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    [NAME] => Last Year’s Progress and Problems
    [~NAME] => Last Year’s Progress and Problems
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    [DETAIL_TEXT] => – Mr Yakunin, could you please outline the company’s main results of 2011? Were all planned corporate budget figures reached? Are you satisfied with the company’s work in the different fields of its activity?

– The company completed all key budget tasks. 1,241.6 million tons of cargo were transported last year, a 3% increase in comparison with 2010. Meanwhile, the planned growth was 2.8%. As for freight turnover (i.e. tons multiplied by kilometres), the figure of 2010 was exceeded by 7%, and the railway’s share in the Russian transport system’s freight turnover structure grew from 42.5% to 43.2%. In 2011, Russian Railways transported 992.4 million passengers, 4.8% more compared with the previous year. Of those, 114.8 million people used long-distance transportation services (i.e. the same number as in 2010), and 877.6 million passengers used suburban transportation services (a 5.5% increase).
The revenue from RZD’s basic activity amounted to RUR 1.283 trillion (over $40 billion), 1.3% more than planned, and 7.3% more than in 2010. The net profit was RUR 17.7 billion ($570 million). Not to trouble your readers with numbers, I would like to mention just the increase in labour efficiency that amounted to 7.5%, while the cost price grew by 7%. On the whole, we must admit that all basic planned tasks, set by the Government and RZD’s Board of Directors, were completed. In addition, the increase in the volume of Russian Railways’ work coincided with the national macro-economic trends. 

 – The II Railway Congress took place in Moscow at the end of the year. What was the goal of this event? Are you satisfied with its results?

– The first such congress was held in 2007. It was devoted to discussion of the Strategy of Railway Transport Development to 2030. A lot of changes have taken place in the external environment as well as in the railway sector since then. The global recession badly impacted the investment processes, and there appeared the necessity to put amendments not only to the company’s short-term programmes, but to long-term strategic ones as well. As for internal factors, in the recent years we made significant progress in terms of carrying out railway reform, particularly, in restructuring Russian Railways and the entire transportation market. So, there arose the necessity to discuss a number of urgent issues, and understand on which questions market participants and representatives of state regulators had a similar opinion, and on which problems they should hear each others’ arguments and reach a compromise. On November 18-19, 2011, the II Railway Congress was held in the Manezh Central Exhibition Hall. Over 3,000 people took part in its work, including representatives of legislative and executive powers, RZD, transport and industrial companies, scientific institutions, and, of course, our foreign partners. 
Dmitry Medvedev, President of the Russian Federation, and Vladimir Putin, Chairman of the RF Government, sent welcome letters to participants of the Congress. The most urgent and most important issues and tasks of the sector were discussed during the two days. I should say that not all speakers were of one mind. However, all railwaymen – either speaking from the tribune of the forum, or via sent messages – supported the policy of the Government, and the political powers targeted at the development and upgrading of our community. This is direct evidence that we have never been isolated from the needs of the entire society. At the Congress, we didn’t just summarise the results of the railway sector’s activity, but defined clear markers for the mid-term and long-term development of the sector as railway transport modernisation, and its move towards innovative development, when scientific and technical elaborations are an obligatory part of technology development.    

– What are the most urgent problems, on which specialists should concentrate in the framework of the railway reform?

– The most important thing is to harmonise the legislative base and the system of state regulation of tariffs on railway transportation with the new configuration of the transportation market. Unfortunately, the development of the new regulatory model fell behind the asset restructuring processes. This caused a number of negative consequences in such sectors as efficient management of the wagon park, which belongs to many owners, financing of railway infrastructure maintenance and development, transfer to a lossless operation in the separated suburban sector, etc.   

– In accordance with the Target Model of Railway Transport Services Market, adopted in 2007, and the Target Model of Cargo Transportation Market, approved by the Government in January 2011, the entire railcar park was given to daughter companies. However, efforts are being made to form a pool of universal wagons now. These railcars are supposed to operate under the control of RZD. Why?

