ANATOLY GOLOMOLZIN: WE MUST CREATE ORGANIZATIONS AND MECHANISMS FOR COMMERCIAL RAILWAY INFRASTRUCTURE

Providing high-quality railway freight services is a mandatory condition for developing EAEU economies

Experts discussed the existing tools for providing rocking stock to consignors and developing railway carriage service at a meeting on improving pricing transparency on the market of wagon operating and leasing, organized by the Ministry of National Economy of the Republic of Kazakhstan.

Deputy Head of FAS, Anatoly Golomolzin, pointed out: “The objectives of the government policy is to develop fair competition across various sectors of the economy, particular, transport, their comprehensive modernization. Incompleteness of structural transformations in the industry deters inflow of new investments, introduction of innovations and modern management schemes. Institutional changes in the railway sector in Russia started back in mid-1990s and advanced quite a lot”.

According to Mr. Golomolzin, reforms have shaped the following structure of the railway transport: “Russian Railways” OJSC – the owner of the infrastructure in public use and the sole network-wide freight carrier; freight operators (more than 1700), offering freightage cars; long-distance passenger transportation companies (“Federal Passenger Company” OJSC, “Grand Express” OJSC, “TransClassService” CJSC, “Sakhalin” Passenger Company” OJSC, “Tver Express” Ltd.): and commuter passenger companies.

Deregulating the car element of the freight tariffs allowed to modernize the fleet of freight cars and to attract investments for over 1 billion RUB in the industry.

At the beginning of the 2000s, the Ministry for Antimonopoly Policy and Support of Entrepreneurship devised highly effective (as practice proved) measures to increase flexibility of the tariffs for passenger transportation in open-plan carriages and deregulating them for premium-service trains, first-class coaches and compartments, as well as in enhanced-comfort commuter trains. Traffic could be raised only subject to increasing the quality of services and giving passengers a choice. First of all, flexible tariffs were introduced for travels in open-plan cars. They began to change during a year depending on demand: higher demand – higher tariffs, and vice versa. Deregulation of long-distance passenger carriage was performed stage-by-stage: initially in first-class coaches and compartments of premium-service trains, then in compartment coaches. As a result, the passenger flow began to grow, the quality of service improved and in the high demand periods railways rather than profiteers got the passengers’ money. Carriage was spread out more evenly throughout a year, and consequently, the loading of rolling stock also became more balanced. Dynamic pricing was introduced in the deregulated segment, due to which recently (from 2013 to present) annual passenger dispatching increased. High-speed “Sapsan” and “Lastochka” trains, luxury trains would not emerge without institutional reforms in tariff regulation.

The Target model of railway transportation market is again under discussion in Russia. It is important to mention, that for efficient performance and development of the railway market, commercial market infrastructure is needed. Such commercial market infrastructure functions efficiently in the oil-and-gas sector of the Russian Federation. Creating commercial infrastructure of rail-freight market is aimed at achieving efficient conditions for turnover of the infrastructure services, freight services and wagon-load cargo-luggage carriage and other, related services.

In 2015, upon a FAS initiative, the Exchange Committee was formed at FAS, jointly with the Federal Tax Service and the Bank of Russia.  Its sessions are open, and representatives of EAEU member-states are actively involved. The main task of the Committee is to develop on-exchange trading.

The exchange market of oil products in Russia is sufficiently developed. The share of on-exchange trading with petrochemicals accounts for around 15-20% of the total domestic supplies.

Developing on-exchange market requires establishing commercial infrastructure:  devising and implementing the new rules of the game, emergence of new actors - trading organizers, clearing, traders, brokers, market-makers, etc.

For instance, work of a goods delivery operator is one of the key elements of commercial infrastructure. "Transeft" is quite efficient in its new status.

It used to be a production monopoly that pumped oil under a schedule approved by the Ministry of Energy. After assigning the status of a goods delivery operator, the company’s business has been changing: it underwent modernization and is getting more comprehensive. Modern means of accounting, transportation and storage will allow supplying oil products, for example, on the second day, and a possibility of Т+0 supplies is under discussion. Delivery Versus Payment. It means a new quality of the spot market of goods on hand and absolutely different, extended capabilities of the derivatives market.

Work on a distributed sales base is of special importance. Currently, trading use a refinery basis, or sometimes a unified consumers base. Possibility to ship petrochemicals at any point of the system of the main product pipelines generates conditions for direct competition between all oil companies on the common sales base and expands choices for consumers who participate in exchange trading.

“We are discussing a similar scheme with “Russian Railways”, SPIMEX, operators and consignors. So far, rail loses to pipelines. You can judge for yourselves: with the 20-day average delivery period, irregular deliveries can reach +/- 20%, and nobody can predict when the goods arrive. Oil products markets are volatile, there can be dynamic price changes, and a situation may happen that good are sold on exchange at a particular price, while at delivery the price is already different. As a result, losses due to inefficient transport can be significant”, explained Anatoly Golomolzin.

FAS is considering whether rail transport can operate under the regular competitive freight traffic mode. Fuel sold through an exchange can be transported by several competing companies, operating on schedule on allocated train paths of rail infrastructure. Prices for carriage services, services for providing rolling stock can be determined through on-exchange trading. Quotations, published on a regular basis following the trading outcomes, will make the market trends predictable and manageable along the entire sales and logistics chain, including the off-exchange segment.

“Our proposals and initiatives are formalized legislatively. The Presidential order on the main directions of the government antimonopoly policy in 2018-2020 obligated all of us to move towards creating organizations and mechanisms for commercial infrastructure on rail transport. The result of this work depends on uniting efforts of all market participants (operators, consignors, etc.) under the frame of the Market Council for Rail Transportation”, emphasized Deputy Head of FAS.