Rail freight in Japan - track access

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Rail freight problem in Japan- Difficulty accessing for rail track -

Shigeki Ozawa

ITS Research Seminar (1st December 2016)

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Agenda

■ Separation and Privatization of Japanese National Railways(JNR) 　　

■ Current Sate of Rail freight transport in Japan

■ Problems of Rail freight transport in Japan(sorting out the problems)

■ Rail freight problems caused by track access (problems in Railway industry)

+

■ My current study

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Separation and Privatization of JNR

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■Development of mortorization

■Inefficient operation as Public body

■Labor dispute (strike, sabotage)

1960’s ～

■High fee (repeated fee increase: 1974, 76, 78 ～ 82, 84 ～ 86) ■Bad service (rolling stock, delivery service, attitutes of empoyees etc.)

Big deficit as serious social problem

1970’s ～

1987Separation and Privatisation of JNR c.f. UK Railway privatisation in 1997

Background of Separation and Privatization of JNR

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Japanese National Railways(JNR)

・ Hokkaido Railway Company

・ East Japan Railway Company

・ Central Japan Railway Company

・ West Japan Railway Company

・ Shikoku Railway Company

・ Kyushu Railway Company

・ Japan Freight Railway Company

Separation and Privatization of JNR

Separation by region

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Freight Company

Passenger APassenger Com

pany F


pany E


pany DPassenger APassenger Com

pany C


pany BPassenger APassenger Com

pany A

access Network Rail

TOC A

TOC B

TOC C

FOC A

FOC B

…. ….

access access

Rail Track Rail Track

JNR BRB

Comparison of National Railway Separation/Privatization

Passenger Train A

Passenger Train B

Freight Train A

….. …..

Passenger Train C

Freight Train B

Passenger Train A

Passenger Train B

Freight Train A

….. …..Passenger Train C

Freight Train B

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Current state of rail freight in Japan

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Rail Freight Network

Rail Freight Network Length 83,473km

UK Railway Network Length16,423km

(source:IBRD)

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High Density Area

TokyoOsaka

NagoyaFukuoka

Sapporo

1,000km

Domestic Freight Volume in Japan

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1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

0

100 000

200 000

300 000

400 000

500 000

600 000

700 000

Air

Truck

Rail

Ship

Million Ton-km

11

ton

over

Truck

Ship

Rail

Modal share by distance in Japan

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Rail freight Transport Volume Comparison between Japan and UK

⇒ 　 Freight trains in Japan are operated on long distance⇒ 　 Coal trains in U.K. are operated on short distance

Freight moved(billion ton-km)Freight lifted (million ton)

22.221.1

44.1

110.5

Coal(43.5)

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Goods transported by rail freight

Intermodal68%

Intermodal29%

Petroleum products 21%

Coal29%

Construction 18%

Metals 8%

Oil and Pertoleum 5%

International 3%Other 8%

Cement 2%Lime stone 2%

Metallic minerals 1%Coal 1%

Chemical drugs 1%

Other 4%

Sorted by ton Sorted by ton-km

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Rail freight problems in Japan(Overall sorting out the problems)

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Needs for Rail freight and actual condition

Government have tried to shift truck to rail - Subsidy for rail facilities, new transport with rail freight - Interest subsidy for rail facilities - Preferential tax treatment for rail facilities

However government actions don’t achieve the shift

■ Truck driver shortage ■ Environment problem ■ Traffic congestion ■ Traffic accident (especially dangerous goods transport)

The policies don’t work (They are in trouble)

Background

External cost happen

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Problem outside of railwayDisadvantage of rail freight as compared with truck

　　　　　　　　　　　　　 Causes

○Characteristic of rail freight transport ・ Higher rate in case of small amount and short distance ・ Train operation in specified time and section (difficulty making flexible response) ・ Difficulty for recovering traffic incident ・ Necessity for corporation with truck transport

