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. Last Updated: 07/27/2016

Cabinet Urges Speed On Railway Revamp

Pressed by the International Monetary Fund, the Cabinet on Thursday took a tougher line in talks with the Railways Ministry, ordering it to speed up work on a restructuring plan that will put an end to its national transportation monopoly.

The Cabinet gave the Railways Ministry and the Economic Development and Trade Ministry an April 1 deadline to submit a restructuring plan.

Ministers supported a plan for the creation within two weeks of a commission to regulate tariffs on railroad transportation and to set, within a month, the goals and scope of an audit of the Railways Ministry.

Prime Minister Mikhail Kasyanov’s appeasing remarks about the role of the railway sector at Thursday’s Cabinet meeting shed little light on a simmering feud between Railways Minister Nikolai Aksyonenko and Economic Development and Trade Minister German Gref, developing against the backdrop of the IMF’s urging of the government to put the railway’s house in order.

The Cabinet meeting was held a day after an IMF mission arrived in Moscow to discuss the Joint Letter of Intent and three days after IMF managing director Horst K?hler criticized the progress of deregulating the nation’s monopolies.

K?hler, speaking at a conference organized in Vienna by the Austrian National Bank, emphasized fighting corruption and defining the role of the state as major areas of IMF concern.

He listed two types of corruption in former communist states.

"The most visible is ‘grand corruption’ wherein vested interests in effect ‘capture the state,’ and then use their power to preserve monopolies," K?hler said. "Russia and the Ukraine have been unhappy examples over the years. … The government should be a regulator, not a player, in the market," he added.

The restructuring of the railways was first approved in 1998 and was put in writing by the Central Bank and the government last year, but most of the issues have been left unattended.

The government made another attempt to overhaul the sector this year, but so far little progress has been made.

Aksyonenko insisted Thursday that his ministry would control restructuring, but Gref, sitting beside him, said the draft would be a joint effort.

Aksyonenko, who first proposed the initiative, suffered two major setbacks in the past three months and has had to share his influence with Gref.

The Railways Ministry’s first suggestion was to monopolize the right to set tariffs, but that was torpedoed by the Anti-Monopoly Ministry, which embarked on a public campaign against Aksyonenko.

The Anti-Monopoly Ministry argued that railroads, which complained of a lack of resources, were keen to raise tariffs to solve their problems without increasing the attractiveness of the industry to investors.

The Railways Ministry estimates it needs to spend 120 billion rubles ($4.3 billion) to update its services, but in recent years it has only spent about half — 60 billion — of what is needed to maintain its rapidly aging assets.

Aksyonenko’s second proposal was to split the Railways Ministry into a joint stock company, Russian Railroads, and an administrative body in charge of regulatory issues.

But that plan was also put on hold after Gref insisted on spinning off all 17 regional railroads into joint stock companies under the umbrella of a holding.