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The Analysis of the Results of International Studies Related to the Feasibility of Separation of Railway Infrastructure and Transport Operations

Research presentation "The Analysis of the Results of International Studies Related to the Feasibility of Separation of Railway Infrastructure and Transport Operations, Investigation of the Nature and Outcomes of International Railway Reforms" (pdf)

Appendix 1. The Theoretical Evaluation of Infrastructure and Transportation Services Separation Feasibility in Frame of Third Stage of Structural Reform of Railway Transport (pdf)

Feasibility of separation of railway infrastructure and transport operations has recently become a subject for debate. According to the target market model of freight transportation, infrastructure and transport operations will be integrated for the period up to 2015. The decision about the future target model for the period after 2015 is yet to be made.

Over the last 15 years there have been published a great number of scientific studies covering this problem either directly or indirectly. IPEM research gathered and analyzed 25 major studies on main problems of railway systems in the European Union, US, Canada, Japan, China, Russia, Australia, South Africa etc. Most of the studies (18 out of 25) analyze European railway systems; this fact indicates the great importance and relevance of this issue for the region.

Most of the studies analyzed by IPEM experts (16 out of 25) concluded that decision on the vertical separation of railways should be made according to the functioning conditions of railway transport in each country or region. The rest of the authors come to the following conclusions: the vertical integration is generally perceived as negative by 6 authors, only 3 authors consider the separation to be feasible. In 2009 IPEM conducted a research “The Theoretical Evaluation of Infrastructure and Transportation Services Separation Feasibility in Frame of the Third Stage of Structural Reform of Railway Transport”. The study shows that separation of infrastructure and transport operations in Russia will inevitably have negative consequences. At the same time, positive effects can be described in probabilistic manner, although they will be less pronounced, even under the most optimistic scenario. The main negative effect is an expected growth of costs for freight transportation using Russian railway system by RUB 223 bln (+32%) compared to 2007 accounting conditions.

IPEM has also compared the main indices indicating the performance of railway systems in the countries where there are most developed. According to the analysis results, functioning conditions of railway transport in Russia differ much from those in the EU (the EU target model is the separation of railway infrastructure and transport operations). Railway transport functioning conditions in Russia are more similar with North America’s functioning conditions (transport operations and infrastructure are integrated there). Thus, the policies which had positive effects when implemented in European countries during railway reforms can bring negative effects if implemented in Russia. The emergence of a large number of freight carriers in case of railway infrastructure and transport operations separation in Russia is less possible than in the EU.

Key findings:

1. Effectiveness of every structural model depends on the functioning conditions of railway transport in each country.

2. There’s no clear evidence that vertical separation leads to increased productivity and efficiency of railway transport.

3. The main disadvantages of vertical separation are as follows: lack of the responsibility center; infrastructure and transportation operators may have contradictory incentives; maintaining a balance of functions and responsibilities distribution between infrastructure and transportation operators in the areas of technological, operational and economical cooperation may be a problem.

4. The greater the intensity of infrastructural uses by the largest transport operator, the greater its market share, the more favorable the integration of transport operator with infrastructural company is, the greater is the effect of such cooperation.

5. Independent infrastructural company is more vulnerable facing economy crises and thus can demand for larger amounts of state subsidies than the integrated economic entity.

6. Searching for a funding by an infrastructural company in order to cover its fixed costs is a weak point of the complete vertical integration.

The research was presented by Yury Saakyan, General Director of IPEM, during the extended session of the Russian Union of Industrialists and Entrepreneurs (RSPP) Committee for Transportation and Transport Infrastructure on May 23, 2013. “Finding the most feasible model for integration of transport operations and infrastructure within the Target market model of freight transportation was the mail topic of the session”.

 

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