– I would like to remind that since the start of the millennium, when the railway transportation volume started to grow after the decline of the 1990s, there has appeared the need for wagon park enlargement. A lot of industrial and transport enterprises began to purchase wagons and use them for cargo transportation. In the mid-2000s, the proportion of public (owned by RZD) and private parks was approximately 70% to 30%. At the same time, the wagon constituent of the tariff on railway transportation in the public rolling stock was harshly regulated by the state in accordance with the law “On Natural Monopolies”, while private wagon owners could regulate this constituent by themselves. This led to unequal conditions of competition between these parks, and caused a decline in the revenue rate of RZD’s cargo transportation. 
There appeared the necessity to equalise tariff conditions for all wagons, and after heated discussions in 2007, it was decided at a governmental level to bring the entire rolling stock to the market. The technologies of controlling the traffic of a public railcar and a private one are different, that is why we started to lose wagon efficiency. As a result, it was decided, on the one hand, to activate the renewal of the legal and tariff base, which would stimulate efficient use of railcars by all market players; and on the other hand, to create conditions for RZD to rent wagons from its daughter companies and other owners and to use them in accordance with a special order for tariff setting. This order envisages that the Federal Tariff Service is to set special rates, formed with consideration of market factors, and the opportunity for RZD to change them in the +10% – -30% band. Due to this, it will be possible to use such railcars efficiently and without incurring losses.

– In recent years, the wagon park has been actively renewed because a competitive market and a favourable investment climate had been formed in this sector. Mass media often name the amount of private investment attracted into the sector during the reform – RUR 400 billion. Simultaneously, judging by the speeches of senior managers at RZD, the railway infrastructure, i.e. rails and different track facilities, is badly underfinanced. What measures, in your opinion, should be taken to improve the situation?

– Really, here we also see the slippage of regulatory decisions in terms of creation of an efficient infrastructure financing model under conditions where the infrastructure belongs to the state, the company’s legal status is a monopoly, and there are legislative restrictions in terms of market turnover of assets and use of economic instruments to react to the demand.
Meanwhile, the situation with the ageing of basic infrastructure funds cannot be called “favourable.” And we don’t just need to upgrade the existing assets, but also to develop those directions where the carrying capacity is exhausted. Therefore, we think that it is necessary to strengthen such funding sources as direct investments of RZD into the most important national objects, the issue of infrastructure bonds, and different forms of public-private partnership. I’d like to say that the authorities understand the needs of the railway. At the recent meeting, headed by Vladimir Putin, Chairman of the RF Government, in Kemerovo, where the coal sector’s development was discussed, a number of decisions were made. No doubt, they will help solve transport problems more efficiently. Particularly, it is envisaged that if any infrastructure development project is unable to pay back the costs using the existing tariffs on cargo transportation, then tax funds, which will appear as a result of the development of manufacturing and new transportation volumes, will be given to compensate for the expenditures on the project. 

– You have mentioned suburban transportation. What were the major difficulties the company faced when transferring this activity into a separate business?

– Out of all arising problems here, I would highlight two. These are participation of the federal and regional budgets in financing the operation of suburban passenger companies and ticketless travel. It is common knowledge that suburban transportation is one of most socially vulnerable transport modes in the world, and as a business it is unprofitable. Budget subsidies are needed to keep the optimal ratio between the volume of this transportation and cost of travel. Last year, a very important question was solved at a federal level, i.e. to allocate RUR 25 billion to RZD for the suburban companies to pay for the infrastructure supply services. Also, the company found a way to cut the size of payments on other parameters by RUR 9 billion. 
Nevertheless, we have not still succeeded in getting an adequate participation of regional authorities in transportation financing. Last year, regional subsidies to compensate for revenue lost to state regulation of tariffs amounted to about RUR 6 billion, while the required sum was RUR 14.5 billion. However, there are some positive dynamics. Suburban transportation reached break-even point in just five subjects of the Federation in 2010, and there were 25 such subjects in 2011. And their figures make up the larger share of all 73 regions, where suburban passenger transportation services are provided, including: wagon-kilometre operation – 65%; passenger turnover – approximately 70%; revenue – 75%. As a result, 10 suburban companies, which service 37 regions, operated without loss in 2011. 
Nowadays, there are 26 suburban companies, and we will continue to cooperate with regions to make their operations lossless. As for ticketless travel, there are gaps in the legal base as well as some definite peculiarities in the mentality of a significant share of passengers. Since “elektrichka” (a suburban train) used to be owned by the state not so long ago, which meant it was “nobody’s”, a lot of people think travelling without a ticket is not disgraceful. Consequently, such passengers try not to pay for the travel.  

– In your speeches you declared the necessity to increase the social responsibility of businesses under market economy conditions. What is your evaluation of the social responsibility of RZD? 

