In pursuit of balance

There is lack of balance between different types of transport in Russia. It is difficult to regulate under a free market economy especially amid extremely low water level at inland water ways (IWW). Nevertheless, RF Ministry of Transport is set to strive for adequate distribution of cargo flows between automobile, railway and water transport, though the Ministry of Finance does not side with all the measures proposed.

Leaving the big road

The Ministry of Transport of the Russian Federation sees its task in bringing a proper balance into the transport industry of Russia when it comes to competition between different means of transport, Deputy Transport Minister Victor Olersky, Head of the Federal Marine and River Transport Agency (Rosmorrechflot), told journalists at the meeting of Rosmorrechflot’s Board. He believes that road transport should be used for short distances, railways – for average and long distances, water transport – for shipments of heavy and bulk cargo if possible. 

According to Victor Olersky, the balancing of different means of transport is the priority today, though it is extremely difficult to do as each sector is eager to improve its own results. There is no state planning today, therefore this is to be handled through application different economic incentives like charging heavyweight trucks under Platon system. “When it comes to federal investments per tonne-km, rivers are the most efficient,” Victor Olersky believes. He says Platon also contributed to partial shifting of cargo flows to water transport.

As Volga Shipping Co. Board Chairman Rishat Bagautdinov said at Rosmorrechflot’s Board meeting, railways try to attract cargo flows from water transport by high discounts during the period of river navigation just to take over the cargo from water,” – said Rishat Bagautdinov . According to him, Russian Chamber of Shipping has addressed the Federal Antimonopoly Service and informed it on the directions with hot competition between railway and river transport during the period of summer navigation. No reply has been received yet.

When answering the question of IAA PortNews at the VII annual conference “Barriers and Growth Areas of Russia’s Transport Industry”, Sergei Tugarinov, Deputy Director General of the Center of Corporate Transport Services (Russian Railways branch), confirmed that the company is struggling for cargo flows by offering competitive rates but refused to acknowledge them as dumping rates. According to him the company is focused on taking over the cargo flows from road transport, not from rivers.

In our opinion, the regulators should ensure partial redistribution of road cargo flows in favor of railway and water transport with easing the railways’ pressure on water transport as river transport is in the crisis due to external factors. The loss of the entire sector in the transport industry would be a strategic blunder on a nationwide scale and would have a negative multiplicative effect touching shipbuilding  and ship repair as well as other industries, would make transport and logistic costs even higher.

Nevertheless, river transport is mainly challenged by infrastructure limits today, rather than by competition with railways. It requires the construction of hydraulic engineering facilities at the Volga and Don rivers (first of all, Gorodetsky and Bagayevsky hydrosystems) as well as optimization of water resources management in the country to ensure more efficient water consumption. Those overarching issues associated with the agriculture, housing and water transport sectors are to be discussed in August-September 2016 at the meeting of the State Council chaired by RF President. 

Balancing on the brink

As for construction of hydraulic facilities for debottlenecking the Unified Deepwater System of European Russia, the Federal Targeted Programme “Development of Russia’s Transport System in 2010-2020” provides for construction of Nizhny Novgorod hydrosystem while the construction of the Bagayevsky hydrosystem approved by the Ministry of Finance and the Ministry of Economic Development is to be included into the Programme. According to the draft revision of the Programme issued by the Ministry of Transport, the project for construction of the Bagayevsky hydrosystem will be financed this year with RUB 600 mln of federal money.

Ideally, to solve the problem of low water level at inland water ways it is necessary to build a Nizhnesvirsky hydrosystem. Earlier, Rosmorrechflot decided to reject simultaneous implementation of projects on construction of Bagayevsky and Nizhnesvirsky hydrosystems amid the budget deficit in favour of the first one which is a priority.

Apart from construction of hydrosystems, there are other factors of negative impact on the river transport. Among them is insufficient financing of IWW maintenance. According to Victor Olersky, the Ministry of Finance of the Russian Federation has not approved allocation of RUB 5 bln required for maintenance of inland water ways in 2016 under the plan for gradual raising of IWW financing to the normative level. Financing of IWW maintenance is still insufficient, 61% instead of expected 75% of the normative level, Rishat Bagautdinov says. 100-pct financing of IWW maintenance was planned for 2018.

Representatives of shipping companies say this type of transport can die if no urgent measures of support are undertaken in the nearest future. Some tell about “enormous cash deficiency” of tens of millions of dollars caused by a disastrous fall of water level. This has complicated servicing of loans raised for construction of new vessels at domestic shipyards while banks are reluctant to restructure debts. “Our main task for 2016 is just to survive,” head of Volga Shipping Company said at the meeting of Rosmorrechflot’ Board. 

Shipping industry calls on the regulator to ensure adequate financing of IWW maintenance, balance the rates policy of the railways in order to exclude dumping rates, financing of the programme for subsidizing of interest rates under construction of new vessels at Russian shipyards, development of a regulatory document for ship utilization grants.

Vitaly Chernov