Second Cargo Company: An Operator? A Carrier? Or a Freight Forwarder?

12.03.2009 (15:48)

"Second Cargo Company” should be independent, instead of being part of RZD’s structure - stated Professor Semyon Rezer, President of "The Guild of Freight Forwarders", Doctor of Technical Science and the Honored Scientific and Technical Worker of the Russian Federation. He also pointed out some risks involved in creating “Second Cargo Company” and how these could be avoided.  

- Semyon Moiseevich, is Second Cargo Company needed at all?  

- In the opinion of The Guild’s members, SCC is needed, but it should be independent and not part of RZD’s structure, and then it will be possible to speak about its positive role in the development of competition. 

- What are main risks from the creation of SCC for RZD, "First Cargo Company” and the private operators? 

- The main risks for RZD are the absence of any legislative or legal documentation to define its work with FCC, SCC and with the private operators. In such understanding the concept ‘operator’ is not defined in the RF Civil Code. In order to reduce risks, it is necessary to recognize in the Railway Transport Charter and other statutory documents, that we do not have such operators anyway, and  that there are only carriers and freight forwarders, the same as in the whole world community. Private operators responsibilities to cargo owners and RZD are not legally defined anywhere. And a freight forwarder is not mentioned in the Charter at all, which means that RZD is responsible for everything. It seriously constrains the development of competition. With the appearance of SCC a real competitive carrier service market will start to be created at last.  

- With the transfer of the park to the "daughter" company RZD becomes a carrier without wagons. At the same time, according to the current legislation, a carrier is obliged to have rolling stock. How can this legal collision be resolved? 

-The carrier is really obliged to have rolling stock, and with transfer of the park to FCC and SCC, RZD will stay without wagons. The decision here is very simple - it is not necessary to go against the Charter and other railway transport legislative documents. It is only one of the dilemmas connected with idea to physically transfer the wagons to the affiliated companies, and after that, to take them to RZD legally. Sooner or later it will create complications for the carrier. It is better to make the transfer of wagons to FCC and SCC, as the law says, and then organise mutual payments between these companies and RZD under a separate contract. 

- How do you view the prospects for alternative ways of allocating public rolling stock? I mean, their possible sale to private operators, or their transfer to FCC, or general deregulation of the wagon component for everyone, including RZD? 

- Our domestic and foreign experience shows that such prospects are connected with the creation of not only two, but several cargo companies in the market (in Germany, for example, eight companies are worth mentioning). In Russia we have about a hundred of them. But nevertheless it goes to the situation that we shall have big carriers with the rolling stock too. The merger of some small and average size carriers has already started and continues.  

As regards the liberalisation of the wagon component for all companies, including RZD, we must remember that RZD carries a huge social burden as a 100% state owned company, therefore these projects bring substantial liabilities which should be covered by the State, so it is necessary to take the State’s obligations in transport into consideration. And all other carriers should agree such contracts with RZD, which will allow their tariffs to be profitable.  

The tariff system will change too. We should move towards liberalisation, in order not to lose competitiveness with other means of transport. For example, a non-regulated tariff system for railway container transportation is already needed now. The water and motorcar transport container pricelists are worked out on a contractual basis, whilst railway transport tariffs are still set by Federal Tariff Service. This discriminates against the railways. They operate in unequal conditions, therefore often lose out against the competition.  

"The Guild of Freight Forwarders" has begun working to create the concept of railway container tariff deregulation on behalf of RZD and the RF Transport Ministry. We have created a working group in which FTS, TransContainer, Far East Transport Group and Spetscontainer representatives are included, as well as representatives of other companies. The working plan is prepared, and the ways of sorting out the problem of railway container tariff liberalisation are outlined. 

Interviewed by Elena Ushakova