commercial volatility for the operator, while calibrating the revenue risk borne by the Government. If ridership turns out much lower than projected and the financials of the operator suffers as a result, LTA shares some of the shortfalls in fare revenue and profits. Conversely, if profits outperform expectations, there is a greater component of profit-sharing, the operator will pay an increased licence charge that is channelled into the Railway Sinking Fund to be used for the renewal of operating assets. This also effectively caps the operator’s profit margins.

Regulatory Framework

Regulatory Framework

Together, rail operators and LTA are guided by a regulatory framework that covers four key areas:

Maintenance of rail assets with prescriptive maintenance requirements. Rail operators must conduct internal audits and submit annual maintenance plans and fault trends analyses.
Incident management to better integrate incident management plans. LTA takes the lead in establishing clear roles and responsibilities to facilitate quicker and better coordinated responses during major train service disruptions. This is part of an overall Land Transport Emergency Plan. Working with rail operators, LTA's Crisis Management Team will provide prompt assistance during service disruptions by enhancing bus services, managing traffic for the better movement of buses, and coordinating the response across government agencies.
Operating Performance Standards (OPS) which establishes the performance required for service quality, safety and key equipment reliability.
A penalty framework in which rail operators can be subject to financial penalties for regulatory breaches. Under the Rapid Transit Systems Act, the maximum financial penalties that LTA may impose is the higher of $1 million or 10% of the licensee's annual fare revenue. LTA has completed our investigations and imposed penalties for the following cases:

Description of Incident	Description of Penalty
On 12 December 2018, an accident occurred during maintenance works near Joo Koon station.	LTA had imposed a financial penalty of $200,000 on SMRT Trains Ltd for the breach of licence condition under Section 19 of the Rapid Transit Systems Act, requiring the operator to exercise due diligence and vigilance.
On 4 March 2019, an electrical flashover occurred during maintenance works at Changi Airport station.	LTA had imposed a financial penalty of $200,000 on SMRT Trains Ltd for the breach of licence condition under Section 19 of the Rapid Transit Systems Act, requiring the operator to exercise due diligence and vigilance.