Business – 6.1 External influences – Political and legal | e-Consult
6.1 External influences – Political and legal (1 questions)
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Model Answer:
- Advantages
- Improved public accountability – the government can set service standards and ensure coverage of unprofitable routes.
- Potential for cross‑subsidisation – profits from busy lines can support rural services, enhancing social equity.
- Strategic control – the state can align rail policy with broader economic plans (e.g., freight for key industries).
- Long‑term price stability – fares can be regulated to avoid excessive price spikes.
- Disadvantages
- Risk of political interference – decisions may be driven by electoral considerations rather than commercial efficiency.
- Potential for reduced investment – limited access to private capital markets can slow modernization.
- Efficiency loss – bureaucratic management may lead to higher operating costs and lower productivity.
- Fiscal burden – if the railways run at a loss, the government must subsidise them, impacting the budget.
- Overall assessment: In the short term, nationalisation can quickly address service gaps and public concerns, but without strong governance mechanisms the long‑term profitability and efficiency may suffer.