I welcome this opportunity to discuss with the committee the 1994 Estimates for my Department. Last year, for the first time, departmental Estimates were considered in this way and the procedure was successful in providing information on the various areas of my Department and the reasons why funds had been made available. We had an in-depth debate on all of the sectors for which I have responsibility and, as I recall, Deputies were given ample opportunity to express their views and concerns. I hope today's session will be equally constructive.
It would be appropriate for me to give the committee a brief outline of the nature and extent of my Department's responsibilities and functions. This should help the committee to understand the background against which the Estimates were framed. The transport, energy and communications sectors, for which I am responsible, have vital contributions to make in the realisation of our economic objectives. These three areas embrace a considerable segment of the commercial State sector of our economy. The commercial State bodies under the aegis of the Department employ over 60,000 and have a combined turnover of £3.7 billion. These bodies have a major role to play in the provision of essential services to the economy and in helping the whole economy to adapt and prosper.
In addition to the services provided by the State bodies, my Department's functions include issuing of licences for on-shore and off-shore exploration and development, for road haulage, for tour operators and travel agents and for the relay/transmission of multi-channel television. Two other services, the Meteorological Service and the Geological Survey play an important role in the provision and updating of vital information to many sectors of the economy.
Deputies have already been given briefing notes on the subheads. The structure of this year's Estimates has changed from 1993, mainly due to the transfer of functions of the former Air Navigation Services Office (ANSO) to the newly established State body, the Irish Aviation Authority. A number of new subheads are included in the Estimates to accomodate the financial arrangements agreed with the Authority, while some subheads which related specifically to ANSO requirements are no longer needed.
The gross expenditure provision for my Department in 1994 is £223.797 million. Appropriations-in-aid are estimated at £41.115 million, giving a net estimate of £182.682 million. The net figure shows an increase of over £70 million against the 1993 equivalent. While there are a number of variations in the Vote, the net increase is due mainly to the provision of payments to An Post and Telecom Éireann of the State's first instalment to the pensions of staff of the former Department of Posts and Telelgraphs in respect of pre-vesting day service.
As announced in his Budget Statement earlier this year, the Minister for Finance has provided £72.5 million this year to An Post and Telecom Éireann in respect of his liability for these pension payments. Ongoing costs in respect of the liability involved will arise in future years. The Minister for Finance is currently examining proposed arrangements for dealing with his ongoing liability to these two funds.
On the administration budget the provision for the running costs of my Department, the "A" subheads, is £23.836 million, which includes a figure of £1.265 million carried over from 1993. The running costs are governed by the terms of a three-year administrative budget agreement which each Department has concluded with the Department of Finance. Under the terms of the agreement the Department must show a saving of 2 per cent in each of the years 1995 and 1996 over the 1994 figure. Within certain limits, the Department is then free to manage its own administrative costs in the most cost-effective way.
In the energy area there are a number of significant developments to which I would like to refer. On electricity, Deputies are aware that last year the Government approved proposals for a major restructuring of the electricity industry designed to stimulate efficiency and create a market which will respond effectively to the wide variety of customer needs. The proposals are fully in line with the recommendations of the Culliton committee and also reflect general trends within the European Union. The ESB is being reorganised into five business units: power generation; national grid; customer services; commercial enterprise and business services, with each unit producing separate accounts to ensure full cost transparency.
Under the restructuring proposals the ESB's monopoly on the sale of electricity will end, an independent power procurement function will be established and an independent regulatory agency, funded by the industry, will be established to ensure that the market is fair, transparent and cost effective. Further extensive work is required before new regulatory arrangements can be implemented.
In addition, I recently announced that a cost and competitiveness review of the ESB would take place which would examine how the company's operations compare with best international practice. Work is under way on that review. The conclusions will serve to inform the Government in its assessment of the need for future price adjustments and on the appropriateness of the ESB's proposed capital expenditure programme. The results will also be fed into the restructuring study. I expect the review to be completed by August of this year.
On gas, the provision of adequate and secure supplies of energy to all sectors of the economy at reasonable cost is a vital part of the Government's strategy for fostering economic growth. The long term development and continued improvement of gas network infrastructure, security of supply, emergency supply and linking with a trans-European gas network are important aspects of that strategy. Also, the Government is committed to natural gas as it believes it can play an important role in the balance of energy sources, whether or not that gas is imported, both for reasons of the efficiencies that can be obtained by gas used in modern plant and because, as the least polluting of all fossil fuels, it will be central to our strategy for limiting harmful emissions. Furthermore, a diverse range of fuel supply options means that we are not overly dependent on any single source, so supply security can be maintained.
