New direct award to Dutch Railways raises costs for passengers and taxpayers

In the Netherlands, ALLRAIL has announced that train passengers are facing higher costs in 2024, with even steeper fare hikes expected in 2025. Dutch Railways (NS) has announced plans to raise fares by over 8.7% starting in 2025. Alongside this, a new nine-year Public Service Obligation (PSC) contract has been awarded directly to NS for operating the Main Rail Network from 2025 to 2033, which will result in a significant increase in taxpayer funding.

The new PSC is projected to cost the Dutch government an additional €1.38 billion compared to previous agreements. This increase is a result of various changes in the way NS will receive financial support. Until 2024, NS paid €86 million annually back to the government. However, with the new contract, this annual dividend will be lost, and additional subsidies will be provided to NS. These include €125 million in 2024, followed by €42 million in 2025, and between €13 million and €17.5 million annually for the remaining years of the contract until 2033.

In addition, the contract includes provisions for further taxpayer compensation. NS may receive up to €410 million if passenger numbers fall short of projections, and could also receive unlimited compensation if future competitors’ commercial services cause a revenue loss exceeding 1%.

Despite the direct award, the new PSC is not yet finalised, as an infringement procedure is still underway. This is due to concerns that the award may violate European Union (EU) rules. In 2016, the Dutch government agreed to the EU’s 4th Railway Package, which stipulates that services that can be operated profitably should not receive public subsidies. The Main Rail Network, until 2023, was considered profitable, but the new contract now categorises it as requiring subsidy. Furthermore, the EU’s regulations mandate that a market analysis be conducted before awarding such contracts, a step that has not been completed.

ALLRAIL’s Katharina Dekeyser said: “The direct award of this new PSC, which starting 2024 is ‘suddenly’ no longer profitable and needs subsidy, is not finalised – an infringement procedure is still ongoing. The new PSC for NS will cost more – for both passengers and taxpayers. It is time to cancel this inefficient award while it is still possible to do so.”

As the legal and financial implications of the new PSC for Dutch Railways continue to unfold, the increased burden on passengers and taxpayers remains a pressing issue. With the ongoing infringement procedure and the absence of a market analysis, many question whether the decision to award the contract directly to NS is in the best interest of both public finances and rail users. For now, the future of the PSC and its financial impacts remains uncertain, and the debate over market opening versus state support for NS is likely to continue.