The Kowloon-Canton Railway Corporation (KCRC; ) is a Hong Kong wholly government-owned railway and land asset manager. It was established in 1982 under the Kowloon-Canton Railway Corporation Ordinance for the purposes of operating the Kowloon–Canton Railway (KCR), and to construct and operate other new railways. On 2 December 2007, the MTR Corporation Limited (MTRCL), another railway operator in Hong Kong, took over the operations of the KCR network under a 50-year service concession agreement, which can be extended. Under the service concession, KCRC retains ownership of the KCR network with the MTRCL making annual payments to KCRC for the right to operate the network. The KCRC's activities are governed by the KCRC Ordinance as amended in 2007 by the Rail Merger Ordinance to enable the service concession agreement to be entered into with the MTR Corporation Limited.
The XRL Hong Kong Section and the Sha Tin to Central Link have since been injected by the Hong Kong Government into the KCRC.
History
From 1910 to 1982, the KCR network was operated as a department of the Hong Kong Government. The Kowloon-Canton Railway Corporation was created in December 1982 after the government decided to corporatise its railway department. Until 2007, the KCRC owned and operated a network of heavy rail, light rail and feeder bus routes within Kowloon and the New Territories. It was also a land developer by utilising its property development rights atop and around railway stations and depots. In December 2007, it ceased railway operations, with its business becoming primarily that of earning revenue from being the holder of railway assets. While it continues to own the rail network, the network is operated by the MTR Corporation under a 50-year service concession, for which the MTR Corporation Limited makes annual payments to the KCRC.
An expanding network During the electrification of the KCR in the 1970s and early 1980s, thought had been given by the government as to the future management of the railway. Before 1982, the Kowloon–Canton Railway had been run as a department of the government, and was subject to the normal civil service rules and requirements. This made it difficult to take a commercial approach to operating what was increasingly becoming a major business in investment and revenue terms. Corporatisation of public services as a means to permit government-owned public utilities to operate more along the lines of private sector business was an approach that was beginning to gather interest at the time from several governments – the US and UK governments under Reagan and Thatcher being prime movers. The object of corporatisation was to allow the public service providers to make a commercial return on their assets, thus reducing the need for investment of public funds raised predominantly from taxes, while still remaining under government control.
On 24 December 1982, the KCRC Ordinance (Cap 372) was enacted and the KCR ceased to be a government department, although it remained wholly owned by the government. Under the Ordinance a managing board, comprising 10 members appointed by the governor (Chairman, managing director and not less than 4 nor more than 8 other members), became responsible for overseeing the day-to-day operations of the Corporation. The Corporation was required to "perform its functions with a view to achieving a rate of return on the assets employed in its undertaking, and in accordance with ordinary commercial criteria, is satisfactory."
The KCR expanded its operations starting in 1984. It accepted an invitation from the government to build and operate a light rail network in the north western New Territories serving the local public transport needs of the future residents of the Tuen Mun and Yuen Long new towns.
The first choice of operator for this network had not in fact been KCR, nor had the construction of a light rail network been decided when the plans for the new towns were first drawn up. Originally the focus had been on Tuen Mun, with the new town being planned from the outset with an 'exclusive public transport right of way' segregated from the ordinary road network.Minutes of the Legislative Council meeting of 16 July 1986 In 1977 the government commissioned Swiss Electrowatt Engineering and Scott Wilson Kirkpatrick & Partners, both as the engineering consultants for the Tuen Mun new town, to undertake the Tuen Mun Transport Study. This involved the evaluation of the respective merits and demerits of various modes of public transport to determine which would best meet the needs of the area.
The final selection came down to a choice of one of three systems – double-deck diesel powered buses, electrically powered trolley buses, and electrically powered light rail vehicles supported by diesel buses serving less densely populated areas or where steeper gradients limited the use of light rail vehicles. Diesel buses, although unquestionably more flexible in operation and requiring far lower initial capital costs, because they did not rely on fixed overhead power lines and tracks like trolley buses and light rail vehicles, were ruled out on grounds of air pollution.
Trolley buses were ruled out on grounds of capital costs, in that the purchase price of a trolley bus was twice that of a diesel bus but offered no greater passenger carrying capacity. They also offered less operational flexibility in that they required the provision of a fixed overhead power line. It was recognised, however, that a case for the use of trolley buses over diesel buses might made were the relative costs of diesel fuel versus electrical power to change.The case for adopting trolley buses might be stronger today given increased oil prices, and the considerable progress made over the past few years in battery, supercapacitor and hybrid power systems that allow trolley buses to partially free themselves from total dependence on fixed overhead power lines.
