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December 02, 2010

RZD demands more from Russian government

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RUSSIAN Railways (RZD) and the Russian government are heading towards a showdown over the amount of funding the state owned railway will receive for its investment programme in 2012.

While the government approved a Roubles 350 billion ($US 11 billion) investment programme today, there is concern at RZD over the widening gap between what it costs to operate passenger services and the fares it is allowed to charge. The government wants fare increases to be restricted to 8% next year, 7.4% in 2012 and 6.4% in 2013 to help keep inflation under control. RZD, however, says it needs to increase fares by 23% in 2012 or it will require a subsidy of Roubles 447 billion.
According to Russian newspaper Kommersant, the company is expected to announce a loss of Roubles 11.5 billion for 2010, and this figure is expected to increase to Roubles 176 billion by 2013 is nothing is done.
RZD says that failure to address the problem will force it to lay off 42,000 workers and cut track repairs by 3000km. This would consequently reduce the number of new trains RZD procures by 30% and have a detrimental impact on its freight services which has already reportedly turned down 69.3 billion tonnes of freight following a lack of investment in infrastructure.
Economic development minister Ms Elvira Nabiullina told a cabinet meeting Wednesday that negotiations with RZD are continuing.
"We have made a decision to approve the figures for 2011 and conduct additional discussions for 2012 and 2013," Nabiullina says.

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