Andrei Dementiev
Higher School of Economics, Moscow
October 6-7, 2016
Means and Ends of Reform
Goals
• Increasing – reliability,
– safety, and
– quality
of railway transport
• Cutting overall transportation costs in the economy
• Meeting projected demand for transportation
Principles
• Encouraging on-track competition
– Non-discriminatory access to infrastructure
• Increasing attractiveness for investment
– Financial transparency
• Developing tariff policy
– Elimination of cross subsidies
2001-2002 2003-2005 2006-2010
Ministry of Railway
Transport (est.1863)
Russian Railways
RZD (est. 2003)
RZD &
Cargo Co. (est. 2007?)
State-owned
monopoly providing
final and (informally)
access service
Vertical access model
integrated
100% state monopoly
RZD = Infrastructure
100% state monopoly
Cargo Co.
RZD has 51%
3 TOC’s
private
Access charge (a) =
End-user tariff (T)
Ramsey pricing
‘Self-regulated’
a 0.85 T
Ramsey pricing
‘over’-regulated
global price-cap
a 0.85 T
Ramsey pricing of access
Unregulated
downstream
Unregulated
downstream
Wagon owners build capacity (rolling-
stock) to secure their revenues from any
delays
Operators
Captive / General
Local & niche markets (oil, metal)
RZD–the only carrier
Operators? Carriers?
The initial reform agenda S
TR
UC
TU
RE
R
EG
UL
AT
ION
C
OM
PE
TIT
ION
De jure there is no competition
RZD (Russian Railways) – vertically integrated provider (VIP) of infrastructure and transportation services is the only licensed carrier who can legally execute public contract of transportation
There is no legal definition of infrastructure services
The only carrier (RZD) uses wagon fleet of independent operators for haulage
De facto train operating companies compete with RZD on the downstream market - open access model Market structure: several independent rivals, RZD looses its
share
Behavior: strategic interaction (rivals set prices, invest in private wagon fleet, VIP adheres to sabotage)
The emergence of on-track competition
The new tariff system provides ‘top-to-bottom’ approach to infrastructure charging setting a discount of w=T-a for private operators wagon owners Incentives to invest in rolling stock if w>cR (wagon operating costs)
L L
Regulated price
a
T
IL
IW
L
W W
Regulatory reform
T-km share in Russia
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Other Owners
Affiliates ofRussian Railways
Russian Railways
Federal Freight
Regulatory reform and open access in Russia
Operations
Infrastructure
and
locomotives
Consumers
Federal
Tariff
Service Access Charge
End-user Charge
Federal
Antimonopoly
Service a
cc
es
s
co
nd
itio
ns
CPI
Ministry of
Transport
licen
sin
g
a
T
Ministry of
Economy
OPERATORS
Merger of FAS and FTS in 2015
The story: toughness of competition rises
The ratio of freight ton-km to freight rolling
stock capacity in Russia (1993-2013)