The consultants' final report of November 1978 recommended the construction of a light rail system. The consultants argued that a light rail system offered "the best technical and economic solution to the future travel needs of Tuen Mun. Such a system would, moreover, help to promote and develop the image of the new town." Light rail vehicles would offer greater passenger carrying capacity than buses, and, although initially more expensive to purchase than diesel or trolley buses, their economic life of around 50 years was far longer than that for diesel and trolley buses of around 15 years. The consultants estimated that over 30 years the light rail system would provide an 8% return on assets assuming an annual discount rate of 15% and an annual inflation rate of 7%. The study finally also recommended the extension of the light railway system to the Yuen Long new town.
The consultants proposed the use of double deck trams each carrying 247 passengers (diesel buses then in operation could each only carry about half that number).The proposed vehicles were 16.5 metres long, seating 103 passengers on the upper deck, with 32 sitting and 112 standing passengers on the lower deck. The use of single deck trams was ruled out on the grounds of capital cost because of the need to purchase a larger number of vehicles to provide the same total passenger carrying capacity for the system. It would later transpire that no light rail vehicle manufacturer could offer such double deck vehicles and none were prepared to invest in the manufacturing capacity needed to build such vehicles given the relatively small number required. Ultimately single deck vehicles had to be ordered, which although longer at 20.2 metres, can only achieve a similar maximum passenger capacity of around 238 passengers by having all but 26 passengers standing.
Capital Cost Comparison of Different Systems Based on 15 km of Light Rail Track Plus 10 km of Bus Feeder Routes Capital Cost (HK$ million) Diesel buses 60 Trolley buses 109 Double-deck light rail 164 Single-deck light rail 266 Source: Tuen Mun Transport Study 1978, Volume 1
These recommendations came at the same time as the government was examining proposals for a mass transit system along the north of Hong Kong Island. As explained by the Secretary for Transport in the Legislative Council on 5 July 1978, the government had asked the then Mass Transit Railway Corporation (MTRC) to plan the construction of a mass transit light rail system on HK Island more or less along the alignment of Hong Kong Tramways' existing line, which had been in operation since 1904 and lacked the capacity to handle anticipated future public transport demands. If MTRC's plan was viable, the government would exercise its option under Section 30 of Tramways Ordinance to buy out the existing tramway operation.
Section 30 of the Ordinance required the government to acquire Hong Kong Tramways' land and assets at their full market value. In exchange for the surrender of the Hong Kong Tramways' Hong Kong Island operations, the government indicated its willingness to offer the right to operate the future Tuen Mun light rail system to the company. However, in January 1983 the government announced that it had not been able to reach an agreement with the Kowloon Wharf and Godown Company (the owner of the Hong Kong Tramways). The main sticking points in the negotiations appear to have been the amount of profit that the company would have been allowed to earn from the Tuen Mun light rail network and the granting of property development rights.South China Morning Post, 21 July 1982Minutes of Legislative Council Meeting of 2 February 1983 Also during this time, the decision had been taken to construct the MTR Island line underground as had been the case with the MTRC's earlier Kwun Tong line.
Subsequent discussions with other possible interested parties also failed and in 1984 the government turned to the KCRC to invite it to take on the construction and operation of the light rail network.
The Light Rail Transit (LRT, known later as the KCR Light Rail and currently simply as the Light Rail) came into service in September 1988. Although the system was generally successful in meeting passenger demand, it was never a commercial success. According to the corporation's annual reports, the system showed an annual cash-operating loss up to 2003.In December 2003, the corporation introduced free light rail feeder services for those light rail passengers paying by Octopus Card who also made use of the new West Rail line for part of their journey. The free feeder service was intended to encourage use of the new line and to release light rail vehicles from the previous long-distance Tuen Mun to Yuen Long routes, which were now paralleled by West Rail, for reallocation to those more congested internal routes within the two new towns. With the total fare for the combined Light Rail plus West Rail journey now becoming simply the West Rail fare, and given the large number of Light Rail passengers taking such combined journeys, the corporation ceased to publish separate operating profit figures for Light Rail from the end of 2003.
The KCRC started to participate in property development and management at around the same time as constructing Light Rail. The first joint-venture property development, Pierhead Garden, located above a light rail and bus terminus in Tuen Mun, was completed in 1988. While profits generated from property and commercial services were useful to fund new railway projects, they were never regarded as essential, being generally treated as a useful windfall. The chairman of the KCRC, K Y Yeung, highlighted this in his statement made in the 2002 annual report, by pointing out that "our main source or revenue has always been and will continue to be fares. The receipts from property developments are one-off in nature and are not a dependable, long-term source of revenue for the Corporation."