Most of Indonesia’s railway investment is supported from the government budget where the operation and maintenance conducted by PT KAI – a sole state owned enterprise in railway industry. Currently, the government attempt to attract private sectors in railway infrastructure by contracting out operation and maintenance. However, limited experience in formulating suitable contract makes the progress relatively slow. The objective of this research is to examine alternative contract in operation and maintenance for Indonesia’s railway transportation by taking Greater Jakarta Light Rail Transit (LRT) as the case study. It will consider financial components that consist of net present value, internal rate of return and payback period to produce targeted output. This research generates two simulations; (1) a simple contract where the government covers investment cost; procurement of rolling stock; and construction of stabling yard and depot. Meanwhile, the winner from tendering process have to conduct operation and maintenance for both the infrastructure and rolling stock; (2) a lease contract where a winner from tendering process require to pay lease fee through selected government body to run the operation and maintenance. The result shows simple contact where the operator only responsible for operating and maintaining the infrastructure and rolling stock is more favorable to attract private investment.
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