Existing reserves of natural gas — Kinsale Head and the smaller Ballycotton Field discovered in 1989 — will be depleted early in the next decade. I am hopeful that current and future exploration in our offshore will identify further reserves, but we must plan prudently in case further reserves are not discovered. For this reason Bord Gáis Éireann undertook the construction of a gas interconnector pipeline linking the UK grid in Scotland with the Irish grid.
The pipeline is complete and in December last Bord Gáis took delivery of the first gas from the UK via the interconnector. The entire project, including the compressor station in Scotland and the pressure reduction station in County Dublin, will be completed later this year. It will cost in the region of £250 million and is being grant-aided by the European Union out of its REGEN initiative at 35 per cent of approved cost. Bord Gáis is providing the remainder of the funding, mainly through borrowing from the European Investment Bank and by means of a syndicated bank loan. The pipeline will initially be used to access alternative emergency supplies in the event of a disruption in supply from the Kinsale Head platforms and to augument production as the fields decline. The pipeline will give access initially to the UK grid and eventually to the greater European grid, which will enable us to access our gas supplies from a number of sources. In the event of further indigenous supplies being discovered, the pipeline can be used to export any gas which is surplus to our requirements.
On peat, as part of its strategy for the future Bord na Móna has made two proposals to me aimed at securing the future of peat production and peat generated electricity. One is a proposal for a new 120 mW peat fired power station to be located in the east Midlands using the most up-to-date technology. This would involve the consumption of an additional one million tonnes of peat per annum which would significantly improve Bord na Móna's finances.
The National Development Plan includes a proposal to provide Structural Fund aid for a peat fired generation station which the plan identified as a key project in the energy sector. Discussions are continuing with the EU Commission in the context of agreeing the Community Support Framework, or CSF, for Ireland aimed at securing Structural Funds for this project.
The other proposal from Bord na Móna is one aimed at reducing the burden of debt while enabling milled peat to be sold on a more competitive basis. While Bord na Móna has undertaken a major rationalisation programme in recent years it is in a serious financial position with net borrowing of £180 million at the end of March 1993 and a negative net worth of £77 million. The Government is committed to the continued use of peat for electricity generation provided it is economic to do so. It is in this context that both proposals are currently under consideration in my Department.
In relation to oil, in response to the recommendations of the Culliton and Moriarty reports the Government decided that the mandatory off-take of petroleum products from Whitegate Refinery at cost recovery prices must be terminated by the end of 1996 at the latest. In order to enable the refinery to compete with market prices after 1996, the board of the Irish National Petroleum Corporation (INPC) developed a three-year plan, which was approved in December 1993, for commercialisation of refinery operations. The plan, which is currently in the course of implementation, incorporates investments costing about £26 million and marketing initiatives including a broadening of the product range. These developments will secure the 155 jobs at Whitegate, enhance our energy security and lead to reduced prices for petrol, diesel and home heating oil, thereby contributing to the international competitiveness of the Irish economy.
The greatly increased funding in the 1994 Estimates in respect of energy conservation reflects the importance attached to this area by the Government. This has been outlined in the Programme for a Partnership Government and the National Development Plan, which target energy conservation as a priority area to be promoted in all sectors of the economy. The potential for energy conservation in cost terms is significant and its economic importance is self-evident. It is my intention that a dynamic new programme will be developed and expanded in 1994 and in the following years.
This programme will be centred around the establishment of an Irish energy centre which will be set up later this year and will co-ordinate the energy conservation measures referred to in the Programme for a Partnership Government and the National Development Plan. These measures will boost the efficiency of energy use and so reduce the cost requirements in national output which will have the impact of creating employment through improving competitiveness.
A key feature of the new conservation programme will be the introduction of a scheme to provide grant assistance to carry out energy audits in all sectors of the economy. Such audits have been recognised as a major first step in evaluating the potential for energy saving in organisations and the provision of grant support for consultancy costs will encourage the setting up of companies offering an energy auditing service. An ongoing pilot project which has been developed by Forbairt in the field of energy audits for industry is at an advanced stage and will be of assistance in encouraging the increased use of such audits. Of course, it is also important that the recommendations of energy audits be implemented and for this reason assistance will also be provided for the selective implementation of such recommendations.
