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Fradkov Shelves Railway Reform for a Year
Russia’s Cabinet focused on the railway reform yesterday, November 10, 2005. The government appears rather at a loss about the dates of setting up a separate Federal Passenger Co. The vital point is that once such company emerges as an independent entity, all cross funding of passenger carriage for the account of cargo traffic will terminate in the railway industry. The officials reasoned Thursday to start with an RZhD affiliate in 2006, i.e. the cross-subsidy would survive for a time.
According to Russia’s Transport Minister Igor Levitin, the basic objectives of Russian Railways (RZhD) reorganization are as follows: “the rails will remain in state ownership, while everything moving along them should be in business.” So far, however, it is too early to speak of any material progress in attaining these targets despite that four years have passed since the start of reform. “The reform has not stopped, we are just taking other steps on the way, changing implementation tactics,” Levitin said to shed light on today’s situation in the industry. Here, shelving creation of Federal Passenger Co. to from 2007 to 2008 is apparently a tactical move. One thing is clear now, the passenger company will be established only as a Russian Railways’ department in the next year and its future will depend on calculation made out by the Federal Tariff Service for the following three years and submitted by it before late this year. Exactly this calculation will serve as a base to justify the losses, which are to be offset either from the federal budget or by the passengers themselves in time of Federal Passenger Co.’s establishment. "Of course, the Federal Passenger Co. could remain as the Russian Railway’s subsidiary, but no private investor will invest in passenger carriage, as [in private business] there will be no way to set off passenger losses for the account of the cargo carriage,” Levitin specified.
Therefore, no stake could be placed on cross subsidy’s elimination before 2009. Although exactly this idea was unexpectedly backed up by Finance Minister Alexey Kudrin. “This reduction is the most effective investment of budget funds, similar to trimming taxes for companies operating on the market of cargo carriage,” Kudrin said pledging to find the funds in 2007-2008 budget. Nevertheless, today's survival of cross funding actually ends all hopes for fair competition between RZhD and private carriers.
Another hazard is that splitting off various types of railway businesses into RZhD subsidiaries may give rise to a lot of specialized and, therefore, “more fierce” monopolists instead of a sole monopoly, Igor Artemiev, head of the Federal Antimonopoly Service of Russia, pointed out.
Another highlight is tariff rates differentiation for railway carriage and the need for accounting reform long expected in Russian Railways. “True, they conduct separate accounting for large types of businesses, but it won’t suffice. The accounting should be separately maintained in respect of personnel, assets, arrears, stock, investment, profit and losses. Only then, we will have a clear picture,” the Audit Chamber’s auditor Mikhail Beskhmelnitsyn specified.
www.kommersant.com
All the Article in Russian as of Nov. 11, 2005
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