– Relations between the employer and its employees are based on the Collective Employment Agreement. It is a rather functional system of social partnership, a mutually beneficial one, because it makes for the attraction, training, and motivation of the company’s employees. We use principles of responsibility of managers for the creation of the necessary conditions for work, and those of responsibility of personnel for the results of their labour. As a result, our company has one of the most comprehensive level of social protection for employees in the Collective Employment Agreement in Russia. I would like to emphasise that approximately one third of social benefits and guarantees envisaged in the document are set in national labour legislation, and the rest is what the company adopted in addition to the federal legislation, based on the strong belief that the social side of our economic activity is of primary importance to the company. We are holding rather active youth, housing, retirement, and other social policies. And company employees regard this favourably.             

– Are you satisfied with the level of salaries in the company?

– It is RUR 33,500 for people engaged in transportation. That is more than $1,000. It is 40% more than the average salary in the Russian economy. In line with the Collective Employment Agreement, the salary rates are indexed in accordance with inflation in the state and the growth of labour efficiency in the company. For example, real earnings increased by 5% last year. We think that it would be economically justified to enlarge the ratio between this figure in the company and the average figure in the Russian industry to 1.5.  

– Nowadays, much is said about modernisation and the necessity of innovation. What is your evaluation of these processes in the railway transport sector?

– We have a number of programmes in the sector of carrying out scientific and technical elaborations, united in the so-called White Book of RZD. Russian Railways is one of a few companies in Russia, whose expenditure on scientific and technical research may be compared to that of foreign corporations in terms of percentage of revenue. 
In the near future, we will increase this expenditure, so that by 2015 they will amount to 1% of the revenue. In recent years, we achieved a significant success in the creation of new pulling rolling stock, in cooperation with leaders in the international transport machine building sector. We launched high-speed communication on the Moscow – St Petersburg line more than two years ago, and since then the “Sapsan” train has not just come into life, but has entered the mentality of the citizens of these two Russian cities. Russian engineers took an active part in the development of this product of Siemens. The “Allegro” high-speed train services the St Petersburg – Helsinki line. It was built as a result of our cooperation with Alstom. 
Last year, for the first time a cargo train weighing 9,000 tons ran from the North Siberian Railway (an affiliate of RZD) to the Ust-Luga port via the Urals. It was pulled by a modern electric locomotive “Granit”. Ural Locomotives started to produce such locomotives in Verkhnyaya Pyshma town (the Sverdlovsk region) last year. It is a joint venture of Siemens and Sinara group of companies. The first electric train of the “Lastochka” (“Swallow”) series was completed in Germany recently. RZD ordered these trains to use them during the Olympic Games in Sochi in 2014. At the end of January in Madrid, the company and Patentes Talgo signed a framework agreement to adapt the passenger rolling stock made by Talgo to the 1520 mm broad gauge rail system. I must mention such innovative products as the gas turbine locomotive manufactured on the initiative of RZD at the Voronezh Diesel Locomotive Repair Plant in 2007. It was demonstrated at the Innotrans-2008 exhibition in Berlin, and on September 7, 2011, the gas turbine locomotive set a world record by pulling a train that weighed 16,000 tons. A lot of innovative solutions were developed in the sectors of transportation process informatisation, service quality management, monitoring of basic assets and production processes. We presented innovative elaborations at the Expo-1520 in Scherbinka last year, at the test ring of the Science and Research Rail Transport Institute (VNIIZhT). Also, last August, the company launched a special mobile exhibition and lecture unit, which demonstrates RZD’s best innovative achievements as well as the elaborations of other Russian companies.

– Such a train is an interesting innovative product itself. Could you talk more about it?

– The mobile exhibition and lecture unit comprises three office-cum-residential carriages and eight exhibition cars, each of which is dedicated to an innovative project or company presenting its projects. In particular, there are scale models of Russian Railways’ modern rolling stock – gas turbine locomotive, a cargo railcar for coal transportation, a passenger electric locomotive and diesel locomotive, and a double-deck passenger wagon. Also, in the wagons visitors can learn about the history of Russian railway transport development, and the modern infrastructure of the network. The train visited the territory of 15 railways in Russia, having run more than 23,000 kilometres. Over 100,000 people visited the unit. Of that, approximately 50% were young people and children. Local authorities also had a look at the exhibit in the unit, which is very important for us. In early February, the train started another trip. 
This time its route lies via the territory of five railways in Russia. In three months, the train will make over 40 stops in the largest settlements. On the whole, I would like to say that RZD is successfully fulfilling the task of innovative development. Also, as I mentioned at the meeting of the company’s Board in December 2011, there is a harsh necessity to increase radically the efficiency of all resources, labour efficiency, renewal of basic assets and changes in their structure. 