In the minerals development sector, one of the cornerstones of Government policy is to facilitate the creation of useful and productive new employment taking full advantage, where possible, of all our human and natural resources. The minerals industry in Ireland already makes an important contribution to the national economy and has the potential to increase that contribution significantly. We are now on the threshold of a new era in the minerals industry in Ireland as the development of the major zinc/lead deposits at Galmoy and Lisheen gets closer. These developments have the potential to provide 500 to 600 well paid long term jobs and I remain determined that both these projects will get under way with the minimum of administrative delay.
In the case of the Galmoy mine project, I have now reached agreement with Arcon International Resources plc. on the terms and conditions of a State mining licence which I propose to grant to the company subject to consideration of any representations I receive in response to the notice which I published in the national press last week. The developers of the Lisheen deposit in County Tipperary are currently finalising their planning application, environmental impact statement and related documents and it is expected that they will submit that application shortly.
The Government has decided on the establishment and the composition of a group of experts from across the various sectors concerned, to undertake a fundamental review of national minerals policy and to report this year. The objective of the review is to ensure that the contribution of mining to the national economy and, in particular, job creation, is maximised whilst ensuring that mining operates in an environmentally acceptable fashion leading to sustainable development.
My Department has recently concluded a review of the terms and procedures governing the minerals prospecting licence system. The purpose of that review was to establish means to stimulate dynamic new prospecting activity and to streamline the prospecting licence system. I am now in consultation with the minerals industry about my proposals and I hope to implement them at an early date. I welcome the considerable upsurge of international interest in minerals exploration in Ireland, thanks to the sustained efforts of my Department and the exploration industry, and I hope that the new prospecting licensing arrangement will greatly stimulate prospecting activity by existing as well as new firms and lead to worthwhile mining development in due course.
The positive economic benefits of the availability of natural gas from the Kinsale Head and Ballycotton gas fields illustrate the importance of actively promoting hydrocarbons exploration offshore. I am convinced that we still have untested potential for further significant commercial discoveries of oil and gas. The realisation of that potential, however, is utterly dependent on the existence of a sustained and substantial level of exploration activity.
It is my intention, therefore, to ensure that all the necessary measures are taken to encourage and promote further exploration in the Irish offshore. Indeed, a number of steps along this road have already been taken. We now have in place taxation measures designed specifically to attract investment in petroleum exploration offshore Ireland together with the licensing terms introduced in 1992 which were framed to attract additional interest in the exploration of the Irish offshore. These are having the desired effect.
The Slyne and Erris licensing round closed last December and I was very pleased with the response from the industry. Five licences covering 28 blocks were awarded and the companies have undertaken an extensive work programme over the area. In January of this year another petroleum exploration licensing round was announced covering 172 blocks and one part-block in the Porcupine Basin. The closing date for this round is December next and I am optimistic that we will have a satisfactory response to this round also.
It is heartening to know that a number of major exploration companies have again turned their attention towards Ireland and I am confident that this renewed interest will lead to a significant increase in exploration activity in the coming years. If this exploration effort meets with success, we can look forward to the further substantial economic and social benefits which will arise from the development and production of hydrocarbons off our coast.
I would now like to deal with transport matters. The Estimates provide for an Exchequer subvention of £106 million to CIE, over 80 per or cent or £85 million of which goes to support rail services. The level of Exchequer subvention paid over the past number of years has been considerable and it demonstrates the Government's continuing commitment to public transport. Nevertheless, because of constraints on Exchequer spending in recent years the funds available for investment in the railway have been limited. This has affected the quality of services provided by Iarnród Éireann. A considerable investment in the network will be required over the coming years. A sizeable portion of the track, the signalling and rolling stock is very old and is currently in the process of being replaced.
