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Suburban Passenger Traffic
Profitability of suburban trains in Russia remains one of the main objectives of industry reform. Current measures to support suburban trains through budgets are insufficient. As such, the methods of interaction between carriers and regional authorities also require change.
Since 2011, JSC “Russian Railways” has only been managing long-distance express passenger trains.
Suburban services are provided to the population by 26 suburban passenger companies (SPCs) established with the participation of the regions1, LLC Aeroexpress, LLC Interregional Passenger Company, and LLC Permsky Express.
JSC “Russian Railways” provides services related to the public railway infrastructure used for passenger traffic.
Suburban traffic volumes have been increasing for the past two years. This organic growth is driven by the carriers’ flexible marketing policy, improved passenger services in some regions, and the governmental decision to subsidize infrastructure services and reduce JSC “Russian Railways”’ tariffs for the provision of rolling stock to carriers.
- Key Trends
- Suburban traffic volumes have been increasing for several years.
- Revenues fr om suburban passenger companies (SPC) grew by 8.4% in 2012.
- In 2012, 100 agreements were entered into with 73 constituent entities of the Russian Federation to provide a certain volume of services at fixed tariffs
- SPCs are not required to be compensated for losses in just five constituent entities of the Russian Federation
- JSC “Russian Railways” is developing express and accelerated commuting services in the Moscow Transport Hub
At year-end 2012 revenues of all suburban companies from passenger transportation increased by RUR 46.4 bln in total. During this time, on total SPCs generated a shortfall in income amounting to RUR 15.2 bln (net of profit received in a number of regions and subsidies for state tariff regulation). The shortfall in income increased by RUR 0.9 bln during the year. The bulk of the shortfall in income is attributed to unprofitable SPCs (RUR 13.1 bln).
The shortfall in income is due to the fact that suburban tariffs are regulated by constituent entities of the Russian Federation, therefore, only a full compensation of shortfall in income will make suburban trains profitable for SPCs. However, at the beginning of 2012 regional budgets provided only RUR 6.4 bln for the compensation of a shortfall in income.
During the year, 34 constituent entities of the Russian Federation adjusted their budgets to pay suburban passenger companies additional subsidies amounting to RUR 2.1 bln. Of these, RUR 640.3 mln were subsidized to cover losses from the previous year (2011). Thus, in 2012 the actual compensation received was only RUR 7.8 bln, less than half of the amount required.
In 2014 the situation may deteriorate. The three-year Russian budget for 2014 allows for only RUR 12.5 bln to cover JSC “Russian Railways”’ shortfall in losses from infrastructure services provided to suburban trains, which is half the amount of subsidies allocated for this purpose in 2012.
Indicators of the suburban complex, RUR bln
|Total expenditure at the infrastructure rate of 1%||−48.9||−53.9|
|Consolidated losses for the Russian Federation given a reduction in the infrastructure rate of 99%||−6.1||−7.5|
|Total demand for subsidies in regions of the Russian Federation, excluding profitable constituent entities||−14.3||−15.2|
|Subsidies received from regional budgets, including:||5.2||7.2|
|subsidies received by regions, excluding profitable regions||5.2||7.2|
|Total losses, including subsidies and excluding profitable regions||−9.1||−8.0|
|Suburban complex structure||Suburban complex reform||Suburban orders|
Structure of the suburban passenger complex in 2012
26 suburban passenger companies operate suburban traffic services in 73 constituent entities of the Russian Federation (on “common”, so called 6000 number suburban trains). Of them:
|2 SPCs> 25% private investors|
|OJSC Moskovsko-Tverskaya Suburban Passenger Company (JSC Russian|
Railways owns 50%
(2 shares), with 25%
(1 share) belong to
the Tver Region, 25%
+1 share belongs to
Company (JSC Russian
Railways owns 25%
+ share, 25%+1 share
belong to the Moscow
Region, 50% minus
2 shares belong to LLC
|4 SPCs100% minus 1 share|
of JSC Russian Railways, 1 share
|OJSC Bashkorto-stanskaya SPC|
|OJSC Kaliningra-dskaya SPC|
|OJSC Sakhalin Passenger Company|
|OJSC Northern Suburban Passenger Company|
|14 SPCs>50% shares of JSC Russian Railways, with the rest of shares owned by the constituent entities of the Russian Federation|
|OJSC Zabaikalskaya SPC|
|OJSC Perm Suburban Company|
|OJSC Saratovskaya SPC|
|OJSC Sverdlovskaya SPC|
|OJSC North-Western SPC|
|OJSC North-Caucasian SPC|
|OJSC SPC Chernozemie|
|OJSC Express Primoriya|
|5 SPCs>50% shares of constituent entities of the Russian Federation, JSC Russian Railways, with the rest of shares owned by JSC Russian Railways|
|OJSC Baikalskaya SPC|
|OJSC Volgo-Vyatskaya SPC|
|OJSC Kuban Express-prigorod|
|OJSC Samarskaya SPC|
|1 SPCs100% private investors|
|LLC Perm Express|
In addition, the complex includes companies that provide express passenger transportation services with luxury trains:
- LLC Aeroexpress (an operator of suburban express trains linking Moscow, Sochi and Vladivostok with airports)
- LLC Moscow Passenger Company (express transportations in the Saratov and Volgograd Regions)
Reform of the suburban complex: new methods of interaction between carriers and regional authorities
In November 2012, the Government Commission on Transport and Communication approved the suburban passenger service development concept for the period up to 2025 proposed by JSC “Russian Railways” and the Russian Ministry of Economic Development.
