Despite receiving €5 million a week from the State, CIÉ is seeking a fare increase and ran a €7.8 million deficit last year, writes Barry O'Keeffe.

CIÉ turned a €21.9 million surplus in 2000 into a €7.8 million deficit last year, despite an increase in its annual subvention. Its annual report showed that it received €245.1 million from the Exchequer towards the cost of providing services last year.

However, there are signs that things may be about to change at CIÉ. The group transport company has called for a fares increase of up to 20 per cent. Such calls have become an annual ritual, along with a litany of complaints from the group about running uneconomical service and having to honour national pay agreements.

Last year wage increases cost it an additional €75 million, the company said. Yet it has not had a fares increase since 1999.

However, the Minister for Transport, Mr Brennan has said he will not countenance such increases until the company introduces some significant changes, including market liberalisation.

The Government is unlikely to be in any rush to accede to the CIÉ request, given the effect it could have on inflation, which is more than twice the EU average. It will also be mindful of the fact that consumers have been subject to a range of increases, from college enrolment fees to VHI levies.

CIÉ receives the equivalent of €5 million per week towards running the group. It amounts to a quarter of a billion euro per year. CIÉ argues that the figure is low by European standards, amounting to about 50 per cent of what is known as a "fare box ratio". In Britain, this amounts to about 10 per cent, while in Rome it is 80 per cent of the fare, according to CIÉ.

Regardless, the subvention is a staggering amount - all the more so when one considers that there are still no conditions attached to the monies. CIÉ does not have to provide a specified standard of service in return. Introducing public service performance contracts has been talked about by successive ministers in charge of the transport portfolio and by CIÉ but, to date, nothing has happened.

One of Mr Brennan's first actions on taking office was to call in CIÉ and the private transport operators. He told CIÉ that it had to assess ways of reducing its €230 million State subvention. In recent years there has been a steady increase in the subvention.

Much of the money goes to Iarnród Éireann, with the lion's share of the remainder going to Dublin Bus. Despite reported difficulties last year, Bus Éireann is largely self-funding.

Even with an increase in fares, CIÉ clearly believes it will need a similar level of subvention this year, and probably into the future. It also believes it will not get the 20 per cent it believes it needs.

"The Minister will allow a fares increase on a political, rather than an economic, basis," a source close to CIÉ said.

The group argues that providing extra services - such as 200 extra buses for Dublin and increasing DART frequencies - means increased capital expenditure and extra staff. The company employs 12,141 people, a huge number by any yardstick.

CIÉ is the last State company to be restructured in any meaningful way. Mr Brennan's predecessor, Ms O'Rourke, began the process in August 2000, with a document known as the "red book". This suggested ways of breaking up the group into a number of separate units, in consultation with unions and management.

It is likely that Mr Brennan will eventually grant some type of annual fare increases, perhaps linked to the inflation rate. But, linked to that will be a series of demands including opening up parts of the group to more competition, especially on Dublin Bus routes, and more transparency in how the subventions are spent.

It is likely that, as with all negotiations that take place in CIÉ, the next round of talks will be long and arduous. Getting the unions onside will be very important. CIÉ executives will argue that they have no problem providing transparency in how State subventions are spent, with much of it going on maintaining railways.

Mr Brennan will be pinning his hopes on getting competition into the market and overhauling some of the group's less-than-efficient practices. He will also be keen to divide up the companies to operate on a standalone financial basis.

It is up to Mr Brennan to seize the initiative and ensure that the State transport company can serve the needs of 21st century Ireland.