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Replacing expired locomotives, carriages to place enormous financial burden on railway sector

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HCMC – The domestic railway sector needs some VND6.8 trillion to replace expired locomotives and carriages this year, which will place it under immense financial pressure amid the difficulties caused by the Covid-19 pandemic, the upgrade project of the Hanoi-HCMC rail route and the price competition between road and air transportation.

According to Decree 65 which prescribes some articles of the Law on Railway and came into force from July 1, 2018, the lifespan of locomotives and carriages should not exceed 40 years for passenger trains and 45 years for freight trains. The decree also stipulated that railway firms have three years until 2021 to replace expired vehicles.

Data from the Vietnam Railways Corporation (VNR) and railway transportation joint stock companies showed that as of December 31, 2022, some 60 locomotives, nearly 1,000 cargo carriages and 500 passenger carriages will need to be liquidated gradually.

Vu Anh Minh, chairman of VNR, said that building new carriages to replace the expired ones without enjoying preferential interest rates will place much financial pressure on railway companies.

Meanwhile, given the current difficulties caused by the pandemic, VNR’s equity worth VND3.2 trillion at its subsidiaries, especially at the Hanoi Railway Transport JSC (Haraco) and the Saigon Railway Transport JSC (SRT), could completely disappear and the efforts of Haraco and SRT to run their businesses over the past years could be erased in the next three years. Moreover, the sector is financially incapable of buying new equipment, Minh said.

Phung Thi Ha, vice general director of Haraco, said the firm faces a carriage shortfall to serve passengers during the upcoming Lunar New Year. It also lacks a high number of cargo trains.

The Haraco representative added that the country’s transport infrastructure system has yet to meet the transport demand. Accordingly, the firm will find it hard to recoup investment if it builds new carriages to replace out-of-date ones.

While awaiting investments, VNR had requested the Ministry of Transport to propose Prime Minister Nguyen Xuan Phuc extend the expiry for locomotives and carriages by three years.

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