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. Last Updated: 07/27/2016

Railways Writes New Rules for Cargo

The Railways Ministry on Thursday introduced sweeping new rail cargo regulations, saying it would give private companies more incentive to buy more railcars, fueling competition in the reforming sector.

Many rail operators were skeptical of the long list of new prices and rules, though, with some saying the new rules would only create additional advantages for new private supermonopoly Russian Railways Co., the $50 billion, 100 percent state-owned firm due to be spun off from the ministry this fall.

"It is a historical event," Yury Kosov, head of the Railways Ministry's commercial cargo department, told reporters Thursday. "At midnight [Wednesday] a fateful document for the Railways Ministry and its customers came into force."

The new regulations are fundamentally different from the old ones that had been around since 1990.

"The old list could have stayed in place for another 10 years, but due to ongoing structural reforms, it needed to be changed," he added, saying the new one creates a level playing field for all cargo carriers.

Rolling stock owners are to pay only for the use of infrastructure and Railways Ministry locomotives, something the the ministry hopes will stimulate companies to buy their own rolling stock, Kosov said. Companies could save an average 15 percent on rail transportation expenses by using their own railcars.

Previously, those who owned their own rolling stock had to pay full tariffs. Now tariffs will be calculated separately for infrastructure, locomotives and railcars.

Prices on the new list also differ depending on destination. The ministry increased tariffs for shorter destinations and reduced tariffs for long-distance routes.

The Railways Ministry has toughened the weight standards that flat and tank cars are required to meet before they are allowed to set off.

The three main cargo classifications have remained.

For first-class cargo -- including substances like coal, ore, aluminum, non-ferrous metal concentrates and wood chips -- tarrifs will be reduced by an average 4 percent. On some items, though, the decrease is more dramatic. For example, the cost of transportating coal on a company's own railcars would drop 41 percent, by 31 percent for ore, balanced out by miniscule increases on a vast range of other goods in the class.

Revenues gained from increased second-class tariffs -- covering crude and fuel oil, mineral fertilizers and bricks -- compensate for the first-class decreases.

Second-class cargo has become 3 percent more expensive on average. Prices on crude oil will increase by 12 percent and diesel and fuel oil prices will rise 6 percent.

Prices for third-class cargo -- oil products and non-ferrous and ferrous metals -- were left unchanged.

Prices for all types of container cargo, which are primarily used to carry goods across national borders, were increased 20 percent. Kosov said this was simply because container tariffs had not been increased since 1995.

"The new price regulations won't change the Railways Ministry's revenues from cargo transportation," Kosov said. "The rail tariff increases that were capped by the government at 12 percent for 2003 won't be exceeded."

The new regulations are the fruit of three years of deliberations by representatives from the Railways, Finance and Economic Development and Trade ministries, the Federal Energy Commission and various industry associations.

Yevgeny Neporada, who oversees rail cargo for the St. Petersburg-based transportation group Incotec, was unsure of the value of the new regulations.

While the new rules create preconditions for operators to acquire their own rolling stock, he said, the price increases on some cargo will not increase the competitiveness of the industry.

For example, rail transport of food products in some regions, in particular in Moscow, might become uncompetitive compared to auto transport, Neporada said.

"Introducing the new price list will lead to significant growth in prices on consumer goods, products, medicines, cars and office equipment in the regions," said Roman Denisov, deputy director of transport firm MTK Twins.

He said that those with complaints were advised at a meeting with the document's authors to take their appeals to Prime Minister Mikhail Kasyanov, who signed the document setting it into force, or directly to the Constitutional Court.