The New Rail Financing Framework (NRFF) is the operating model for all rail services in Singapore, wherein rail assets are owned by the Land Transport Authority (LTA), a statutory board under the Singapore government.
Under this framework, LTA manages rail infrastructure and assets, while rail operators focus on day-to-day operations. Operators earn a share of the profits but must pay an annual license fee to LTA, which varies based on their profitability.
Originally introduced in 2008 as part of the Land Transport Master Plan, the NRFF has been gradually implemented since 2011 to improve the sustainability and efficiency of Singapore’s rail network.
Key Milestones
- 2008: Announced under the Land Transport Master Plan
- 2011: NRFF implemented on the DTL
- 2016 (Oct 1): NSL, EWL, CCL and BPLRT transitioned to NRFF V2
- 2018 (Apr 1): NEL, SKLRT, PGLRT transitioned to NRFF V2
- 2022 (Jan 1): Transition of DTL to NRFF V2
Types of Frameworks
Due to the staggered rollout of the NRFF, there are differences in the financing framework between each train line. In 2021, there were three separate financing frameworks as follows:
- Version 1: DTL (till 31 Dec 2021)
- Version 2: NSL, EWL, CCL, NEL, BPLRT, SKLRT, PGLRT, DTL (from 1 Jan 2022)
- Version 3: TEL, JRL
SBS Transit
The Downtown Line (DTL) was the first line to operate under the NRFF, starting in 2011 when SBS Transit was awarded the operating contract (under NRFF Version 1). One outcome of the NRFF is the appearance of the DTL’s C951 trains, which are predominantly white with turquoise and dark blue reflecting the assigned colour of the line.
SBS Transit made a full transition to the NRFF on 1 April 2018 with a licence for SBS Transit Ltd to operate the lines until 31 March 2033. The Land Transport Authority took over all operating assets of the North East Line (NEL), Sengkang–Punggol LRT (SPLRT) from SBS Transit for $30.8 million, representing the net book value (cost less depreciation) of the assets, plus GST.
The company continues operating the NEL and SPLRT daily and retains a share of the earnings. It pays a licence charge to LTA annually, which varies according to SBS Transit’s profitability, and the money goes into a sinking fund for asset replacement. SBS Transit also has to abide by a more stringent maintenance regimen, as well as higher service standards. Financial penalties faced are also greater than the ones in place now if SBS Transit fails to do so.
Downtown Line transition to NRFF Version 2
In November 2021, LTA announced that DTL would transition to NRFF Version 2 from 1 Jan 2022. This would be under a single licence with the other rail lines operated by SBS Transit (NEL & SPLRT) with a licence term of 11 years.
As part of the agreement, SBST will hand over its rail advertising business to LTA from 1 January 2024. Before this date, LTA will review the arrangements and may consider requiring SBST to pay a concession fee to continue operating the rail advertising businesses from 2024 instead. This fee will be set by LTA in consultation with SBST.
In addition, LTA and SBST have reviewed the service fee for five of SBST’s existing bus contracts, and SBST has agreed to a revised rate that is lower than the current service fee and is benchmarked against recent bus tenders. The contracts will be extended (by an average of three years) at these revised rates.
These five contracts are [as published in a Straits Times article]:
- PT211 – Bedok Bus Package
(originally ending in 2023) - PT207 – Tampines Bus Package
(originally ending in 2024) - PT209 – Serangoon-Eunos Bus Package
(originally ending in 2025) - PT210 – Clementi Bus Package
(originally ending in 2025) - PT208 – Bishan-Toa Payoh Bus Package
(originally ending in 2026)
The exact number of years extended for each affected bus package has not been announced publicly by LTA.
SMRT Trains
SMRT Trains made a full transition to the NRFF on 1 October 2016 with a licence for SMRT Trains to operate the lines until 30 September 2031. The Land Transport Authority took over all operating assets of the North South Line (NSL), East West Line (EWL), Circle Line (CCL) and Bukit Panjang LRT (BPLRT) from SMRT for $1.06 billion, representing the net book value (cost less depreciation) of the assets, plus GST.
The decision was made after more than four years of intense negotiations between SMRT and LTA. The rail operator will also continue to operate the NSEWL, CCL and BPLRT up till 2031 with an option for a 5-year extension. Under the old system, SMRT’s NSEWL and BPLRT contracts expire in 2028, while its Circle Line contract expires in 2019. Both come with an option for a 30-year extension.
SMRT continues operating the NSEWL, CCL and BPLRT daily and retains a share of the earnings. It pays a licence charge to LTA annually, which varies according to SMRT’s profitability, and the money goes into a sinking fund for asset replacement. SMRT also has to abide by a more stringent maintenance regimen, as well as higher service standards. Financial penalties faced are also greater than the ones in place now if SMRT fails to do so.
For the Thomson-East Coast Line (TEL), SMRT Trains was awarded the limited tender to operate the Thomson-East Coast Line (Contract T200 – Operation of Thomson-East Coast Line) in August 2017, with a total service fee of about $1.7 billion over 9 years from the commencement of revenue service for the Thomson-East Coast Line in 2020. The contract comes with an option to extend the operator license for 2 additional years.
The NRFF Version 3 for TEL entails the government collecting all fare revenue, while granting the operator a service fee to operate the train line.
Singapore One Rail
On 28 November 2024, LTA announced that the Jurong Region Line (JRL) operating contract was awarded to a joint venture between SBS Transit Rail and RATP Dev Asia Pacific (SRJV), named Singapore One Rail.
JRL will be operated under NRFF Version 3, with an operating license granted for 9 years, with the option to extend for an additional 2 years.
