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. Last Updated: 07/27/2016

Rail Boss: Tariff Reform a $785M Blow

Railways Minister Nikolai Aksyonenko on Thursday called on the government to cough up $785 million — the amount he says his ministry will lose this year as a result of a new unified tariff policy.

A newly created federal railways tariff commission decided this week to abolish the controversial dual-tariff policy that put the Anti-Monopoly Ministry in charge of domestic rates and the Railways Ministry in charge of export rates, which are several times higher.

During a train ride from Tomsk to Omsk on the Trans-Siberian Railroad in February, President Vladimir Putin told Aksyonenko, a group of regional governors and executives from Unified Energy Systems that he wanted rail tariffs gradually unified and put Deputy Prime Minister Viktor Khristenko in charge of the new commission, which now controls the tariffs.

Anti-Monopoly Minister Ilya Yuzhanov said the old system was crazy and something had to be done to level the playing field. "Say you are sending a potato from Moscow to St. Petersburg. If you plan to eat it, the tariff will be 1 ruble. But if you plan to export the potato from there, the tariff will be 3 rubles," he said.

But while exporters are rejoicing, the Railways Ministry is in a panic — it will no longer get revenue on goods exported from sea ports, where most of its cargo ends up. The special tariff the ministry charged on exports from sea terminals will be abolished Aug. 1, and the dual-tariff for overland exports will be abolished six months from now. These two tariffs accounted for 60 percent of the ministry's annual revenues and subsidized its money-losing passenger service for years.

"There is a circumstance no one wants to talk about," Aksyonenko said. "The move will leave a gap of 22.9 billion rubles, or almost 10 percent of the annual revenues of the Railways Ministry," he said.

"I don't see any other answer but aid from the budget," he said, adding that the ministry serves an important social role by financing an unprofitable passenger service that the governments of many nations subsidize.

The ministry can save 6.5 billion rubles this year by increasing efficiency, "but the rest the ministry is not able to take upon itself," he said.

"The revenues the ministry loses will be gained by shippers — more exactly, shippers of oil, oil products, ferrous metals, wood and other 'poor' industries in need of government support," Aksyonenko said with a smile.

Even though Khristenko's commission set the rate of the new unified tariff at an average of 18 percent — depending on the category of goods being transported — above the current domestic rate average, it is still far lower than what Aksyonenko wants.

The greatest increase, 200 percent, will be for shippers of ferrous metals.

"Two-hundred percent is better than 300," said Russian Aluminum spokesman Vladimir Alexandrov. "But we don't like the discriminative way tariffs are determined."