Development of commuter train services should help economic growth

4 december 2018

"New laws on commuter train services are on the whole ready so it's time to talk about who needs these changes," Svetlana Ganeeva, Deputy Head of the Analytical Center, said opening a roundtable titled "Modern Trends and Future Changes in Commuter Train Services".

This year the commuter train services in the country are passing through a big transformation: new rolling stock is being purchased in the regions, a new draft law seeking to regulate passenger rail transportation is on the verge of being passed into law. Meanwhile, modern comfortable commuter trains and new convenient services are drawing more and more passengers to the rail transport, which should become the backbone for any solution to transport problems faced today by big cities.

The draft law on regular passenger services that is currently being reviewed by the State Duma creates the conditions necessary for the development of commuter train companies. The market of commuter train services would become competitive as it would no longer be within the purview of the law on natural monopolies. The new model would be based on long term contracts between the state and private carriers who would be picked in biddings and awarded 15 year contracts. This will allow carriers to ensure consistent and predictable conditions of operation and raise loans to finance the performance of their investment obligations under the contract. The contract would also stipulate the basic principles for setting the fares.

Today the federal government provides significant aid to the regions and commuter service companies to help them operate commuter transportation systems at a profit. The federal government allocates some RUB 37 billion to subsidize the expenses of commuter service companies that they pay for using the infrastructure of Russian Railways, while the application of a zero VAT rate improves their financial performance by a further RUB 10 billion per year. Some RUB 1.5 billion goes on helping commuter service companies buy new rolling stock. As the Head of the Ministry of Transportation of Russia Evgeny Ditrikh noted earlier 46 out of the country's total 66 regions have completely resolved all the issues of financing commuter transportation.

"In 2018 Russian Railways decided to buy enough rolling stock to set off depreciation," said Acting Department Head of the Ministry of Transport of the Russian Federation Alexander Fedorchuk. "This year we began buying new rolling stock in a number of regions such as Rostov and Volgograd regions, Krasnodar and Krasnoyarsk territories, Primorye." As a result a total of 600 new railroad cars will be purchased this year, with more than half of them being purchased by the Central Commuter Service Company. He also noted, that the number of passengers taking commuter trains always rises on the lines that use new train models.

Alexander Malakhov, Head of the Department for Information Technologies of the Analytical Center, brought up the important topic of digitalization in transport. He talked about the 3rd generation of information system in transport in the fare collection on trains segment and about whether they can be used effectively, making special mention of the use of mobile apps that could also offer users a broad range of other services. "The better the service we offer, the more passengers we get," Mr Malakhov is sure.

Alexey Belyankin, the Head of the Center for Corporate Management of the Commuter Train System at Russian Railways, stressed that the commuter train system model must be based on three basic principles: it must be profitable, new rolling stock must be acquired faster than the old rolling stock is going out of service and it must generate a lot of revenue.

The economic model used by the Central Commuter Service Company could be used as an example here. The largest commuter service company in the country buys new rolling stock on its own, it also leases and repairs the infrastructure. Today the company owns 20% of its trains and in 2019 it plans to buy 37 more new electric commuter trains (not including the Ivolga train for the MCD). The company has set up a situational analytics center and is developing digital technologies and online services. The carrier offers free Wi-Fi, makes use of co-branding projects to offer related services, tries to get feedback from passengers, always improves safety on trains and offers different levels of comfort and service to passengers.

The experts paid special attention to free riders. "Hunting down free riders costs a lot of money but the measures we take are not always effective from the economic point of view, even though the estimated losses free riders cause to train companies amount to some RUB 5 billion a year," notes the Head of the Association of Passengers Kirill Yankov. "We need to have tighter controls in place on trains and ideally riding a train without a ticket should be made an administrative offense as it once was." The situation can also be improved by putting more ticket inspectors on trains and introducing stricter train access controls.

Speaking of the experience of other countries the Head of the Center for Independent Integrated Transport Research RUT (MIIT) Aleksey Kolin stressed, that on the whole Russian carriers are following pretty much the same trends as their colleagues in the developed countries and on some metrics, like running on schedule, they are actually better than their foreign counterparts.

On the whole, the participants of the discussion agreed the further avenues of development for the sector were pretty clear. The same approach cannot be used all over the country but the new draft law will afford different regions plenty of flexibility in how they go about developing the local commuter train services.