The concept had been developed at the request of the Russian Government (No. P9-43077 dated 17 September 2011), and the draft has been submitted for the final approval at the Government’s meeting.
Underlying principles of the new organizational model of suburban passenger service outlined in the concept:
- use of the state order mechanism for public railway infrastructure services (constituent entities of the Russian Federation should place orders for transportation services). The state order mechanism should be envisaged by the Federal Law “On the Organization of Regular Passenger Train Service in the Russian Federation”;
- constituent entities of the Russian Federation should be required by law to:
- draw up
mid-termtransport service development plans (for 3-5 years);
- determine cost-base tariffs for suburban passenger services and compensate revenue losses incurred by suburban passenger companies as a result of tariff regulation;
- approve a realistic mechanism for subsidizing carriers from regional budgets and fully compensate shortfalls in income;
- draw up
- the federal budget should fully compensate carriers’ shortfalls in income from the transportation of passengers entitled to federal-level benefits;
- a penalty fare system, a penalty collection procedure and regulations governing the responsibility for train fare evasion are under development.
Placement of orders for suburban passenger services
Four constituent entities of the Russian Federation did not provide compensation for shortfalls in income incurred by carriers in 2012 (Vologda, Kurgan, Vladimir and Leningrad Regions).
In 2012, agreements for the organization of public transportation services were entered into with all 73 constituent entities of the Russian Federation (all territories wh ere railway services are available). A standard contract provides for the full compensation of shortfalls in income and the approval procedure for the volume of fixed tariff transportation services by the ordering party (a constituent entity of the Russian Federation).
However, 57 of 100 contracts (including 43 constituent entities of the Russian Federation) do not specify any financial compensation rates for shortfalls in income.
Shortfalls in income were fully compensated to carriers in 21 regions. However, in the following five constituent entities of the Russian Federation there was no need for subsidies: Moscow, Moscow Region, Saint Petersburg, the Republic of Adygea, and the Astrakhan Region.
Carriers were fully compensated for revenue losses in just 16 regions: Nizhny Novgorod, Kaluga, Orenburg, Omsk, Kirov, Novosibirsk and Ryazan Regions, the Karachay-Cherkess Republic, the Republic of Tatarstan, the Khanty-Mansi Autonomous Territory, Altai, Krasnoyarsk and Perm Territories, the Udmurt Republic, Volgograd Region and the Republic of Bashkortostan. OJSC Bashkortostanskaya PPK failed to make an agreement with the Samara Region for 2012.
OJSC Bashkortostanskaya PPK failed to make an agreement with the Samara Region for 2012.
At year-end 2012 positive financial results in suburban services were achieved by the following eight suburban companies: OJSC Central Suburban Passenger Company, OJSC Moscow-Tver Suburban Passenger Company, OJSC Kuban Express-Prigorod, OJSC Suburban Passenger Company, OJSC VTP, OJSC Express- Prigorod, OJSC Omsk-Prigorod, OJSC Altai-Prigorod.
Summary table by regions
| Compensation rates to constituent entities
of the Russian Federation
|Number of constituent entities|
|Compensation is not required||6||5|
|> 50% compensation||13||14|
|< 50% compensation||34||34|
Profitable and unprofitable suburban passenger companies in
|2011, RUR mln||2012, RUR mln|
|SPCs||Financial result net of subsidies||Volume of subsidies||Financial result adjusted for subsidies||Financial result net of subsidies||Volume of subsidies||Financial result adjusted for subsidies|
|Sverdlovsk Suburban Company||−2,092||1,313||−779||−2,114||1,595||−519|
|Perm Suburban Company||−526||222||−304||−284||295||11|
|Volgo-Vyatskaya Suburban Passenger Company||−231||163||−68||−278||232||−46|
|Saratov Suburban Passenger Company||−282||151||−131||−253||116||−137|
|Bashkortostan Suburban Passenger Company||−716||388||−328||−897||533||−364|
|Samara Suburban Passenger Company||−360||209||−151||−219||199||−20|
|Chernozemie Suburban Passenger Company||−707||51||−656||−1,435||228||−1,207|
|Northern Suburban Passenger Company||−1,594||246||−1,348||−1,732||350||−1,382|
|North-Caucasian Suburban Passenger Company||−1,192||156||−1,037||−644||106||−538|
|Kaliningrad Suburban Passenger Company||−275||5||−270||−283||50||−233|
|North-Western Suburban Passenger Company||−54||45||−9||−372||86||−286|
|Moscow-Tver Suburban Passenger Company||97||—||97||345||15||360|
|Central Suburban Passenger Company||5,678||215||5,893||5,249||446||5,695|
|Baikal Suburban Passenger Company||−512||242||−270||−854||624||−230|
|Zabaikalskaya Suburban Passenger Company||—||—||−472||113||−359|
|Sakhalin Suburban Company||−70||79||9||−94||66||−28|
|Total net of profitable companies||−11,840||—||−7,021||−13,147||—||−6,519|
|Total net of profitable regions||−14,274||—||−9,117||−15,257||—||−8,071|