Rail transport structural reforms: some results

Before launching into the question under consideration, the author believes that there are sufficient reasons to remind of main indicators of transport development in Russia. It will help the author to express well-grounded opinion, besides any economic research should be accompanied with statistical data and calculations. It should also be noticed that the indicators of transport sector development such as loading of cargo, freight turnover, railcar turnover etc. put easy the researcher into orbit which makes it possible to see main outlines of national economy development rather clear. In the author’s opinion, the real state of affairs is reflected in the light of the main indicators of transport work.

The railway network doesn’t cover the whole territory of Russia. At present 6 constituent territories of the Russian Federation don’t have railway (the Altai Republic, the Tuva Republic, Nenets Autonomous District, the Magadan region, Chukchi autonomous District, the Kamchatka krai). In another 10 constituent territories of the Russian federation the railway network is not developed enough to satisfy the transport needs of the regions. It testifies to the effect that natural resources are not involved in the economic turnover, and integration relationships between enterprises are not arranged. The differences of transport provision between the constituent territories of the Russian Federa- tion have achieved unsustainable level. The big part of population hasn’t. The considerable part of population hasn’t year-round access to main transport communications of the country at all.

The territorial disproportions in the railway infrastructure development, transport provision of the regions and development of traffic capacity led to the situation when one forth of railway in the developed central districts and big towns works in the mode exceeding the optimum level of workload.

Since the beginning of 2000 the railway transport has got the go-ahead for the reform which has the following aims: to break up the monopoly of the sector, to set up new market entities of railway transportation, to develop competition etc. The main character is currently “Russian Railways”PLC.

“Russian Railways” PLC was founded in May, 2003 on the basis of 987 organizations which had been included into the Ministry of Railways. The authorized capital is more than 1.53 trillions roubles, 100% shares are federal ownership. The company has 133 subsidiary and dependent companies. The principal subsidiaries of the company are 17 railways that unite the network of trunk roads of the country.

We’ll note the basic problems raising before the railway transport of the country at the current stage of economy development.

First of all, it is low rate of renewal of basic assets. The average level of assets deterioration is almost 60%, the considerable part of them is outside the limits of standard service life. The existing deficit for track laying is more than 10 thousand km of railway. One shouldn’t forget that over the last 17 years the length of railways in Russia reduced by 2.5 thousand km.

The deterioration of non-public railway stock is more than 70%. It is the rolling stock of the enterprises! 52% electric locomotives, 31% diesel locomotives and 39% traction aggregates exceeded the standard service life. 40% loaded and discharging machines, car dumpers and devices for defrosting adfreezing loads demand to be replaced and 20% demand to be modernized to a considerable degree.

Another massive problem of the domestic railway transport – low technical and technological level of railway transport in comparison with the advanced nations of the world. Since the beginning of the perestroika in the Soviet Union and economic reforms the level of domestic railway machinery and techniques have been considerably behind the level of the advanced nations of the world, and the rate of lagging doesn’t go down. It is enough to say that in spite of making high-speed train “Soyuz” and its short-term operation there is no serial manufacturing of the train because of technical reasons. Russia had to make a very expensive contract with the German company “Siemens”.

Technical and economic characteristics of the serial production stay at the level of 1960 – 1970’s and the production basis of many enterprises doesn’t make it possible to increase the volumes and to direct the production towards the output of up-to-date competitive production that is world standards-driven.

All-Russian Research Institute of Railway Transport sets its sector “the scientific development prospects” and considers five main directions for scientific researches which have decisive importance for railway transport development and for successful work of “Russian Railways”PLC 1.

The increase in transit by rail freightage sets as one of central objectives to ensure the increase in freight capacity of main directions of railway network. When the rail freightage increasing by 3 – 7% a year the possibilities of existing network will have been exhausted by 2012 – 2015. The most effective answer to the question is a considerable increase in mass of freight trains. The studies on modelling of dynamic processes happening in the trains of high mass – 6, 9, 12 and 18 thousand tons have been carried out.

