On the right track

Regulatory Reform of Russian Railways

Russia is on a fast track to reform its transport system, reports Regulatory Reform of Russian Railways. While the Trans-Siberian highway from Moscow to Vladivostok – the longest road in the world at nearly 10,000 kilometres – had its final gaps filled in as of March this year, it will not be completely paved before 2008.

Russians’ preferred mode of transport remains the train, and the Trans-Siberian railway, the world’s longest continuous railway line, was completely electrified just under two years ago.

In 2003, the government restructured the controlling body of the railway system, called the Ministry of the Means of Communication, dividing it up into several components that include a new ministry and a railway operating division, Russian Railways. Ongoing reforms call for adjusting the tariff system and promoting competition, primarily by encouraging industry to transport its own goods on the existing infrastructure of over 149,000 kms of track.

With general ageing and a national shortage of rail cars, the government has introduced new tariff schedules for operators with their own wagons and locomotives to encourage them to build up their own fleets. Since rail carries over 80% of Russia’s freight traffic, the market will also open up for facilities such as stations, freight yards and train marshalling services.

Passenger operations will be separated into entities that might eventually be spun off to regional or local governments, or even privatised, says Regulatory Reform of Russian Railways. Suburban services operate at a loss in Russia, as they do in most OECD countries. Presently, these short-haul passenger services are subsidised from rail-carried freight revenues.

But if the roads keep improving and car sales keep growing, Russian truckers could put even this income at risk. Competition from road haulage is increasingly limiting the market power of freight trains in European Russia, although rail still holds a near monopoly on freight transport east of the Urals. The government will remain under pressure to keep rail reforms rolling at a good pace.

©OECD Observer No 243, May 2004

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