Analytical Center Launches Discussion of Target Model of Railway Freight Market up to 2020

16 october 2015

The Round Table 'Target Model of Railway Freight Market up to 2020' took place at the Analytical Center. The event was attended by representatives of the Ministry of Economic Development - the project developer of the Target Market Model, the Ministry of Transport, the JSC 'Russian Railways', railroad freight operators, shippers and representatives of the expert community.

Svetlana Ganeeva, the Deputy Head of the Analytical Center, stressed that it is the first discussion on the subject. 'The concept of the Target Model has been recently proposed by the Russian Ministry of Economic Development and was sent for a discussion into relevant ministries and agencies. Market operators and cargo owners also have their proposals, as they are the customers of the industry. Today, therefore, we have to get acquainted with all points of view related to the locomotive traction, tariffs, financing and infrastructure development,' said the expert. Ms Ganeeva described these issues as 'finance-intensive', and their solutions will largely affect the social sphere.

'We still do not have a complete picture of the stage on which the railway transport is placed now, so we do not know where to start from,' says  the Director of the Department for State Regulation of Tariffs, Infrastructural Reforms and Energy Efficiency of the Russian Ministry of Economic Development Yaroslav Mandron. In his presentation the expert spoke about the key disputed points of the Target Model. 'Russian Railways' cannot function properly without the government support. If we limit the scope of the federal budget in terms of compensation for losses of 'Russian Railways', we shall have big problems with the current activities of the company. We must look for tools to overcome this situation,' said Mr Mandron. There are problems with the locomotives too, according to the official. For the second year in a row the money was found out to finance the purchase of locomotives, but their wear is constantly growing. Therewith already in 2016 the volume of investment resources for the purchase of locomotives is very limited. Experts believe that in current conditions it would be very risky to liberalize the  locomotive traction market, considers the expert. 'In addition, there is no clear division of costs between infrastructure and locomotive traction. It is necessary to divide revenues and expenses clearly and transparently, and to remove the locomotive component in the framework of the tariff model of cross-subsidies,' said the official, adding that the maintenance of existing infrastructure must deal with OJSC 'Russian Railways', and the Government should prioritize new infrastructure and invest in it. Considering the carriages, it would be wrong here to artificially break the existing model, Mr Mandron believes. According to him, services should be provided by operators of carriages, and there is no need to create tools that would change the situation.

The discussion touched upon the tariffs setting. 'We have a difficult history with the price list. It was executed at the junction with the other economy and the other share of the transport component of goods, therefore, first of all, we must understand which cargo requires state support. Secondly, the OJSC 'Russian Railways' have radically changed the economy, and it is necessary to re-consider the points of growth. In addition, we introduced a tariff corridor tool, which distorts the logic of the price list, so it is important to improve it,' said the official. Now, the task is to work out current costs before the end of the year - namely, repair, procurement, social costs, which have not changed in recent years. In the short term all these areas can be improved, Mr Mandron believes.

The Head of the Department of Economic Analysis and Strategic Development of OJSC 'Russian Railways' Anton Ryshkov said that the company supports the Target Model that foresees an evolutionary development of the market. The expert highlighted some important aspects of the Model, and the main is  in the formation of a long-term mechanism of modernization and development of the railroad infrastructure. In particular, the expert told about the network contract. 'The network contract is a document that will provide a transparent dialogue with regulators, a mechanism of modernization and development of railway infrastructure,' said the expert. He is convinced that it is forbidden to convert OJSC 'Russian Railways'  into an infrastructure company, since the part of the income will be lost. 'The Target Model must reflect the preservation of integration of infrastructure as a transportation activity. It is necessary to use a conservative approach to the development of competition,' the expert considers. Among the main directions of improving the competitiveness of railway transport the expert highlighted improving the reliability of delivery, service integration of transport services, development of the 'single window' technology, freight of goods with an increased speed of delivery and alignment of competitive conditions.

During the event several options for development were highlited. The main thing on which the participants of the event came together - we should move from theory to practice. The discussion has just started, and the preliminary deadline is scheduled to the first quarter of 2016.