Railway revamp

STAR,  27 October 2011

KTM Bhd (KTMB) will undergo a two-year corporate restructuring programme to turn around the ailing national rail operator and a consultant will be hired to manage this, according to the Treasury, in its reply to the Auditor-General's (A-G) report.

The A-G's report had stated that KTMB posted a loss of RM92.6mil in 2009 compared with RM84.6mil loss in the previous year.

The Treasury said that apart from high operational costs, the losses were also due to a decline in cargo transportation earnings by 50% in 2009.

One of the reasons for this was insufficient train capacity of the State Railway of Thailand to support KTMB's cross-border services.

Insufficient capacity: KTMB does not have enough electric multiple sets to support its commuter train services.

KTMB also did not have enough electric multiple sets to support its commuter train services.

KTMB's associate company KL Sentral Sdn Bhd also saw a 70% decline in revenue during the year under review. KTMB also suffered an asset depreciation charge of RM265mil in 2009.

According to the Treasury, the Finance Ministry has directed KTMB to present its financial and non-financial reports to the Government on a quarterly basis.

The A-G's report also stated that KTMB must tackle its problem of having a high number of outstanding debtors in order to achieve healthy cash flows.

As of end-2008, KTMB had failed to collect debts amounting to RM40.7mil and RM3.8mil more was owed to its subsidiary.

The A-G's report also found that KTMB had not charged any interest on overdue credit extended to its customers.

The report suggested that KTMB institute legal actions against companies or individuals who failed to settle their debt.

However, it acknowledged that part of the problems with KTMB's debt collection was due to its failure to renew its land lease with the Federal Land Commissioner.

It added that the land lease contract had expired and because of this, KTMB was unable to collect debt, rent or take legal actions.

The A-G's report noted that the Transport Ministry, had on April 8 2010, decided that Perbadanan Aset Keretapi (PAK) would become the custodian of all land belonging to KTMB under the Railway Act 1991.
PAK would manage all land matters relating to KTMB, including land rental.

KTMB was also in the process of drafting a new credit agreement (cargo) that will include a clause on interest charges.

The report added that KTMB had begun legal proceedings against some cargo debtors.