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. Last Updated: 07/27/2016

Drop Rail Barriers, Fadeyev Told

The government rebuked the Railways Ministry on Friday for failing to develop a competitive market by not giving private operators equal access to the national rail network.

"The main complaint I received was that barriers to equal access by private companies have not been removed," Railways Minister Gennady Fadeyev told reporters after a Cabinet meeting during which reforms were discussed.

He did not elaborate, but private operators account for just 10 percent of all rail cargo carried this year, a long way short of the 50 percent target. And while the number of private operators grew rapidly in 2001, there has been no increase at all this year. The development of the competitive sector in railroad transport is one of the main targets of the reform.

Reforming the ministry, which controls the world's largest rail system and is the nation's second biggest taxpayer after Gazprom, is "one subject that we follow constantly," Prime Minister Mikhail Kasyanov said in opening the Cabinet meeting, Prime-Tass reported.

Despite chastising Fadeyev, Kasyanov said the Cabinet was generally satisfied with the progress of reforms. Fadeyev said after the meeting that he accepted the government's criticism and found it objective.

He said the ministry's decision this year to stop selling rail tankers -- which carry lucrative cargoes such as oil -- to private companies, forcing them to buy on the open market at higher prices, had contributed to the stalling of growth in the number of private operators.

However, the minister's explanations have not satisfied the government and it has told the Railways Ministry and the Economic Development and Trade Ministry to work out regulations by November for developing the rail freight market and increasing the number of private operators.

In the future, according to the reform plan, the share of cargo carried by private companies must reach 50 percent.

Next year, private operators plan to invest $200 million into their own rolling stock, increasing the number of train cars to 43,000. Currently, private operators own 37,500 cars and rent 38,000, the Railways Ministry said.

The draft bills for railroad reform are awaiting a second reading in the State Duma.

The first stage of the reform process is planned to be completed by April next year when the ministry's commercial and regulative functions will be split up and the joint stock company Russian Railways will be created.

The ministry has finished making an inventory of its assets and capital, estimating it at approximately 1.3 trillion rubles ($41 billion), which the Russian Railways Co. will inherit after the second stage of reforms.

More than 1 billion units of property will have to be re-registered, a time-consuming process expected to cost 5.5 billion rubles.

Fadeyev asked the government on Friday to find a way to ease the process.

Cabinet has decided to finance all of the ministry's social sphere expenses -- such as schools and hospitals -- from the federal budget next year, as well as to fully pay for all military transportation by rail.

The ministry has been paying off its debts very well, Fadeyev said. Since the beginning of the year, the ministry's debt has been whittled down from 154 billion rubles to 131 billion rubles.

Railroad revenues for 2003 are expected to reach 400 billion rubles, he said. The ministry has submitted a 125 billion-ruble investment program to the Economic Development and Trade Ministry for its consideration.

Fadeyev said that railroad tariffs next year might be increased by 12 percent to 14 percent, partly due to hikes in electricity tariffs.

The Cabinet will next discuss the reforms Jan. 10.