Railway transport development strategy till 2030 determines the speed and high-speed traffic as an important factor of “Russian Railways” PLC development.

The most important direction of innovation development of the railway transport is to intensify the work of each unit of transport equipment. In this respect the solutions on increase in carrying capacity of freight cars and increase in their thrust load. The experimental wagon of high load-carrying capacity have been made, these are universal and specialized semiwagons, hoppers for bulk cargo and oil tanks.

Another direction for intensifying the work of rolling stock is use of clearance possibilities of domestic railways. The experimental examples of semi-wagons in wide clearance (these semi-wagons are shorter and wider than the standard ones) have been made. The use of these wagons gives the possibility to increase the mass of trains with the same length of station tracks. New ways of traction development should be noted here among perspective directions – they are making gas turbo carriers and using power accumulators.

It is rather efficient and thrifty to use up-to-date power accumulators made with nanotechnologies. They have high power intensity, high speed of charging and discharging. The experimental domestic accumulators have been set at the traction substation of the Experimental ring of All-Russian Research Institute of Railway Transport, at the model and experiment examples of shunting gas turbo carrier.

Table 1. The volumes of loading and freight turnover in Russia by the kinds of transport in 2008 – 2009

	Loading of cargo, million tons		Freight turnover, billion tons-km
	2008	2009	2008	2009
Automobile transport	6893.0	5240.5	216.0	180.1
Rail transport	1304.0	1108.2	2116.0	1865.3
Sea transport	35.0	37.6	84.0	97.5
Internal river transport	151.0	97.6	64.0	52.6
Air transport	1.0	0.7	3.7	3.5
Industrial rail transport	3555.0	3021.7	31.8	28.0
Pipeline transport	1067.0	985.0	2464.0	2245.8
Total	13006.0	10491.3	4979.5	4472.8
Source: Materials of meeting of total board of Transport Ministry of the RF. March, 2009.

Table 2. Passenger turnover and passenger transportation by the kinds of transport

Kinds of transport	Passenger turnover (milliard passengers-km)			Passenger transportation (million people)
	1990	2000	2009	1990	2000	2009
Rail	274.0	167.1	153.6	3143.0	1419.0	1139.6
Bus	262.0	164.4	140.7	28626.0	22033.0	13659.3
Air	4,8	53.4	112.4	91.0	23.0	45.0
Internal river	-	0.9	0.8	90.0	26.0	17.7
Underground	-	46.9	40.5	3695.0	4186.0	3345.0
Tram	-	25.1	7.3	6000.0	7421.0	2283.0
Trolleybus	-	28.1	8.4	6020.0	8759.0	2479.0
Total	-	486.1	463.7	47665.0	43867.0	22968.6

Source: Materials of Russia’s statistics year-book for respective years.

Railway transport is a heavy fuel-energy user. The energy component of freight cost price is 12 – 16%. The energy-saving programme for “Russian Railways” PLChas been worked out, the issues regarding the energy savings by heavy-freight, speed and high-speed train operation are being decided.

Now we go to the economic indicators.

Below we give table 1 that representsthe indicators of loading and freight turnover by the kinds of transport for the last two years.

For the last years the indicators of rail transport work were ranged within the data of the table. So, for example, in 2001 loading of cargo and freight turnover were 1056.1 mill. tons and 1433.6 bill. tons-km, in 2005 – 1273 mill. tons and 1858,1 bill. tons-km.

The fact that the freight turnover indicators have increased attracts attention. The answer is easy. In connection with the growth of delivery of bulk cargo for export (oil cargo, coil, wood, fertilizer etc.) the number of kilometres travelled by both loaded and empty rolling stocks has increased.

We give the indicators by passenger transportation (tab. 2) .

As follows from the table over 19 years the passenger transportation by railway reduced almost by 3 times. We suppose that decrease in population mobility doesn’t influence on many aspects of social and economic life of the country in a positive way.

