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. Last Updated: 07/27/2016

Rail Passengers Cost State $1.7Bln in 2002

Railways Ministry losses on passenger operations in 2002 swelled 48 percent on the year to 55 billion rubles ($1.7 billion), Deputy Railways Minister Yury Dyakonov said Tuesday.

Although revenues from ticket sales jumped 24 percent to some 100 billion rubles, expenditures grew faster -- long-distance service cost the government 33 billion rubles, while suburban operations resulted in a net loss of 22 billion rubles.

Dyakonov said revenues covered just 45 percent of expenses, meaning "a heavy burden had to be laid on cargo operations" to cover the remaining 55 percent.

"Out of every ruble of revenues from cargo transportation, 15 kopeks went to counter losses from passenger traffic," Dyakonov said.

Although ticket sales dropped 8 percent last year to some 1.3 billion, the ministry expects growth this year of 16 percent to 18 percent, and not less than 25 percent for the key St. Petersburg-Moscow route. To meet demand for the second city's 300th birthday this year, the ministry is planning to increase service to St. Petersburg, including running all three of the nation's high-speed trains to and from Moscow for the first time.

Dyakonov said the decline in passenger traffic was due to the poor standard of living for most of the population, the slow speed of many trains, increased competition from automobiles and buses, and operational mistakes leading to the cancellation of scores of suburban routes.

Those factors, coupled with higher electricity prices in several regions, will likely lead to higher losses this year, he said.

The price hikes will likely force the ministry to cut its investment program this year, and passing on the higher operational costs to cargo customers is not an option, First Deputy Railways Minister Vadim Morozov said Friday.

Instead, the new price dynamics will make 2003 a "starting point" for the gradual elimination of cross-subsidies, said Dyakonov.

To lure passengers, the ministry is also working to modernize its largely Soviet-era rolling stock, 41 percent of which is considered "exhausted."

"For the first time in the history of Russian railroads" the ministry has started a project to modernize third-class wagons, including the introduction of air conditioning, Dyakonov said.

The ministry bought 400 new wagons last year and is planning to add another 500 this year, with most earmarked for third-class seats, where 60 percent of all passengers sit.

Dyakonov said by the end of the year the ministry would introduce faster suburban electric trains that are not only popular among passengers but also bring in "significantly higher revenues."

Such trains are currently operating on only 15 routes, but more will be introduced in all of the regions by the end of the year, Dyakonov said, declining to give financial details of the project.