QR divestment – the case for a different model

He said that every Queenslander has a stake in the privatisation of QR National's above-rail freight business - along with the below-rail coal track network servicing the State's leading export industry.
The coal industry was worth $38 billion to Queensland last financial year. That’s the direct value of production, excluding the flow on to the Queensland economy, government revenues and regional communities.
Subject to the fate of the Federal Government’s super tax on the resource sector, it’s an industry planning to invest tens of billions of dollars more over coming years in start-ups and expansions to existing operations.
One of the most critical components in the development and maintenance of a globally competitive industry is its export supply chain, said Roche.
“As we learned to the state and nation’s detriment only a few years ago, export supply chain capacity is the difference between maximising our opportunities or losing hard-won markets to competitors.
“No-one should be in any doubt over the importance to the Queensland economy of an efficient, responsive and globally competitive export coal industry.”
Before the Government’s divestment announcement last June, QRC has argued for a separation of the coal trains and coal track businesses.
The QRC and its members - including all the state’s major coal producers - did not advocate QR privatisation but nor are they opposed to it.
However, they are united in their opposition to the sale of an integrated QR National combining coal track assets and haulage operations under one company, as currently proposed by the Government.
“Competition in the above-rail sector is not only good for industry but also the state as a whole,” said Roche.
“The structural separation of QR’s essentially contestable above-rail coal haulage operations from the monopoly below-rail track business precludes the ability of an integrated rail business to stymie above rail competition...and promotes investment.
“The coal industry’s ownership of the QR coal track business makes sense. It is the coal industry that has the incentive to ensure timely investment in expansion of and maintenance of the network.”
Roche suggested that the industry will need a regulatory regime in place that addresses the perverse incentives for a non-aligned, vertically integrated railway business to abuse its monopoly power at the expense of third-party operators and coal industry operations.
“The current competition watchdog for QR is the state government and if QR is sold in its current form, it will not have control over uncompetitive behaviour.
“Without substantial amendment to the current regulatory framework, a privatised QR will have the incentive and means to profit at the expense of competition and industry growth,” said Roche.