Jakarta-Bandung High-Speed Rail Concession Extended
27 January 2023 20:40 WIB
TEMPO.CO, Jakarta - The Indonesian government has recently approved the extended concession period for the Jakarta - Bandung high-speed rail project from 50 years to 80 years. The company overseeing the ambitious project, PT Kereta Cepat Indonesia China (PT KCIC) had initially pitched the concession extension in December 2022.
This was revealed by the Coordinating Minister of Maritime Affairs and Investments Luhut Pandjaitan.
“It is in effect,” said Luhut to journalists on Thursday, January 26, 2023.
Behind the Ambitious Project's Dynamics
The Transportation Ministry has the authority to extend the high-speed rail’s concession permit to 80 years as previously stated by the Minister of Transportation Budi Karya Sumadi. Minister Budi said that an extension may be granted if KCIC increases the value of its investment in the project.
- Initial agreement
The concession agreement between the government and KCIC was originally regulated in Concession/Cooperation Agreement No. HK.201/1/21/Phb 2016 Amendment and Restatement of the Concession Agreement/Cooperation Agreement No. PJ 22/2017.
The agreement stated that the investment value financed by KCIC was US$5.9 billion with a concession period of 50 years from the date of operation of the infrastructure and facilities. The handover will be conducted at the end of the concession period, however, five years later, in a letter to the Ministry of Transportation dated August 15, 2022, KCIC Director requested that adjustments be made to the concession period for the High-Speed Rail project.
The letter stated that the extension of the concession period was needed to meet the project's cost overrun of roughly Rp21.4 trillion. The cost overrun is based on the calculation of the Financial and Development Supervisory Agency (BPKP).
- The concession extension from 50 to 80 years
KCIC had asked the government to extend the KCJB management concession period from 50 to 80 years. This information was revealed by the Transporation Ministry's director general of railways Risal Wasal in a hearing with members of Commission V House of Representatives (DPR) on December 8, 2022.
According to Risal, KCIC asked the Transportation Ministry to make adjustments to the concession period for the high-speed rail project as a consequence to numerous obstacles that caused changes in the project's business feasibility.
- The reason behind the 30-year extension period
According to Risal, there are three reasons that underline the concession extension. The first is to improve the fast rail’s feasibility indicators in meeting the cost overrun funding. That way, the project can be completed on time.
The second reason is to maintain the continuity of the Jakarta-Bandung high-speed rail project in order to maximize the project's positive impact in various aspects such as social and economic, and state revenue contributions.
The third reason is to strengthen bilateral relations between China and Indonesia.
The high-speed rail project that will connect Java Island’s two major cities is scheduled to be operated for the public in June 2023.
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