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Prospects for the Development of Russian Passenger Rail Transportation Market

The report of Vladimir Savchuk, Head of IPEM Railway Transport Research Department, at Passenger Forum in Moscow, 27/03/2013

Today we face a number of pressing issues connected with maintaining a balance of traffic among different kinds of transport and disproportional distribution of subsidies among air and railway transport. For example, subsidies for 2013 for air transport operators accounted for RUB 3,55 bln (including subsidizing of return flights to the Russian Far East from the European part of Russia, other 33 routes, 22 airports), while subsidies for railway operators accounted for RUB 13,6 bln (including subsidizing of 800 routes and more than 1000 railway stations). Interchangeability of air and railway transport, scope of work done by air and railway operators should be taken into account when preparing a distribution plan of subsidies for passenger transportation. State subsidies should be distributed only after this preparatory work is done.

The present way of distributing subsidies negatively affects domestic carriage engineering. Alignment of volumes of state support will lead to more effective renovation of carriage rolling stock of Federal Passenger Company LLC (FPK LLC) and using full capacity of engineering plants. In particular, according to IPEM calculations, RUB 2,785 bln, aimed to subsidize air companies’ lease payments for new airplanes, would have allowed railway companies to buy 120 second-class carriages and 700 multiple units under the lease contracts.

State regulation doesn’t fully ensure breakeven result for long-distance passenger transportation. In particular, there are the following problems:

• The volume of transportation in regulated segment is hard to forecast (operators may include or not include second-class carriages and sitting carriages into the set of carriages on their own)
• Incorrect size of subsidies comparing to real volume of transportation
• Rise of ticket prices due to the operators’ right to impose special coefficient on regulated tariffs if the train is branded
• The subsidies are not addressed (subsidies are granted to those passengers who don’t need material support)
• Regulated segment is linked closely to the types of carriages being manufactured nowadays
• Regulated segment is cross-subsidized by unregulated segment due to the lack of subsidies

All of the problems mentioned above lead to the decrease of competitive abilities of railway transport in comparison with other kinds of transport.

Today it is necessary to make a decision on the state level and choose the direction for long-distance passenger transportation development. If passenger transportation will be taken for business only, then transport operators will concentrate exclusively on making profit, while the state will distribute addressed subsidies for particular routes. As a result there will be a significant change in the structure of carriage rolling stock – the number of first-class carriages, sleeping cars and carriages with extra services will increase. Moreover, branded trains will prevail in the schedules comparing to non-branded trains.

At the same time if passengers’ transportation is considered to be a state social responsibility, then the state officials should make a list of parameters and decide what the volume of public contract will be. They should also develop a long-term mechanism of granting subsidies in the regulated segment and compensate lost incomes to operators (with calculations based on the results achieved by the end of the season). In both ways a federal law “On organization of regular passenger rail transportation in the Russian Federation” must be adopted.

As for the development of high-speed transport, IPEM evaluated the effect on redistribution of cargo base between railway and auto transport caused by the construction of high-speed railway VSM-2 Moscow-Ekaterinburg. Experts came to the conclusion that as the passenger traffic will move to VSM-2, existing railway will be able to every day receive up to 52 800 ton of extra freight which is being delivered by auto transport now (52 800 ton is equal to 2 640 auto trips). Such volume of freight is comparable to the current freight traffic on the route Moscow-Ekaterinburg (excluding transit).

 

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