January 21, 2016

The Fourth Railway Package - towards a more dynamic and efficient railway

Written by  Violeta Bulc
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THREE years after it was adopted by the European Commission (EC), the Fourth Railway Package has reached a key phase in its gestation, and is likely to become law in 2016, bringing significant structural changes to the industry.

In October European Union (EU) transport ministers reached a unanimous agreement on a general approach to the Political Pillar of the package at a meeting of the EU Transport Council, backing the liberalisation of domestic passenger services and measures to strengthen the governance of the rail sector.

A core aim of the proposals is achieving non-discriminatory access to domestic passenger markets - which accounts for around 94% of all passenger traffic - in all EU states, either through commercial operations or public service obligation (PSO) contracts.

Violeta BulcEuropean transport commissioner Mrs Violeta Bulc considers this to be a vital step towards making rail more attractive and more competitive with other modes. "Market opening is not an objective per se but it is necessary to stimulate a more user-oriented approach, better performance and more innovation is the rail sector," she says. "It should improve the competitiveness of European railways and ensure that they grow and prosper. This is why it is so important that member states adopt and implement the Fourth Railway Package as soon as possible."

The Fourth Railway Package proposes that competitive tendering should be the primary means of awarding PSO contracts, although the legislation will permit the use of direct awards in specific circumstances, for example in small markets and where there is a need to ensure the long-term continuity of services. Operators would be contractually obliged to meet specific performance criteria on parameters such as train frequency and punctuality. Bulc argues that the competitive tendering of PSO services has been successful where it has been applied so far, and she is eager to see the benefits extended right across the EU. "The competitive tendering of these contracts will mean more choice for member states, better quality services for passengers and saving public money," she says.

While the Fourth Railway Package seeks to introduce more competition at an operational level, it goes back on the commitment to institutional separation of infrastructure and operations enshrined in previous EU legislation. This has been resisted by a number of member states eager to keep their infrastructure manager and incumbent operator under the umbrella of a single holding company, a situation that persists in key markets such as Germany, Austria, and Italy.

The governance directive of the Market Pillar therefore includes provision for different structural models, albeit with safeguards to prevent conflicts of interest and make financial flows between infrastructure managers and incumbent operators more transparent.

"We have accepted the principle - which was very important for certain countries - that all existing structural models can continue to exist," Bulc says. "Clearly, in countries where the infrastructure manager and the incumbent operator are part of the same company, stringent rules are necessary. This is to ensure that the infrastructure manager acts impartially towards new entrants and the incumbent railway can't benefit, directly or indirectly, from state subsidies granted to the infrastructure manager. I have confidence that the governance directive will lay down such rules."

Technical pillar

The Fourth Railway Package took another step forward on December 10, when the Council of the EU adopted a common position on the Technical Pillar at first reading. The Technical Pillar will transfer responsibilities for rolling stock authorisation and train operator safety certification from the member states' national safety authorities to the European Railway Agency, which will ultimately become a one-stop-shop for approvals. Bulc argues this shift will be a vital step towards making rail more efficient and attractive to new entrants.

"We need to streamline and harmonise authorisation procedures at EU level to reduce the costs and duration of authorisation on one hand and improve safety on the other," says Bulc. "The main aims of the Technical Pillar were to simplify vehicle authorisation and operator certification, reduce costs and time-to-market for the industry, reduce the number of national rules, and remove the sources of potential discrimination of new entrants. We are satisfied that these objectives have been achieved by the agreement reached between the co-legislators. And the Commission will of course ensure that the legislation is applied in an adequate and timely manner by all parties when it comes into force."

Funding

In addition to Fourth Railway Package, the EC is focussing on the development of international rail links, removing bottlenecks, and bridging gaps in the network through the Connecting Europe Facility (CEF), which will be used to distribute €24bn in EU grants for transport projects between 2014 and 2020. Last June Bulc unveiled a list of 276 projects, which will share the initial €13.1bn tranche of the CEF (IRJ August 2015 p18), with key beneficiaries including the Brenner Base Tunnel (€1bn) the Fehmarnbelt fixed link (€589m), and Rail Baltica (€442m).

In November the EC's Innovation and Networks Executive Agency issued a call for proposals for a second €7.6bn round of funding, which comprises €6.5bn for Cohesion Fund countries and a €1.1bn fund which is open
to all member states.

"I was not only encouraged but also delighted to see that the 2014 CEF calls for proposals generated such a high level of interest," Bulc says. "We received more than 700 applications totalling €36 billion of requested funding, three times more than the available envelope. This has allowed us to choose the projects with the highest European added value and ensure a balanced distribution geographically and between different transport modes. I hope to see similar enthusiasm for the 2015 call for proposals."

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