The State will decide who is welcome
29.05.2010 (21:28)
We asked Dmitry Korolyov, Executive Director of The Council of Railway Rolling Stock Service Market Members, to share the operators' opinion about the Action Plan for the Railway Structural Reform from 2010 to 2011, which is currently under the Government’s consideration.
- Dmitry Olegovich, do you agree with the opinion that the decision to sell the controlling stake in Freight One should be made in the near future?
- The situation is that currently two companies with single-type activities belong to one entity, which creates an objective risk that, finally, the market wil be centralized and monopolized. Selling a controlling stake in PGK is actually a purely financial transaction, which has no goal to change the current PGK’s business model. On the other hand, Freight Two's (VGK’s) business model will be implemented much sooner, and its quality will be considerably improved, in case a qualified investor (a professional operator) is attracted to be involved in VGK’s authorized capital,.
- Can you please give us more details of your own attitude to this "PGK business”?
- RZD’s public park will disappear after VGK is created, and operators will become a necessary part of the transportation process, providing rolling stock for cargo freight. VGK will be created in two phases. In October 2010 it will receive 75,000 rolling stock items, and the whole wagon fleet will be transferred to it only at the end of 2011. Second Freight’s charter capital will be completed at the same time. RZD is planning to sell 51% to one of cargo companies. For example, if IPO took place, RZD would have all opportunities to buy a stake and to continue controlling this company. It means that there would be a risk for the freight market to be monopolized. Here the State is to decide, which investors are welcome in this process. If a qualified investor (a professional operator) is needed, then the VGK’s controlling stake should be offered, because the company is currently in the creation stage, when the main task is to build its business-processes. To my opinion, if qualified investors are attracted to VGK, it will make life easier for everyone, and also a competitive market will be created.
- Is it time to create conditions for the competition in the transport sector?
- It is necessary to work out a special tariff, which will define amounts to be paid for using railway infrastructure by those operators who own locomotives and wagons, because after operators come into this sector, they will, actually, become carriers. They will conclude freight agreements with cargo owners, thus fulfilling the job RZD is doing now. It includes the reception of cargo, its transportation and protection, the implementation of all delivery terms and passing cargo over to the receiving party. We already have such train operators, but they are not carriers. There will be an opportunity to invest in the traction rolling stock as soon as this legal confusion is resolved. The locomotive fleet is to be upgraded within the next ten years. It will be done either by the State, or by RZD, or by private investors. Attracting investments in this sector and balancing interests of all market participants is an important task for our partnership.
The reform in its present form will not only help developing our transport market. It can also play a significant role growing industrial production. The development of competition between operators and emerging private independent carriers will create conditions to enter into long-term agreements with cargo owners, using a flexible tariff system, which will depend on freight volume figures. Cargo owners will grow their annual production, consumption of raw materials and finished products for transportation within a defined geographical range, for which they will receive a discount for the increased traffic. In this situation, our partnership will become a provider of cargo owners' interests too, not only operators'. It will become the meeting place with RZD, who is interested in increasing productivity (loading figures) of its infrastructure, and also with the Federal Tariff Service of Russia, which can apply flexible tariff regulation methods, thus helping cargo owners to ensure substantial growth in production figures.
- Do you think that the creation of a legal framework for the development of self-regulation in railway transport has a good future?
- The railway reform is generally successful. Private investments are being actively involved in railway rolling stock. Currently, RZD is a moderator for the transportation process, but the company will leave this sector after the public fleet disappears. After VGK is created, operators will have to take their own responsibility for the rail cargo traffic. Operator community must actively facilitate drafting the State’s legal documents and adopting them, including technical regulations and rules relating to the legal status and operation of rolling stock on RZD’s network, in CIS and Baltic countries. The operator community will receive a new social responsibility after the public park is completely transferred to RZD’s subsidiaries. Operators will become a necessary party in carrying goods by rail.
Due to all mentioned above, self-regulation will become the main platform for debating and drafting documents. It will gradually bring such a market situation, when unscrupulous parties are excluded, and only strong players are staying, who follow the principles of fair competition.
Understanding of it has brought the establishment of The Council of Railway Rolling Stock Service Market Members, whose main purpose is to apply self-regulation in practice. On the one hand, social obligations impose additional requirements to the business, and the consequent additional costs too; but on the other hand, it is a guarantee of the long-term existence for the carrier business.
Interviewed by Nadezhda Vtorushina
Read the full interview in The RZD-Partner ¹ 10
Print version
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