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. Last Updated: 07/27/2016

Auditors: Ministry Breaking the Law

Audit Chamber officials told the State Duma on Tuesday that the Railways Ministry is breaking the law and sabotaging its work by refusing to hand over documents.

With just two weeks left before an official recommendation is to be submitted to the government on how to reform the ministry, which controls one of the world's largest rail networks, it has categorically refused to open its finances to the public and the major issues of the restructuring remain unclear, the Duma heard.

Alexander Dovgyalo, head of the chamber's transportation division, said that ministry officials stonewalled his inspection team on numerous occasions despite being accompanied by law enforcement officials.

"If [the ministry] hinders the work of the federal audit body now, what sort of transparency can we expect once the largest parts of its business become corporate?" Dovgyalo told the Duma during special hearings on reforming the ministry.

Railways Minister Nikolai Aksyonenko, who is working on the reform proposal along with representatives of nine other ministries, reiterated his position: The profitable parts of the ministry will be absorbed by the 100 percent state owned Russian Railways Co. Private operators will be allowed to compete with this company and have "the same access to infrastructure" and be allowed to build their own railway lines.

Aksyonenko's concept has been debated for nearly a year at different levels of the government, but transportation experts and Duma deputies complained that there is still no guarantee that the system will be transparent and that private companies will receive equal treatment. Not less importantly, there is no package of laws to back the reforms.

Economist Dmitry Lvov, the head of the economic department at the Russian Academy of Sciences who has closely followed the reform plan, blasted the ministry for a recent series of murky moves.

"We know that there are a lot of [private] commercial structures created already — however, a lion's share of them are affiliated with the ministry and are draining assets and profits from the state," he said.

The military is also worried about the reform plan.

Chief of the General Staff Anatoly Kvashnin said that he was afraid that the railway system would become "unmanageable" under Aksyonenko's plan, adding that the military needs full-time access to at least 502,000 rail cars for transporting troops, weapons and ammunition within Russia.

The Railways Ministry is now a 300 billion ruble ($10.4 billion) a year operation uniting 17 branches in 85 regions and employing 1.4 million people. Not counting oil and gas pipelines, it carries 86 percent of the country's cargo.

It controls 159,000 kilometers of track — nearly enough to reach half way to the moon.

After suffering severe losses in the early 1990s, it turned profitable in 1997 and last year made a 54 billion ruble profit by Russian accounting standards, according to the ministry. But the profits came only from cargo operations: Its passenger business returned only half of what it spent.

Only about 70 billion rubles a year is invested in the infrastructure every year — a far cry from the $22 billion over the next five years the ministry says it needs. The ministry estimates that about half of all its tracks are in need of replacement and 6 percent are faulty. There are more than 700 temporary bridges that were built half a century ago.