• 2021 November 19

    Railway vs water: how will they balance?

    Final plenary discussion at Transport Week

    The railway has been traditionally considered as a ‘killer’ of river transport. However today when Russian Railways announces the plans to revise its long-term tariff policy and amid a too slow development of railway infrastructure, water routes are in the spotlight again.

    Russian Railways is set to revise its long-term tariff policy adopted back in the pre-pandemic year of 2017. The initiative is based on the plan to change the indexing mechanism by shifting from the consumer inflation to the industrial price indexation, reject of reduce the time of actual and expected inflation monitoring, include overhaul expenses into the tariff and introduce additional indexes per types of cargo and shipment with container transportation tarrif to be increased by 4.75% from 2022 (except for thermal ones).

    The market players are concerned since the tariff policy amendment is expected to entail a considerable growth of railway transportation costs.

    At the panel discussion “Infrastructure vs Tariff. What is more developed?” held in the framework of Transport Week in Moscow, TransContainer President Aleksandr Isurin emphasized that the permanently growing tariff and price pressure have lead this year to a decrease of container traffic growth rates by 1.5 times in all segments excluding transit. According to the speaker, the increase of the tariff and price pressure can trigger shifting of cargo from railways to alternative types of transport.

    Aleksandr Isurin

    Today, the containerization growth is driven by transit which is subject to other indexation mechanisms... In my opinion, long-term indexation principles should not be changed”, said.

    Meanwhile, Russian Railways has its own truth.

    We will not be able to develop infrastructure without a tariff, adequate and fair, necessary and sufficient one”, said Aleksey Shilo, Deputy General Director of Russian Railways – head of the Centre for Corporate Transport Services.

    According to him, long-term tariff policy is based on numerous factors: not just inflation but also cargo base which proved to be different from the target indicators in 2019-2020.

    In 2019, cargo base of Russian was is different (from what was foreseen by a long-term policy adopted by Russian Railways in 2017 – Ed.). In 2020, we also so a difference of 7% due to coronavirus related constraints. In 2021, we started recovering and we are grateful to our partners for that ... Nevertheless, from the adoption of the tariff policy we received RUB billion less than expected due to lack of cargo. That affected our investment capabilities. The inflation is also changing not as steadily as we expected”, said the representative of Russian Railways.

    For example, the 2021 budget of Russian Railways, as a large consumer of industrial products and fuel, was based on expected growth of the industrial product index of 2.8%, fuel – of 3%. In reality, they rose by 19.7% and 44.7% accordingly.

    Aleksey Shilo

    Aleksey Shilo said “it is necessary to move towards a more complex formula of tariff setting ... We believe that the long-term tariff model should be based on many factors ... so that we could implement our infrastructure projects”.

    This module is to provide for a decrease of tariffs if the market situation changes. “We do not set ourselves a task of just raising the tariffs”, said the speaker.

    Besides, Russian Railways is going to sign agreements based on ‘transport-or-pay’ principle to guarantee volumes for the newly developed infrastructure. “We are going to try it at a pilot section and then expand the practice”, said Aleksey Shilo.

    There is also a plan to use investment agreements providing for infrastructure development in view of the guaranteed volumes.

    It is actually understandable: keeping tariffs unchanged is difficult amid the accelerating inflation, the more so as the railway infrastructure development rates are crucial for the country economy. Throughput capacity of railway approaches to seaports are already by far exceeded by the demand of shippers as we wrote earlier >>>>

    Konstantin Anisimov

    In this respect, an old idea of a transport balance system comes back to ensure each type of transport not competing but supplementing each other. The railway’s dumping during the navigation season in some areas has been killing inland water transportation for the recent years. Now with the railway complaining about insufficient level of tariffs, we can nod to classics saying that the reports of IWW transport’s death are greatly exaggerated.

    When speaking at Transport Week, Deputy Head of Rosmorrechflot Konstantin Anisimov said that cargo traffic on inland water ways of Russia is expected to grow by 5% in 2021 which is a great result for a period of coronavirus crisis!

    Mikhail Blinkin

    Mikhail Blinkin, Director of the Institute for Transport Economics and Transport Policy Studies, HSE University, said in his turn that the balance would gradually change in some segments towards inland water transport. “This segment is in the focus worldwide today, particularly in the ecological context”, - said the expert.

    Obviously, water transport is neither a panacea nor a replacement of other types of transport. However, as noted above, it can and should supplement other means of transport on certain routes and in certain cargo segments. That will be facilitated by the launching of the Bagayevsky hydrosystem, implementation of the project on year-round navigation on Astrakhan – Rostov-on-Don route, compliance with the specified level of IWW financing which are the issues on the today’s agenda.

    By Vitaly Chernov


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