September 02, 2015

What future for Poland’s railways?

Written by  Andrew Goltz, Jakub Majewski
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For over 20 years the European Union has been trying to encourage a modal shift of passengers and freight from road to rail. Andrew Goltz and Jakub Majewski discuss the impact of European Union policy and funding with some of the leading figures in Poland's railway industry and consider whether Europe's influence could have been more effective.

 POLISH State Railways (PKP) has often been accused of ordering its investment projects according to its own internal priorities, instead of taking into account the views of its customers. So rather than restrict our analysis to our own opinions, we canvassed the views of a range of stakeholders in Poland's railway industry to establish the principal gains achieved during the previous EU funding period (2007-2013) and the most important challenges for the current 2014-2020 funding period.

Mr Michael Dembinski, chief adviser of the British-Polish Chamber of Commerce, says he has observed a breakthrough in the quality of PKP's management. He says PKP used to be a state-within-a-state, a remnant of communist times, with old-guard managers acting as a brake on progress. But as old managers retire, fresh talent is coming in from outside the industry, bringing with it a new 'can-do' attitude.

An example of this is the successful launch of the Express InterCity Premium Pendolino services in December 2014 which have cut journey times on several routes and ushered in a new level of service. Signage at stations has also been enhanced and electronic information services improved.

PolandHowever, despite these recent improvements in service quality, Dembinski highlights a major challenge facing Poland's railways. He argues that infrastructure projects are being delayed by the regulations concerning the manner in which tenders are conducted, which result in too many unsuitable companies - without the necessary know-how or resources - winning tenders. This, he suggests, needs urgent revision.

In the railfreight sector, Mr Marek Staszek, chairman of DB Schenker Rail Polska, Mr Wojtek Jurkiewicz, managing director of Freightliner PL, and Mr Jacek Bieczek, chairman of CTL Logistics, all agree that market opening has delivered more choice for customers, better value-for-money, and higher-quality services.

However, they all voice concern that while the improved services brought about by the liberalisation of the railfreight market has helped to sustain traffic, volumes are not growing in line with the overall transport market, with the result that rail's market share is decreasing. All three operators agree that the condition of infrastructure and high track-access charges are preventing railfreight from keeping pace with the growth of the Polish economy, let alone encouraging a transfer of freight from road to rail.

Encouraged by the availability of EU funding, investment has brought some improvement in Poland's railway infrastructure, but by 2014 only 15% of the network had been modernised. The limited investment in infrastructure has largely been targeted at enhancements that benefit passenger services, even though Poland is one of Europe's largest railfreight markets. Freight trains run at an average speed of just 27km/h and freight operators face a challenging track access regime with charges - amongst the highest in Europe - changing unpredictably from year-to-year.

Railfreight operators also face a shortage of suitable sidings for loading and unloading freight trains and insufficient terminal facilities for intermodal freight. Even modernised single-track lines lack the passing loops required for efficient freight operations. Moreover, in spite of the EU's emphasis on achieving a level playing field, the former state operator, PKP Cargo, enjoys a monopoly of access to the transshipment terminals at the break-of-gauge on Poland's eastern border, effectively excluding competitors from this market.

As well as being in charge of Freightliner's operations in Poland, Jurkiewicz is also chairman of the Association of Independent Rail Freight Operators (ZNPK). He welcomes the investment that has begun to shift the public perception of Poland's railways and says that infrastructure is the key to the development of Poland's railways. He hopes that when the current EU assisted investment programme is complete, the track will not be allowed to degrade to its former state.

Professor Marek Sitarz, head of the Department of Railway Transport at Dabrowa Górnicza Business College wants to see railways playing a greater role in Poland's transport mix, arguing that they should not be seen as an outmoded relic of "the bad old days" - as too often is the case - but as a vital tool in delivering a sustainable and integrated transport system.

Mr Leszek Mietek, president of the train drivers trade union and chairman of the Confederation of Railway Trade Unions highlighted the completely different approach to financing roads and railways, which has become a systemic problem in Poland. He argues there is a lack of will within governmental institutions to improve Poland's railways and says the government has adopted a "hands off" attitude to the problems of the industry. Furthermore, he says the fragmentation of the industry as a prelude to privatisation has created barriers to railway development.

Mietek calls for the transfer of all of the shares in infrastructure manager PKP PLK to the state treasury to be completed as quickly as possible and for rail track access to be set on the same basis as charges for access to the road network.

Mr Tomasz Strapagiel, chairman of short-line operator SKPL would like to see PKP divest itself completely of its remaining shares in, and responsibilities for, its former railfreight unit PKP Cargo. At present PKP retains around 20% of PKP Cargo's shares and has the right to veto the appointment of the company's chairman.

While these three men have completely different jobs, all three raised the issue of safety. Sitarz noted that the safety record of Poland's railways, though improving slightly, was still very poor by European standards and the accident rate is not falling in line with investment. Mietek says he is concerned that rapid technological advances and the reorganisation of Poland's railways have led to safety "black holes." He is adamant that railway operators should not compete with each other on the basis of adopting different safety standards.

Strapagiel calls for UTK, which combines the responsibilities of rail regulator and national safety authority, to concentrate on the task of market regulation and ensuring a level playing field for all operators, as required by EU directives. He feels that that an improvement in safety can only be achieved through the creation of a cross-industry body - along the lines of Britain's Rail Safety and Standards Board - which could adopt an evidence-based approach to the challenge of improving safety.

Mr Damian Grabowski, chairman of regional passenger operator Arriva PL, questions whether regional services could be operated more efficiently. Grabowski notes that some regional authorities have received EU funding to acquire new rolling stock and establish their own local operating companies. He questions whether the existence of these small regional companies, each with its own overheads and where the procuring authority is also the supplier, is a positive development for regional rail in Poland.

Local authorities have tended to purchase rolling stock of different types in small batches. When major overhauls become due, costs escalate and all too often the solution adopted is to further curtail the frequency of services. Grabowski argues that if EU funding was concentrated on infrastructure refurbishment and the choice of service delivery made by competitive tender, everyone would ultimately benefit.

Challenge

There was consensus among those interviewed that the biggest challenge ahead for PKP will be to ensure that the next tranche of EU funds - some €5bn - is fully used and spent wisely. This will not be an easy task as PKP has struggled in the past with the prioritisation of projects and project management.

At the turn of the century, two of PKP's most profitable routes were the Warsaw - Lodz and Warsaw - Radom lines, which carried very heavy commuter traffic to and from the capital. After eight years the upgrading of the Lodz line is still not complete and passengers are still waiting for the 1h 15min journey time promised at the start of project. Upgrading of the Radom line, where a single-track section earmarked for doubling more than 20 years ago, has not progressed beyond the completion of an EU-funded feasibility study. Tens of thousands of passengers have deserted both routes. Elsewhere, short deviations which would have eliminated speed restrictions on the Warsaw - Poznan and the Warsaw - Gdansk routes were eliminated from the 2007-2013 EU-funded project list due to lack of government funding to cover PKP's own cost component.

Against this backdrop, the argument that infrastructure improvements should be given priority over rolling stock when it comes to EU funding is a compelling one. With quality infrastructure in place, improved journey times will help freight and passenger operators win traffic back to rail and enable railway companies to arrange the finance necessary to acquire better rolling stock.

The tendency of senior politicians to distort investment priorities in favour of high-profile "vanity" schemes, such as the PKP Intercity Pendolino train procurement, the new underground station in Lodz, and the feasibility study for a new high-speed line, at a time when the condition of some 85% of the railway network gives cause for concern, is the most serious threat to the effectiveness of EU investment in Poland's railways.

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