It is beyond any doubt that the social and economic activity reform in any sector must be finished with the result which at least doesn’t worsen the condition of national economy as well as the condition of workers engaged in the given sector and the population in whole. It is doubtful when the reform is carried out just for “hardware”.

Summing up the results of three stages of the railway transport reforming in Russia

(2001 – 2010) one should mean that ten years – is quite real term to come up to the parameters built into the plan and to reach the real achievements and the direct results2.

When following up and analyzing the course of structural reform of railway transport the Institute of Economics Prediction of RAS undoubtedly acted on the premise that the changes had been necessary and had been dictated by the objective reasons and the replacement of one economic setup with another.

It is necessary to notice that over the years past the beginning of the reform we have stored questions the answers to which one can’t always find. At the same time we act on the premise that they (the questions) – are not only the subject of the railway experts. They touch upon theoretical and practical interests of economic community of our country.

“Reduction of aggregate national economic costs for cargo transportation by railway” was declared as the basic aim of reform. According to the plans the following tasks were to be solved: to increase stability of rail transport work, its accessibility, reliability and service quality; to make uniform well-balanced transport system of the country; to satisfy the growing demand for rail transport services.

To all appearances, the reformers of 1990’s didn’t imagine the scales of the sector and tried to make the railwaymen put the railways on the reformist path quickly by storming attempt “tomorrow by 9 a.m.”. These attempts ran into the cautious line of experts.

In 1996 we might say an outstanding event took place. It was All-Russian railwaymen congress. At the congress it was spoken that the sector wasn’t against the market principles but transfer to market must be realized little by little, commercialization mustn’t be regarded as of paramount importance, it was necessary to carry out fundamental changes to both the management of huge sector. Solution of particular economic tasks of each railroad, each rail branch, each rail interchange up to optional halt. The delegates pointed out the fact that other transport sectors that had joined in reforming quickly (automobile, air, river, sea transport) displayed the preliminary results of “their reforms” by that time – vessels were being sold out, auto transportation market has been transformed into practically uncontrolled field of economic management by foreign carriers, aircraft overhaul plants started to offer piracy products etc.

Nevertheless in 1998 the Railway Reform Concepts were adopted (rammed?), later – the Reconstruction Programme (2001), and now the sector is formally finishing the last third stage of reform.

We stress that the science representatives including academic science attracted the reformers’ attention to the necessity to work out in details the fundamental economic rail problems having their own Russia’s peculiarity (period of transition to market, exposed structural disproportions, vast territory, irregular spacing of productive forces and production capacities etc.).

We’d like to pay your attention not so much to technical and technological aspects as to macroeconomic ones corresponding with the character and peculiarities of our institute’s activity; they were pointed out as far back as 1990s3.

The railways in Russia to be precise from the Urals to Far East were intended to be chiefly a political project in order to hold out the vast territories in common economic space. In the European part of the Russian Empire later the USSR the railroading was economically sound. The railway network, just network, not the only line through the Siberia (the Trans-Siberian Railway), was added with overland communications as well as, and it is also important, meridian rivers having connected the indus- trial North with the South of raw materials. There were already multi-model technologies of cargo transportation. The Trans-Siberian Railway from the Urals to Vladistok still has no alternative. Hence it appears great distinctions regarding transport accessibility, character of transportation market (monopoly) etc. The question arose –can we proceed from the same economic positions in regard to the European part of Russia’s railways and to the TransSiberian railway by new conditions? Is it against making a uniform transport space?

By the way, it is not easy to find any intelligible explanation why the length of railway network has reduced by 2.5 thousand km at the territory of the largest country in the world over the period of reforms?

The second thing. Reforming the sector was developed under the flag of liquidation of natural monopoly. How deep and elaborate were the problems of monopoly worked out generally? Are there todayafter ten years reforming period any evidences and illustrationswhich prove that newly-made railway structure is economically more successful than the Ministry of railways having been a monopolist? And why?

