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The government has dropped plans to privatise the $4 billion Australian Rail Track Corporation - opting to keep it in public hands to push through one of its new pet projects, the $10.7 billion inland rail scheme.
Finance Minister Mathias Cormann flagged the potential sale of ARTC In last year's budget and commissioned bankers to undertake scoping studies. But the plan was abandoned in Tuesday's budget with the government's announcement that it would instead make a $594 million equity contribution to the Melbourne-to-Brisbane inland rail project.
"The Australian government will build the inland rail project through the Australian Rail Track Corporation and private-sector partnerships," it said.
"The government will retain the ARTC in Australian government ownership to enable the project to access funds at the lowest cost to the taxpayer, testing the market to optimise private-sector involvement in the delivery and financing of Inland Rail."
The government's new projected infrastructure spending commitments.
The $594 million in equity funding - which will not come off the budget bottom line - will be used to acquire land for the 1700-kilometre project and pay for pre-construction works and due dilligence activities.
The budget papers said the funding would be subject to an equity funding agreement between the Commonwealth and the ARTC. This will bring the federal government's commitment to the project to a total of $893.7 million.
There will also be $3.8 million funding in the 2016-17 budget to examine opportunities to "optimise private-sector involvement in delivering and financing Inland Rail".
ARTC, which was created in 1997, manages more than 8500 kilometres of standard-gauge rail track in South Australia, Victoria, NSW, Queensland and Western Australia. It also manages the commercial business of the Hunter coal rail network and other regional rail links in NSW. Train operators using ARTC tracks pay an access charge, which is governed by undertakings regulated by the Australian Competition and Consumer Commission.
The decision to abandon the sale of ARTC will disappoint bankers who were hoping the budget would include funding to proceed with the sale.
The Department of Finance initially appointed Lazard to run ARTC's scoping study, but the job was halted before Lazard could make its recommendations, and re-tendered with a wider reach that included the proposed Inland Rail.
Macquarie won the second tender, ahead of Rothschild and Flagstaff Partners, and has spent the past couple of months looking at two options: sell the whole of ARTC or break up the business and sell the corridors.
But the federal government had erred on the side of caution by keeping ARTC in public hands. Infrastructure and Transport Minister Darren Chester has said inland rail is as important as any high-speed rail project because of the heavy vehicles it takes off roads.
This article first appeared on www.afr.com
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