/  Performance overview / Description of transport market in Russia in 2013 / Tariff regulations

Tariff regulations

The fundamentals of state policy with regards to natural monopolies, including the principles of state regulation and forming of the tariff policy in the freight transport sector are determined by law.

On the basis of federal law, the decisions of the government of the Russian Federation and departmental regulations of federal agencies of executive authority were adopted on natural monopolies regulation. The resulting documents contain state-defined principles of tariff regulation.

During 2013 work on the formation of a tariff policy for the freight transport sector was continued.

Transition to long-term tariff regulation

Implementation of the action plan on the implementation of the target model

Work on improving pricelist №10-01

The transition to long-term tariff regulation in the freight railway transport sector was completed during 2013.

The FTS of Russia approved the Guidelines on State Regulation of Tariffs for Railway Transportation Services and the use of railway public infrastructure during Freight Transport. In accordance with these guidelines, the target indexation level of the freight transport tariffs will be calculated for a period of five years.

A fundamental difference between the new guidelines and the previously existing order of tariff indexation is the calculation of the required indicator of return on invested capital (ROI) in addition to the traditional forward expenses indicator. Application of the market rates of return should allow Russian Railways to increase revenues and spend more of its own funds on the implementation of the investment programme.

Transition to the long-term tariff policy is a key element in the formation of a long-term financial model for Russian Railways operations. The availability of a long-term financial model based on a long-term tariff policy is evaluated by ratings agencies as an indication of the Company’s financial stability and is also an important factor of investment attractiveness for Russian Railways.

Despite the transition to the long-term tariff policy, the government of the Russian Federation passed a resolution to preserve the 2014 tariffs for freight transport at the 2013 level and to subsequently carry out their annual indexation in accordance with the inflation indicators in the prior period.

In order to solve the targets on restructuring of railway transport there were continued works on action plan for implementing the Target Model of railway transportation market for the period through to 2015.

One of the most important areas of work in 2013 was the formation of a legal regulatory framework reflecting our changing approach to tariff policy realization. This will ensure the successful implementation of the Russian Federation’s international agreements linked to its accession to the WTO and to the formation of the Common Economic Space.

The following changes took place under the provisions of the Agreement on Railway Transport Services Access Control, including the basics of the tariff policy (paragraphs 4 and 5 of Article 6 of the Agreement):

  • From the year 2013, railway transport organizations were granted the right to change tariffs for railway freight transport services within certain price limits (the tariff corridor), thus allowing Russian Railways to independently implement a flexible tariff policy. The price limits for tariffs were set by the Russian Federal Tariff Service (FTS) for railway freight transport services under average network conditions in the form of indices to current tariffs. The minimal index to the current Price List No 10-01 tariffs is 0.872; the maximum index is 1.134;
  • In March 2013, new regulations were adopted for the preparation and implementation of Russian Railways resolutions with regards to establishing (changing) tariffs, fees and charges within the price limits set by a federal agency of executive authority on the regulation of natural monopolies.
Russian Railways benefitted from additional income of 
RUB mln as a result of the tariff policy implemented in 2013

The primary aim of implementing a tariff policy within the tariff corridor is to create economic benefit for Russian Railways, by attracting additional financial resources for the development of individual public railway transport facilities, solving technological issues, and enhancing the attractiveness of railway transport as a means of cargo delivery.

While the tariff corridor was in force, about 40 requests from shippers and structural divisions of Russian Railways were considered. At the same time 10 of all resolutions of the Board of Russian Railways related to tariff changes came into force were aimed at tariffs reduction and one was aimed at tariffs increase.

As a result, the additional income of Russian Railways on all resolutions in force in 2013 is estimated at RUB 1,493.7 million, with additional freight volume totalling 1,583.6 thousand tonnes and 15.3 thousand TEU.

Work was carried out on improving the Price List No 10-01, Tariffs for Freight Transport and on the Infrastructure Services Performed by Russian Railways.

A specially created working group within Russian Railways helped to establish a New Freight Transport Price List Concept.

In 2013, it was undertaken tariff unification across all transportation types, in order to bring the current Price List into alignment with the internal and external changes in the economic development of the country. Long-time system exceptional tariffs were also included in the Price List (that being a requirement of WTO and CES).