Operations of the Standard Gauge Railway (SGR) Madaraka Express passenger and cargo trains risk being grounded over Sh38 billion in unpaid bills, Members of Parliament have warned.
The National Assembly’s Budget and Appropriations Committee (BAC) has raised the red flag over the government’s failure to pay Ksh38 billion to Africa Star Railway Operation Company, the Chinese firm contracted to run the trains.
Africa Star Railway Operations Company is majority-owned by China Road and Bridge Corporation (CRBC) and was contracted in May 2017 to run the passenger and cargo trains on the SGR.
In its report on the 2020/21 Budget, the committee said that failure to pay the money could see the company pull out of the daily operations, a move that could ground operations of the Jubilee government’s pet project.
Africa Star manages the ticketing system, landing and offloading of cargo and collection of passenger fares, including non-cash revenues.
“Pending bills arising from operations of the standard gauge railway have accumulated to Sh38 billion and this may force the operator to pull out of the daily operations of the project,” Committee Chairperson Ichung’wa says in the report.
Kenya Railways, the contracting organization however, said that it had not received any protest letter from Africa Star, or parliament adding that it is yet to be furnished with the report.
“As Kenya Railways, we have not received any communication from Africa Star. We have also not received the report from Parliament and at the moment we cannot comment,” Kenya Railways said in a comment to Business Daily.
Kenya Railways has previously made light work of the pending bills claims by Africa Star charged for operating the VIP passenger trains.
Under the contract between Kenya Railways and Africa Star, the operator has the right to manage the ticketing system as a means to recoup some of CRBC’s investment.
Africa Star can only foot repair bills of less than Sh100,000 under the contract that requires Kenya Railways to pay the maintenance fees. Further, the operator cannot be held responsible for any legal claims from third parties involving damage to property, death, illness or personal injury.
The Sh38 billion in pending bills add to the Ksh420 billion that Kenya borrowed to build the modern line from Mombasa to Nairobi and purchase of engines and coaches.
They also pile the woes facing the Madaraka Express amid struggles to meet revenue targets through the passenger and cargo trains, which fell by eight percent in the four months to April from similar period last year.
Kenya National Bureau of Statistics shows that the SGR cargo and passenger trains generated Ksh3.92 billion in the four months ended April, from Ksh4.27 billion compared to a similar period last year.
The data shows that cargo revenues fell to Ksh3.57 billion in the period under review from Ksh3.72 billion while the passenger trains raised Ksh354. 9 million in the four months to April from Ksh548 million last year.
The revenues are expected to fall further following the suspension of passenger services in April to curb the spread of COVID-19.
Last year, the government through the Kenya Ports Authority (KPA) and the Kenya Revenue Authority (KRA) ordered that all imported cargo be transported aboard SGR cargo trains effective August last year.
The move however led to protests as truck drivers and logistics companies protested the move.