Boris Kononenko

    Russia’s railroad transport accounts for over 80 % of freight carriage and 40 % of passenger traffic in the country. That is why the package of draft laws to secure the legal base of reforms was worked out, as Russia’s minister of railways Gennady Fadeev put it, �with no right to make a mistake�.
Today the major obstacle in developing Russia’s system of railroad transport is the very structure of the Ministry of railways, the only department in the country, which still combines state regulatory functions and business activities. Such a combination contradicts the spirit of market relations and does not permit to create a competitive environment in the area, which one way or another affects all kinds of enterprise.
There are four federal draft laws that have been submitted to the State Duma: «On railroad transport in the Russian Federation», «Transport regulations of railroad transport in the Russian Federation», «On specifics of management and control of railroad transport property» and «On introducing changes and amendments to the federal law on natural monopolies». They will permit the separation of functions of state and economic management of this industry and gradually establish a competitive segment in the market of transportation services.
As deputy minister of property Alexander Braverman said, the reform has three stages. The first preparatory one will be completed by 2003. This stage includes setting up a legislative and property base for joint-stock company Russian Railroads, which is now being formed. Also, efforts will be made to work out optimal mechanisms of controling production and personnel as well as to establish independent structural subdivisions specialized in separate spheres of economic activity. The authorized capital of RAO Russian Railroads will get assets of over 300 government-owned unitary enterprises. In Alexander Braverman’s words, decisions on each enterprise will be made separately.
The State will own 100 % of shares. The Ministry of railways will transfer all functions of an economic entity to this company and will retain only the authority of government administration. It is to deal with licensing, certification and standardization as well as to control adherence to norms and rules, to regulate railroad shipments for the State.
The inventory of the enterprise property is already underway at this first stage so as to determine the technical state and actual cost of the railroad monopoly’s assets. It is obvious that these measures will result in a lot of business deals. At the same time the industry’s production and technical facilities will be modernized. Certain changes will be made in the tariff policy. Passengers are to expect an increase in fares. Cross subsidizing of passenger traffic will be partly reduced this way at the expense of freight carriage. Extra subsidies to cover losses should be stipulated in the federal and regional budgets. They will be provided directly to carriers as well as to privileged categories of passengers on the individual basis.

The second stage of the reform will fall in 2003 to 2005, when Russian Railroads is to have subsidiaries in different areas of activity. This way conditions for a competitive environment will be created. Government-owned subsidiaries will deal in local passenger traffic, long-distance transportation, repairs and production of spare parts, transit, refrigeration and other kinds of transportation. Repair shop activities will be open to private stockholders. Russian Railroads will retain in its possession the production infrastructure, including railroads, power engineering, communications, traffic control, management of the operational complex as well as the locomotive park and the major part of the rolling stock.
In 2005 no less than 50 % of all rolling stock should remain in possession of Russian Railroads. The change of the ratio in favor of operator companies will be taking place as the rolling stock of Russian Railroads wears down and is to be reduced. After purchasing these cars operator companies will overhaul them. Besides, they will start placing orders for new cars and this may result in certain buoyancy of the metal-intensive product market. Soon the whole structure of long-distance transportation will be detached from Russian Railroads and federal passenger company should be formed on its basis.
The goal of the third stage of the reform (from 2006 to 2010) is to create a developed railroad passenger market. During these years it is planned to assess expediency of the total organizational separation of the infrastructure from transportation operations. The most part of freight cars (60% and more) will pass into the private ownership. Competition in freight and long-distance passenger traffic is expected to revive. Experts are to assess a possibility of forming several vertically integrated railroad companies that will compete with each other. Shares of enterprises specializing in repair and technical maintenance of railroad transport will be put on sale to private investors.
There is a hope that transformations at railroad transport will become the first real structural reform in Russia with a well thought-out scenario, concrete goals and tasks.