We add that after the reforms finish “Russian Railways” PLC will keep main and station tracks, energy saving systems, signalling and communication. All the rest will be private ownership. The state won’t be able to affect the railways later. If the infrastructure monopoly arises and some shares are sold (“Russian Railways” PLC – is a public corporation and our state has already sold the state shares to private individuals more than once) and the infrastructure can be private even partly, then what consequences can be there? Are there any researches which are taken as a basis when the reform being prepared, the researches about comparison of state and private monopoly on the rail transport, about how much the private owner is more efficient than the state?

The third thing. The father of Russian railways S.Yu. Vitte considered the transport competition to be a bad phenomenon putting the brakes on the economy development. Even at that time almost all today’s “innovations” were given trial runs in practice4. The reform implied creation of competitive environment. We are of opinion that the mentioned task has a complicated solution procedure. The development of competition and competitive relationships at the rail transport is faced with quite a number of peculiarities which were announced about in 1996 at the railwaymen congress mentioned above. The experts asked themselves – what mechanisms can operate under the conditions when there is no alternative to railway regarding parallel tracks, for example? One can and must discuss interspecific competition – frequently motor-vehicle transport simply takes away cargo from the railways. And intraspecific competition at the rail transport isn’t noticeable for the time being in the form that was seen by the reformers of 1990’s.

The operation companies having been established (now there are 2.5 thousand car owners and about 100 operation companies) have a large rolling stock (they have almost half out of million rolling stock), but true indicators of their work are worse than those of “Russian Railways”PLC in the major integral indicator – wagon turnover. For “Russian Railways” PLC it is 8 days and a half, for private companies – 13. Why are their performance indices lower in comparison with “the monster Ministry of railways”?!

The forth thing. The ailway sector is doomed to centralized control over rolling stock all the more so taking into account the extent of our country, security peculiarity etc. Under “the monopoly” of the Ministry of Railways empty wagons after discharge went to freight area according to the plans pre-developed and the departures from the plan were eliminated by operational regulating. Thus, the minimum empty running and time of rolling stock turnover were reduced. When privatizing the rolling stock, the main factor of management of its work – regulating the removal of empty wagons between roads and the delivery of them to be loaded – doesn’t work.

How much will the inputmanagement system permit the wagon operators to transport “money-losing” cargo, war cargo, developing its business “effeciently”?

The fifth thing. Technological advance of the sector. Over the period of reforms the technical equipment of railways hasn’t improved. It is talked of both basic assets and rolling stock. The reform documents say clearly that mass investments will be attracted and that will make it possible to supply the railways with up-to-date rolling stock of our domestic manufacture. It hasn’t happened, the rolling stock is going out of date, the locomotives and waggonage coming into the sector have no time to replace the obsolescent machinery. Starting the train “Sapsan” is an remarkable event, of course, but there are no answers to the questions on domestic industry which is capable to supply machinery and equipment of high up-to-date quality not only to the railway Moscow – Saint Petersburg.

Will the operators of private rolling stock (and in time of private traction) be able to spend a lot of money to produce up-to-date machinery and equipment? Who will place such challenges before them and control the scientific and technological revolution?

Private companies practically never take part in constructing the large infrastructural projects of long pat-back period. How much can one predict the given component of that sort of activity?

Without marking out as separate points we would like to pay your attention to some more points. Passenger and freight traffic in the large megalopolises of Russia entails great difficulties connected with over-loading of urban and circular highways. The traffic jam costs are calculated, although the experts understand – they are huge. The gradual reduction of passenger transportation by commuter trains don’t favour the solution of the mentioned complicated tasks, and the latter demand their special solution in the megalopolises of total number (urban dwellers plus passengers arriving every day for the various purposes – 6 cities) about 30 million people.

The reform doesn't answer these questions yet. Life is strongly dictating the need to address the mentioned and other problems of railway transport development on the way of Russia's modernization.