○Poor infrastructure (handling station, access road to handling station, freight yard, evacuation track, handing machine ）

○Inadequate container or swap body(not to meet needs (capacity, figure, damage avoidance) of shippers

○Regulation(entry/exit, fare, truck transport)

○Original rule and Common practice in railway (lot, unit, separated fare ）

○Train operation by monopoly (Barrier for efficiency and cost reduction)○Competitive relationship between rail freight company and forwarding company (poor sales power)

○High employment cost and large number of labor○International Border (inconsistent of standard, system, regulation and low)

Problem areas

□Higher track access charge

□Unstable rule to make track access charge low

□Difficulty to prove trains to meet shipper’s

　 demand (Passenger trains have a high priority)

□Lack of Incentive for improving efficiency

　　　　　　　　　　　 Problem areas

□Higher rate 　　　　　　　　　

□Longer transit time (lead time)

□Worse transport qualities (damaged shipment)

□Lack of trains to meet shipper’s demand(time zone, section)

□Unstable train operation (delay, poor response to recover after rail incident)

Causes○High access charge for freight train (unbalance between freight train and passenger train)

○Fixed slots (time table)

　 Absent of adjustment and arbitration system

○ Adversarial relationship between train operators or

between train operators and infrastructure manager

○No competitor in rail freight haulage market

Problem inside of railwayProblem between train operators or

between train operator and infra-manager

Possibility of shifting to rail freight

Non/poor shift from truck to rail freight

□Small amount transport

□Short distance transport

□Adhock transport demand

□Characteristic of freight

No possibility of shifting

to rail freight

Summary of the points for not developing rail freight transport

Problems of road transport -Barriers to increase road Transport-

■Traffic regulation -Noise regulation -Environmental regulation (Exhaust gas regulation) -Congestion regulation

■Charging for highway

■Bottle neck -Geological condition -Weather

■Shortage of driver

Red. ： especially happed in Europe

Purple. ： especially happed in Japan

Railway industry issue

Intermodal issue

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Problem areas

□Higher track access charge

□Unstable rule to make track access charge low

□Difficulty to prove trains to meet shipper’s demand

(Passenger trains have a high priority)

□Lack of incentive for improving efficiency

Purple. ： especially happed in Japan

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Causes

○High access charge for freight train(unbalance between freight train and passenger train)

○Fixed slots (time table)

　 - lack of adjustment and arbitration system

○Adversarial relationship between train operators or between train operator and

infrastructure manager(rail track owner)

○No competitor in rail freight haulage market

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Parcel Companies (e.g. YAMATO, SAGAWA) want to increase rail freight transportespecially between Tokyo and Fukuoka (ca. 1,000km)

Over 1000km transport……… - Truck driver shortage - Carriage Cost - Affordance of transport time (2 days-later deliver is allowed over 1000km move)

Developed Parcel service in Japan - within 1000km area, we can send parcel by next-day delivery with cheaper price

However they cannot do it, because of capacity constrain (Freight company can not increase the number of freight trains)

Rail freight demand increase in parcel industry

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Passenger companies refuse the request from freight company ↑　　　 Because passenger company don’t want to give up their capacity to freight company and wants to do railtrack maintenance work on their convenience schedule　　　 ( Passenger company seeks for their ⇒ profit maximization)

Gap between passenger company’s profit maximizationand social benefit maximization ⇒Market failure ⇒Need for government intervention

Passenger company’s behaviors

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Rail freight problem regarding track access in Japan(problems inside rail industry)

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Track access rule(condition)

■Track access charge : incremental cost (=MC) ■Rail track is owned/managed by passenger companies ■Passenger companies and freight company are competitor for using same rail ■Rail track use is regarded as commercial transaction 　　（ Government don’t want to touch the use)

Freight company cannot take slots required

Capacity (slot) is not allocated efficiently - High willingness to pay is ignored - It is impossible to make policy with access charge and slot allocation (lack of opportunity to take slot)

