President of Russia, deliver a railcar for business!

07.11.2011 — Analysis

The reform of Russian Railways, OJSC has resulted in a transportation collapse undermining the backbone of the national economy. This conclusion was made by the participants of the international conference - Freight Transportation for Small, Medium and Large-Sized Enterprises: Solution to Problems. The experts who have been interviewed by the RusBusinessNews columnist state that the railway industry has lost controllability. In their opinion, unless dispatching functions are centralized and efficient management of the railcar fleet is organized in the near future, Russia will wreck supply contracts for oil export.

The existence of problems in the transport industry has been admitted by RF President Dmitry Medvedev. According to him, the reform of Russian Railways has not met expectations and has created additional problems. The paralysis on the railroads resulted in the situation that entrepreneurs turned to the head of state, asking him to find railcars for cargo transportation. The top-tier government representatives embarked on manual adjustment of the industry.

Vladimir Yakunin, head of Russian Railways, was sent to Krasnoyarsk to organize transportation of grain. Presiding at the meeting, he reported: "The problem has been solved". Elena Skrynnik, the RF Minister of Agriculture, explained to Prime Minister Vladimir Putin that 1,300 railcars mobilized for the transportation will haul 500 thousand tons of grain. However, the entrepreneurs who took part in the second international conference - Freight Transportation for Small, Medium and Large-Sized Enterprises: Solution to Problems - spoilt the cheerful picture. They assert that the Russian railroads go through a systemic crisis that may result in a collapse of the whole economy.

The representatives of Russian Railways believe that the crisis stemmed from the reduction of investment in the industry. According to Boris Lapidus, head of the All-Russian Research Institute of Railway Transport, from 2004 to 2010, the percentage of Russian Railways shrank from 4.9% to 3.5% in the total amount of investment in the Russian economy. He is sure that the blame for this drop lies with the government that does not allow the company to set free-of-control prices for its services. In the opinion of the railway authorities, their development is also impeded by a shortage of empty railcars, as their turnaround cannot keep up with the industrial growth index. Vladimir Yakunin states that the shortage of rolling stock is caused by unwillingness to transport unprofitable cargoes that include building and timber materials as well as all welfare freights.

The participants of the conference took this explanation to pieces. Metallurgists and oil producers said that they experience the same problems as the owners of "unprofitable" cargoes: cars are delivered with delay, the prescheduled and agreed orders are not fulfilled, and the transportation costs have risen substantially since the reform in Russian Railways. At the same time, the system per se has no deficit of carriages at all. Sergei Andrianov, Deputy General Director of Vostokneftetrans, OJSC, (belongs to the state-owned company - Transneft), states that tank-cars are not delivered for loading, whereas at the same time within the distance of 2,500 kilometers there are 35 empty freight trains, out of which approximately ten are left without railway engine. There is a paradox: many-kilometer long lines of empty oil tank-cars, and Russia is heading the wreck of the program for oil transportation in the Far East.

Alexei Bezborodov, head of the InfraNews Agency, cannot understand where the shortage of empty railcars comes from, if the handling operations in the country remain almost at the same level. According to him, from 2004 to 2010 the quantity of the loaded cargoes increased only by 0.2%, whereas shipments translated into ton-kilometers increased by 2%. Therefore, talking about the "bottlenecks" on the railroad due to disproportional development of economy is inappropriate. The expert has estimated that even if petroleum shipments increase by 4% (which is unrealistic in today's situation), there will be still no shortage of tank-cars. The deficit of gondola cars can result from the decrease of the turnaround rate of the rolling stock to 22 times a year. That is what is being observed at the moment. For comparison - just a few years ago this rate was equal to 26 times, and the quantity of gondola cars met everyone's needs.

Sergei Andrianov offers to look for reasons for low railcar turnaround rates in the arrangement of the management machinery of Russian Railways. Before the reform, all the issues relating to freight deliveries were in the responsibility of the station master, or, at the very outside, the head of the railway administration. Today, no one is responsible for solving issues. The reform of Russian Railways gave birth to seven directorates that deal with different issues: reconstruction of railroads, railway engines, communication networks, railcars, premium transport services, etc. All the local divisions are subordinated directly to the central department of Russian Railways. The difference in interests of directorates resulted in a chaos on the railroads all over the country, because those who are responsible for repair operations completely ignore the fact that they are the reason for the down-time and idle railcars.

The results were almost immediate: the station master points to the transportation control center, the center points to the Budget Management Directorate, which points to the Central Directorate for Traffic Management, while the latter "passes the buck" to the Center for Premium Transport Services, which quickly kicks off the customer back to the station master. The circle is completed, railcars stay idle, and the economy incurs losses.

The most interesting thing is that the transportation collapse is profitable for participants of the market for railway transportation: railcar-builders receive additional orders, and operators earn additional profits. The proceeds from one car, according to Alexei Bezborodov, have increased from 700 to 1,500 rubles a day over the last four years. In percentage terms, the profit remained approximately at the same level, but directors of transport companies take advantage of showing impressive proceeds, as it influences the size of assets.

Experts understand very clearly that the freight transportation collapse has been fueled by the management crisis. Therefore, businessmen have nothing to do but to prepare a joint document outlining the malignity of the railway reform and forward it to Dmitry Medvedev. The mistakes of the past years compel the RF President to look into the railcar issue personally.

Vladimir Terletsky