Treasury suffocating Railways

Israel Railways is paying a dear price for tensions in the government. TheMarker has learned that the Finance Ministry has been holding up approval of budgets for train-related projects for several weeks, even though the government already voted in favor of the plans. The reason for the suspension is nothing more than strained relations between the senior staff members of Prime Minister Benjamin Netanyahu and Finance Minister Yuval Steinitz.

The problem began six months ago when the former budgets director at the Finance Ministry, Ram Belinkov, found himself sidelined in his official functions - most importantly, forming and shaping the national budget - by Uri Yogev, a special adviser to the prime minister. Following the budget's approval, Belinkov quit. But the feud between the treasury people and the prime minister's people simmered on and has erupted anew in respect to the transportation sector.

Netanyahu and Yogev are pushing for extensive investment in Israel's rail tracks. The budgets department at the Finance Ministry does not approve.

The tensions worsened in May after Transportation Minister Yisrael Katz presented a plan, called Netivei Israel, for the massive upgrade of Israel's rail system, at a cost of NIS 50 billion. The investment would be spread out through 2020. Then came Prime Minister Benjamin Netanyahu's presentation of his master plan to improve Israel's infrastructure in general - roads, rails, ports and airports.

The most immediate casualty of the tensions is a tender to buy new rolling stock and engines. Israel Railways sorely needs new train cars and engines, most urgently to serve the line due to open between western Rishon Letzion and Tel Aviv in 2011. Yet the treasury has been dragging its feet on publishing the tender, which is a big one - for 15 engines and 74 cars (in the form of 12 units of six cars each). Altogether, the engines and rolling stock should cost Israel Railways about NIS 1 billion.

The documents for the tender were delivered to the treasury's budgets department back in August. September passed and October began, yet the documents remain unapproved for publication.

Moreover, the treasury officials are reportedly mulling a new condition to be added to the tender: that the contenders bid to maintain the equipment to be supplied. However, no moves whatsoever have been made ahead of outsourcing maintenance from Israel Railways itself to others. There have been no negotiations to that effect with the Histadrut labor federation, for instance.

The treasury is also holding up a project to build a double track between Ashkelon and Be'er Sheva. The cost here is estimated at NIS 2 billion. The government approved a rail line, which would pass through Netivot, Ofakim and Sderot, back in December. However, Israel Railways and the Finance Ministry started fighting about whether the track should be a double or single one.

Railways claims that it makes no sense to lay a single track, which would limit train traffic on that line. It also points out that the army is moving en masse from central Israel to the south, rendering the train line all the more necessary. The treasury, for its part, argues that laying the track is economically unfeasible, let alone laying a double track.

Last May, Transportation Minister Yisrael Katz handed down an order to put a double line between Ashkelon and Be'er Sheva. The Finance Ministry agreed to foot the bill - but only for a double line up to Netivot. After that the track should be single, the treasury insisted. The difference in cost between the two positions is about NIS 300 million.

Yet another tender on which the treasury's sitting is to wire to the national grid new train lines being built between Jerusalem and Tel Aviv. The original tender, for NIS 1.6 billion, was canceled last year after the project to build a high-speed track between the two cities was postponed.

The Finance Ministry said it isn't holding up any Railways projects, and that it is adhering to "clear processes for approving projects, and to the agreement signed with the Railways."

As for the rolling stock tender, it said the documents are still being checked and that talks are taking place about problems with the tender.

On the electrification tender, it said the concepts are being reconsidered after the original tender was pulled. No decisions have been made about how the project should be carried out or financed, the ministry said.

As for the double track: "For reasons that are not clear, Railways sought permission to publish a tender for a double track, while the agreement reached by the two ministers had been for one."