Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

Railway Reform: Toolkit for improving Rail Sector Performance
Case Study: Russian Railways
Since 2006, reforms have included passenger transportation. The Rail Passenger
Directorate was formed to focus on managing long distance passenger services as
a business entity. Subsidiaries jointly owned by RZhD and local governments are
being formed for local passenger service, which allows RZhD access to local government
financial support for loss-making suburban passenger services. Also,
private companies have emerged to offer specialized passenger services, mostly
on the St. Petersburg-Moscow line. The companies own and operate passenger
coaches, set prices, sell tickets, and provide on-board and on-station staffing.
RZhD locomotives and drivers haul these coaches. CJSC TC Grand Service Express
and LLC Tverskoy Express are the most prominent private companies; by
end-2009, they had garnered 0.3 percent of the market for long distance passenger
transportation.
Box 1
RZhD Corporate Governance
RZhD has shareholders, and the principal shareholder is the Russian Federation.
Its board of directors consists of nine members elected by the government
of the Russian Federation. Currently, six members are elected from external
commercial companies, one member represents the workers union,
one represents the deputy prime minister of Russian Federation and the last
member is the president of RZhD. Annual reports and financial statements
are prepared according to International Financial Reporting Standards, and
are publicly published annually. Its executive body consists of 23 members
from a variety of political and commercial backgrounds and is headed by the
president of the company.
As of 2010, RZhD reforms increasingly include suburban passenger transportation,
for which the immediate goal is reaching the break-even point. RZhD is creating
a new system for tariffs that will eliminate fare evasions by introducing electronic
ticketing and security services on some lines, improving terminals, and
leasing vacant space for commercial use.
3.4 Phase III–Developing Competition
As part of the focus on competition, RZhD formed First Freight Company (FFC)
and capitalized it with 200,000 wagons, and formed Second Freight Company
(SFC), capitalized with 217,000 wagons. Both companies intend to sell shares to
the public; both face competition from independent operators such as Global-
Trans, and operating companies set up by major natural resources companies
such as Gazprotrans. By end-2009, independent private owners had 42.3 percent
of the Russian railway fleet.
This shift in wagon ownership means that RZhD needs fewer repair and maintenance
facilities. As of June 2010, RZhD had sold 18 freight wagon repair depots
to private companies, and plans to separate remaining repair depots into two
competing companies, and sell partial interest in each.
The World Bank Page 395