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Funding of Long-distance Passenger Transportation in Russia

The report of Vladimir Savchuk, Head of IPEM Railway Transport Research Department, RIA Novosti round table “State support of long-distance passenger transportation: cancellation of subsidies” in Moscow, 18/09/2013

As for the volume of state funding of passenger rail transportation, Russia is ranked low compared to developed countries. About RUB 30 bln are allocated annually to support the regulated segment of rail passenger transport (*in Russia the regulated segment includes economy-class carriages (platzcart) and sitting carriages), which equals RUB 0.43-0.45 per passenger km. In the US the volume of state subsidies is about RUB 5 per passenger km, in the EU countries and Argentina – RUB 2 per passenger km.

Cancellation of state subsidies will affect the regulated segment of passenger transportation in economy-class carriages (platzcart) and sitting carriages – the most popular segment (70% of passengers who make long-distance trips by rail choose second-class and sitting carriages). The price rise for railway tickets will lessen passenger mobility of vulnerable groups as they will not afford air transport or more expensive railway transport.

IPEM suggestions on the development of passenger transportation system:

• Develop a system of support measures in order to provide passenger mobility of vulnerable groups depending on the type of transport they choose
• Analyze comprehensively passenger flows on different routes and usage of different types of transport. It will help to:
1. Select the directions, routes, means of transport, and volume of passenger traffic that need state support
2. Optimize federal budget spending on subsidies for passenger transportation while providing passenger mobility to vulnerable groups
3. Determine all the elements and volume of state order for passenger transportation by different types of transport

• Use “subsidy follows the passenger” approach (subsidy is granted to the type of transport the passenger has chosen)

Lack of long term transport policy on funding transportation of selected groups of passengers makes it almost impossible for transport operators to develop long term strategies. Uncertainty of state regulation does not allow companies to plan volume of passenger traffic in regulated segment and amount of purchases of rolling stock.

It is also necessary to change approach to tackling transport issues. More attention must be paid to passengers’ preferences. Cancellation of state subsidies will deprive passengers of choice. At the same time balanced transport policy will encourage competition among different types of transport which will improve the quality of their services and lower prices.

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