TNAG-0957-FCO40-1176-The-Kowloon-Canton-Railway-1980 — Page 2

the KCR accounts will be showing increasing deficits from 1982-83. It is still too early to project the levels of income and expenditure post- electrification with any degree of accuracy, but it is clear that there will have to be a substantial increase in fares if the KCR is to operate profitably and to earn a reasonable rate of return on net fixed assets. When the se projections have been prepared, they will be considered by the Railway Accounts Committee and the financial objectives of the KCR, including target rates of return, will be determined.

C

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In the meantime, however, an immediate interim increase in fares is necessary, not only to remedy the financial position of the KCR in 1980-81 but also to mitigate to some extent the very large increase in fares that would be necessary after an electrified service is in operation.

Proposal

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The General Manager of the KCR, in accordance with his powers to regulate fares under section 29 of the Kowloon-Canton Railway Crdinance (Chapter 99), proposes to introduce an increase in passenger and freight rates with effect from Monday, 28th January 1980. Detailed passenger fare proposals are included in Annex C. The increases average about 30% on existing passenger fares. The increase for freight services will be about 20%.

G.S. 166

Student Fares

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On 13th February 1979, Members considered me morandum. XCC(79)15, which contained proposals for revising student fares which had been set in 1957 at a flat rate of $48 for a six month period, regardless of distance which represented a subsidy equivalent to about 80% of the cost of a normal adult ticket. The Council advised and the Governor ordered:

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(a)

(b)

(c)

that the cost of KCR scholar tickets should be increased to the equivalent of a KCR child fare as proposed in paragraphs 4 and 5 of the memorandum;

that the higher increases be phased over a three-year period, with a first phase maximum of $16, the details to be agreed between the Secretary for the Environment and the General Manager, Railway; and

that the implementation date should be 1st September 1979.

The first increase has thus only recently been introduced and

it is not proposed to change the intermediate adjustments already approved by Members.

CONFIDENTIAL