The Programme for a Partnership Government acknowledges the valuable contribution that the railways make towards balanced regional development. In keeping with the Government's commitment to improve and upgrade the railway network, the National Development Plan includes provision for an EU assisted investment programme of £185 million on the upgrading of the existing mainline railways. In addition, a further £90 million approximately of non co-financed investment is proposed over the period subject to the resources available to CIE. The investment programme which covers all the major lines on the inter-urban network will include expenditure on track renewal, new signalling systems and modern rolling stock. While the precise level of EU contributions remains to be finalised in the context of the Community support framework negotiations, I am confident that the national plan's proposals for mainline rail will be substantially reflected in the CSF. The agreement achieved recently, and with considerable difficulty, between management and unions in Iarnród Éireann on more cost effective working arrangements is an essential component in the total approach to a more modern and efficient railway system.
The National Development Plan also includes proposals for an EU assisted investment programme of £220 million which will enable the public transport elements of the recommended strategy of the Dublin Transportation Initiative to be substantially implemented by 1999. This investment programme will include up to £200 million in expenditure for the development of a light rail transit network in Dublin.
The basic light rail system being recommended by the Dublin Transportation Initiative is for lines to Tallaght, Cabinteely and Ballymun and would cost aproximately £300 million to implement. Possibilities for further extensions to the basic network will also be reported on in the final report of the DTI which will be completed soon. The basic system cannot be constructed within the allocation of EU and other resources totalling £200 million set out in the plan. Moreover, a longer time frame than that of the plan will be needed to complete the basic DTI network.
Again, I am confident that the agreement in principle of the European Commission to these proposals will be reflected in the CSF. Anticipating that agreement my Department has been engaged in detailed work to advise on the optimum combination of light rail links, based on the recommendations of the DTI, which should be constructed over the plan period. All of the bodies involved in the planning and provision of transportation in the Dublin area are cooperating with my Department in this work. Decisions on these issues will be taken by the Government in the coming months.
The Government's decision on the choice of light rail links will be influenced by major factors such as financial viability, congestion alleviation, levels of peak and off-peak demand, social need, ease of construction, environmental impact, etc.
Civil aviation is another important area for which I have responsibility. The aviation sector worldwide has been through turbulent times in recent years and many changes have been brought about by the need to adapt to fluctuating market conditions. We in Ireland have not been immune to the problems of the industry, but I feel we can confidently say we are now addressing these problems in a realistic and positive way. On this basis our industry is well placed to meet the further challenges ahead.
Since I spoke to this committee last year there have been some major developments and initiatives in the aviation sphere. Aer Lingus is currently implementing the strategy for the future as endorsed by the Government on 6 July last year. While the airline has turned the corner, it still has a long way to go in a challenging and ever-changing environment. The strategy for the future should be seen, therefore, as the start of an ongoing process rather than a once-off solution to the problems.
Traffic at our State airports continues to grow. In 1993, 8.4 million passengers passed through Dublin, Shannon and Cork airports. This represents a 2.5 per cent increase over the 1992 figures. Given that the indicators show that further increases can be expected, it is essential we provide the necessary infrastructure to accommodate the greater numbers. With this in mind, Aer Rianta will embark on a capital investment programme of £225 million over the next six years, involving upgrading facilities at the State airports.
Members will be aware the Government last year approved an essential air services programme, costing £1.5 million per annum, which will help to guarantee a minimum level of service to the six regional airports. The decision was taken against the backdrop of a sharp fall off in traffic at these airports. I have since received approval from the European Commission for subsidised internal regional services. Tenders will shortly be sought through the Official Journal of the European Union for the operation of designated routes by air carriers entitled to provide scheduled air services within Ireland.
In October last my Department successfully negotiated an amendment to the Ireland/United States air transport agreement, which safeguards the future of Shannon while providing for direct services to Dublin. As a consequence of this agreement and the Government's approval of the new trans-Atlantic fleet for Aer Lingus, the company announced in January of this year that daily direct year-round services would operate from both Shannon and Dublin to New York. A further achievement in trans-Atlantic services was the agreement by the US authorities to provide passenger pre-inspection facilities at Dublin Airport, in addition to Shannon.
It would be remiss of me not to mention the setting up on 1 January this year of a new commercial State body, the Irish Aviation Authority, which takes over responsibility for air navigation services. The board and management of the new company have set about the task of establishing an effective and efficient organisation which will continue to provide a safe and quality service.
Lastly on aviation matters, earlier this year I published a Government aviation policy document. This clearly sets out our objectives and the issues underpinning these objectives. This policy document will be kept under review, having regard to the changing international regulatory environment and market conditions. We have made significant progress in addressing problems in the past year and it is my intention that we continue this process in the coming year.