Old vs New Rail Financing Frameworks:
| Previous Financing Framework | After Transition | |
| License Period | 30 to 40 years | 15 years, and possibly a 5-year extension |
| Rail Infrastructure (Viaducts, tunnels, tracks, etc.) | LTA owns and makes decisions on building up, replacing and upgrading while Rail Operator maintain the rail infrastructure | |
| Operating Assets (Trains, signalling system, etc.) | Rail Operators own, maintain and make decisions on building-up, replacement and upgrading | LTA owns and makes decisions on building-up, replacement and upgrading, while Rail Operator remains responsible for maintenance |
| Regulatory Regime | Outcome-based regulation | Outcome-based regulation coupled with process-based regulation for maintenance (e.g. Maintenance Performance Standards) |
| Revenue Risk | All fare and non-fare revenue risk borne by Rail Operators | LTA shares in revenue risk with Rail Operator |
| Regulatory Risk | All regulatory risks are borne by Rail Operators | If there are any regulatory changes introduced by LTA after 1 October 2016 that result in changes to costs or revenues, LTA may provide grants to the Rail Operator (if the Rail Operator’ costs increase or revenues decrease consequentially) or require the Rail Operator to reimburse LTA (if Rail Operator’ costs decrease or revenues increase) |
| License Charge | No License Charge | Rail Operator pays an annual License Charge into the Railway Sinking Fund, which will help pay for the building-up, replacement and upgrading of operating assets |
| Operators’ Profit Margin | No cap on EBIT margin | In line with comparable asset-light rail operators in other jurisdictions. The License Charge which Rail Operators pay to the Railway Sinking Fund increases with higher profits |
| Fares | Regulated by the Public Transport Council | |
Under the framework, new rail operating licenses would be valid for only about 15 years, and the LTA would also take over ownership of new rail lines’ operating assets, such as trains, and lease them to the operators. The shorter licensing periods would boost competition in the rail industry, compel incumbents to improve their efficiency and service, and allow LTA to change the licences’ conditions more quickly to adapt to developments in the sector.
By taking on the assets’ ownership, the LTA would also free operators from heavy capital expenditures and enable them to focus on providing reliable rail service. The LTA could also undertake integrated and long-term planning for the whole rail network.
For their part, the companies that were appointed to manage rail lines under the new regime would have to maintain the operating assets according to a new set of requirements, or be penalised. The firms would also have to pay an annual licence fee for the right and responsibility to operate and maintain the lines and earn revenue from them.
The money from the fees would go into a new Railway Sinking Fund, managed by the LTA and set up specifically to pay for expenditure related to the building, replacing and upgrading of the lines’ operating assets.
In Summary:
The transition will benefit commuters by:
- enabling the Government to ensure timely procurement of additional trains and operating assets to enhance reliability and keep pace with growing ridership demand,
- relieving rail operators from heavy capital expenditure and large fare revenue risks so that they can focus on their core role of operating and maintaining the rail network, and
- making the industry more contestable by shortening the licence period from 30 – 40 years under the previous financing framework to 15 years, with a possible 5-year extension.
NRFF Versions 1, 2 & 3 Comparison
| NRFF Version 1 | NRFF Version 2 | NRFF Version 3 | |
| Rail Lines | • DTL (2011–Dec 2021) | • NSL, EWL, CCL, BPLRT (Oct 2016–Sep 2031) • NEL, SKLRT, PGLRT (Apr 2018–Mar 2033) • DTL (Jan 2022–Mar 2033) |
• TEL (from start of operations) • JRL (from start of operations) Exact start/end dates not published by LTA |
| Duration | NA | Up to 15 years | 9 years, with a possible 2-year extension |
| Fare Revenue | Collected by operator | Collected by LTA | |
| Service Fees | • Operator pays Licence Charge to Government every year • Fixed component regardless of fare revenue and profitability + variable component depending on revenue and profitability. • No mechanism for the Government to co-share in profits or fare revenue shortfall. |
• Operator pays Licence Charge to Government every year • Mechanisms for Government to co-share in fare revenue shortfall if actual fare revenue is below projected revenue, and for operators to pay a higher licence charge if profits outperform expectations. |
• Government pays operator service fees based on tender award sum • Government retains all fare revenue • No fare revenue risk for the operator |
| Commercial Risk | High for Rail Operator | Medium for Rail Operator | Not Applicable |
| Rail Assets | • LTA owns and makes decisions on building up, replacing and upgrading rail infrastructure and operating assets • Rail Operator is responsible for operating and maintaining them. |
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External Links & References:
- SMRT Trains and SMRT Light Rail to Transit to New Rail Financing Framework – LTA (2 Jul 2016)
- North East Line, Sengkang LRT and Punggol LRT to Transit to the New Rail Financing Framework: Completion of the Transition of all existing Rail Lines, Benefitting Commuters – LTA (14 Feb 2018)
- Transition of Downtown Line to New Rail Financing Framework Version Two – LTA (11 Nov 2021)
- Downtown Line to transition to new rail financing framework from January 2022 – The Straits Times (11 Nov 2021)
- Downtown Line financing framework to be reviewed | Business Times (5 Mar 2021)
- Jurong Region Line Operations Awarded to Joint Venture Between SBS Transit Rail and RATP Dev Asia Pacific (28 Nov 2024)
- SBS Transit in Partnership with RATP Dev Wins Tender to Operate the Jurong Region Line (28 Nov 2024)
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LTA must scrapped the NRFF for the citizens benefit.Just do a Contracting model like buses with 10 years and an option of 5 years extension for good performance.For bus extend to 7 years with 3 years extension based on good performance.I would be glad if LTA award the EWL to SBST instead an award the DTL to GAS which run UK rail system in more efficient way.The JRL can awarded to other establish foreign multi-modal operator and SMRT takes the CRL.