Integrating the development of the MTR's South and West HK Island Lines will bring substantial benefits, Deputy Secretary for Environment, Transport & Works Paul Tang told legislators today.

Three alignment options are being studied and once evaluations are completed early next year a proposal will be submitted to the Government for consideration in the second quarter.

The project will not be financially viable on fare revenue alone and the Government's financial support will be needed.

Mr Tang said the Government will liaise with the MTR on the funding problem if it finds the project is indispensable and needs financial support.

The Government will also study the project's impact on other transport before making a final decision.

Speaking on the construction of Route 7, Mr Tang said it is being kept under review and the two routes recommended in the Alternative Alignment Study for Route 7 are being protected administratively.

He said the development of the MTR lines and Route 7 are not negating each other. However, if the two projects go ahead simultaneously, the Government will experience difficulties in resource deployment.

The Government has to consider a number of factors to decide which project should go ahead first.

Interim Traffic Improvement Measures for Pok Fu Lam Road are now being carried forward as planned.

The Government has reserved $90 million for the improvement measures. The Highways Department is now conducting a feasibility study and the project is expected to start next year for completion in 2006.

The Peak Tramways Company's right to operate the scenic tram will expire on December 31.

The Environment, Transport & Works Bureau has carefully examined its past performance and intends to recommend that the Executive Council approve the company's request for a 10-year extension to its franchise.