As regulator for the sector, I will continue to ensure we have policies to promote a competitive and efficient network of air links. This is vitally important for developing trade and tourism. As the representative of the shareholder for the three State bodies in aviation — Aer Lingus, Aer Rianta and the Irish Aviation Authority — it is my aim to ensure the policies adopted by these bodies are commercially driven and contribute to national economic prosperity.
In the telecommunications field, it is important to remember the paramount importance of state of the art, front line telecommunications services at competitive prices in the overall interests of the development of the economy in this period, when we are witnessing some 60 per cent of inward investment in computers and electronics. Through the availability of the most modern networks and services, we have seen large numbers of jobs created in the telecommunications sector.
Employment has been provided by Dell in Bray. Dell customers throughout Europe can now, by dialling a local number, be put through to Bray and have their queries answered in their own language by one of the 300 staff employed there. GlobalRes in Cork allows a customer in Germany to book accommodation at a hotel in France. The future of job creation in Ireland and worldwide is in the development of service industries through the availability of top class telecommunications networks and services at competitive prices.
The current issues of importance are the creation of a second mobile ‘phone service; liberalisation of the telecommunications sector; and the question of the strategic positioning of Telecom Éireann. I expect to announce a tender competition for a new mobile ‘phone service within the next few weeks and hope to issue the licence before the end of the year. I expect the second licence will be of high value to the State in its enhancement of the telecommunications infrastructure. Penetration of mobile telephony will be increased substantially as a result. This issue is part of the liberalisation of telecommunications markets and we are already beginning to see the positive results of this process for Irish business.
As Deputies will recall, I advised the Dáil of my request to the board of Telecom Éireann to investigate all options on how best the company will meet the strategic challenges it faces and to report to me later in the year. I propose to await that report before coming to any conclusions on a strategic alliance.
I am pleased that the turnaround in An Post's financial position in 1992 was continued in 1993, with a record after tax profit of £4.8 million. 1993 was a watershed year for An Post, with agreement reached between management and unions on the range of measures identified as necessary to ensure the company is in a position to remain competitive in the coming years. Notwithstanding An Post's good results for 1993 and the implementation of rationalisation measures, there is no room for complacency. The board, management and staff of the company must continue to work to ensure the postal service is able to meet the challenges of the future.
I have dealt extensively in Dáil questions with the delivery problems encountered by An Post recently. These problems are being overcome and the company continues to watch the position closely. When specific problems are identified, every effort is made to satisfy the customer.
European Commission proposals for the development of the postal sector across the EU envisage measures which would open up the sector to increased competition. While these measures have yet to be finalised and agreed by the EU, it is imperative that An Post be in a position to meet the challenge of increased liberalisation in its sector.
Before concluding, I pay tribute to the boards, management and staff of the agencies and State-sponsored bodies under my aegis, who continue to give dedicated service. Our State sector plays a pivotal part in economic activity and continues to display resourcefulness and resilience in serving the State and keeping pace with international developments. Members of this committee do not have to be reminded that the State sector is facing unprecedented challenges and enormous changes. The safety nets of State granted monopolies are under threat in a single European market which seek greater liberalisation and opening up of competition in every service sector.
The pace of technological developments is such that it is effectively opening up what appeared to be protective and protected markets. The winds of change are strong and cold and the associated challenges have to be urgently addressed. Firm and decisive remedial action by Government and the State bodies concerned is urgently needed, otherwise we will not survive as a trading nation in an open and increasingly competitive world wide environment. Aer Lingus is the prime and current example of a State body affected by these developments and by its own financial problems. Other bodies — for example, Telecom Éireann and the ESB — are moving to the top of the queue of bodies which must adapt and cope with the changes and challenges which will not go away.
There is also a need for Government Departments to respond to the challenges being posed by the rapidly changing economic scene. Against this background the Taoiseach announced last February a Government initiative designed to develop strategic management in the public service. The central thrust of the Taoiseach's initiative is about increasing effectiveness of Government Departments and agencies in all their forms. Each Department secretary and head of office is now required to put in place a process of strategic management. My Department had already begun this process.
The Programme for a Partnership Government and the Programme for Competitiveness and Work set out our policies and objectives. These documents are the essential milestones in the road ahead. I look forward to the achievement of high standards by my Department and its associated State bodies in making their contributions to the development of the national economy.