Government intervention is required for efficient capacity allocation

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PassengerTrain

FreightTrain

Rail Truck managed and owned by Passenger Company

Accesspay access charge

Government don’t touch the problem regarding truck access(Government regard the access as commercial transaction)

Commercial transaction

between passenger company and freight company

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PassengerTrain

FreightTrain

Rail Truck managed and owned by Passenger Company

Accesspay access charge

Government don’t touch the problem regarding truck access(Government regard the access as commercial transaction)

Commercial transaction

between passenger company and freight company

Reject !

Freight trans cannot be increased,despite of big demand

×

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Freight company is in disadvantageous position………. 　　■ there is no “appeal” system (no arbitration body)

■ Rail track is essential capital for freight company (Hold-up problem)

　■ Passenger companies ask freight company to pay much access charge if freight company get much profit (lack of incentive to maximize profit)

　■ Freight company has fear of “tit-for-tat” from passenger companies

Freight company’s standing

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Rail Track Owner Passenger companies(Private company)

Network Rail (Public Body)

Relationship betweenFreight company and

Rail Track Owner

Competition(for using same rail rack) Complementary

Freight train Access Charge MC

MC(Passenger: MC+/-)

Response for conflictGovernment(ORR)

solves conflictGovernment don’t want to

touch Rail track issues

Freight company is in disadvantageous position

Track access Comparison between Japan and UK

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Needs for government intervention　 (Limit of market mechanism ) - Access charge can’t achieve efficient slot allocation-

■ Difficulty to set access charge by Social Marginal Cost (SMC) 　　　　　　　　 - Difficulty to calculate SMC (SMC changes by time and place) 　　 - Information asymmetry between government and rail track owner

■Limit of auction 　　 -Needs for many auctions (one train concerns many other trains because railway is network)　　 - Information asymmetry between incumbent operator and new comers 　　 - Endowment effect, IKEA effect (incumbent has much higher WTP) 　

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Needs for government intervention　 (Limit of market mechanism ) - Access charge can’t achieve efficient slot allocation-

■Limit of transaction between operators 　　 - Supply monopoly happen due to no substitute 　　 - Slots are captured for the purpose of speculation 　　 - Slots are captured for the purpose of obstruction for competitor　　 - Information asymmetry between seller and buyer 　　 - Transaction cost happen 　　 - Endowment effect, IKEA effect (incumbent has much higher WTP) 　　 - WTP difference depend on scale of operators

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Sorting out problems (as Conclusion)

■Access charge is set by MC, but freight company can’t take slot required - Passenger companies have high priority to use rail track　　 - Market mechanism does not work in rail track use in Japan - Freight company’ position is weak (Hold-up problem etc.)

■There is no opportunity to appeal for government and no arbitration body (Government don’t want to touch rail capacity problems)

● Efficient slot allocation is not achieved ● Current cconditions prevent new entry

■ Rail freight (freight company) could be victim of passenger rail prosperity - Government intervention is needed to develop rail freight in Japan

■ Lack of combination between railway policy and intermodal policy - Railway reform has not been completed yet

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Current Study

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Meaning of study British rail freight policy ORR has been trying to achieve efficient slot allocation 　　　　　　　　　　　　　　　↓ Until now, slot allocation and access charge in main line have been treated in academic area. However, slot allocation in freight terminal has not been treated 　　　　　　　　　　　　　　 ↓ With studying slot allocation in freight terminal, we can see and consider “true/actual” efficient slot allocation of freight train and rail freight policy　　

Motivation of current study Considering that Japanese government don’t concern with slot allocation of freight trains………. I would like to know: - how ORR try to achieve efficient slot allocation - how ORR take care for freight trains in slot allocation - what kind of help does ORR provide for freight trains

Rail freight in Japan - track access

Economy & Finance

Transcript of Rail freight in Japan - track access