– You spoke about joint projects with foreign companies in the machine building sector. What other forms of international cooperation are a high priority for RZD today?   

– First of all, I would like to mention that February 14, 2012, was the 20th anniversary of the Railway Transport Council of the CIS and the Baltic States, which is chaired by the President of RZD. This form of cooperation between the administrations of the national railway systems on the 1520 area has proved to be an efficient mechanism to coordinate international transportation. The launch of the Common Economic Space on the territory of Russia, Kazakhstan, and Belarus, sets railwaymen new tasks and enlarges opportunities to cooperate and to compete for customers. Nowadays, we are actively participating in development of certain legal, tariff-related, technological and other conditions in the framework of the Common Economic Space. 
Moreover, we think that we will need to form a new, perhaps commercial, structure for the cooperation between the three railways. Cooperation in the framework of the International Union of Railways (the UIC) and other organisations is developing fruitfully. One of the recent joint projects is the launch of regular trains between Moscow and Nice, and Moscow and Berlin. We have started a number of infrastructure projects, particularly, construction of a terminal in the Rajin port and strengthening approaches to it in North Korea, modernisation of tracks and hubs in Mongolia, construction of a broad gauge line to Vienna. I hope we will be able to continue construction of the Sirt – Benghazi railway in Libya. Also, we intend to continue development of joint projects in Iran, Serbia, Qatar, the United Arab Emirates, Kuwait, Indonesia, and other states. 

– What are RZD’s basic tasks in 2012? What are the results of January?

– We started the year in conditions of global economic ambiguity and a high level of risk. Nevertheless, when planning, we chose a rather optimistic mid-term 2012-2014 forecast made by the Ministry of Economic Development as the basis. The planned cargo loading is +2.8% year-on-year. Last January, cargo transportation volumes grew by 4.8%. One of significant trends is the increase in export transportation. Here are some results. Transportation to the Far Eastern ports in January 2012 increased by 31% compared with the same period the previous year; that to southern ports of Russia grew by 50% and to north-west ports – by 13%. 
On average, transportation to all Russian ports increased by 30%. At the same time, the cargo flow via border crossings destined for Ukrainian ports plummetted 50%, while that destined for the Baltic ports grew by 70%. Thus, one of the most important targets is to provide export freight flows with all necessary transport resources. Another priority is to continue to carry out the tasks of the fourth stage of structural railway reform in accordance with the decisions of the Government. It is necessary to balance structural changes and the formation of an adequate regulating model, especially in terms of the legal base and tariff regulation system. One more priority is to make interaction with authorities more flexible, to form long-term relations with state regulators to develop a clear and predictable prospect for railway infrastructure development. Simultaneously, this year we are to complete the creation of a new organizational structure of RZD, to develop and adjust all regulations for interaction between the company’s units – both vertical and horizontal. 
Other priorities include improving work quality, traffic safety; the competitiveness and attractiveness of long-distance passenger transportation, and transport infrastructure for the Olympic Games in Sochi in 2014 and for the Universiade in Kazan in 2013, etc. This year, we will celebrate the 175th anniversary of Russian Railways. It is a very important date for us, taking into account the geopolitical importance of railways for Russia, this event will be celebrated at the state level. In their turn, railwaymen will do their best to fill their forebears’ shoes.
Interviewed by Andrey Guryev
    [~DETAIL_TEXT] => – Mr Yakunin, could you please outline the company’s main results of 2011? Were all planned corporate budget figures reached? Are you satisfied with the company’s work in the different fields of its activity?

– The company completed all key budget tasks. 1,241.6 million tons of cargo were transported last year, a 3% increase in comparison with 2010. Meanwhile, the planned growth was 2.8%. As for freight turnover (i.e. tons multiplied by kilometres), the figure of 2010 was exceeded by 7%, and the railway’s share in the Russian transport system’s freight turnover structure grew from 42.5% to 43.2%. In 2011, Russian Railways transported 992.4 million passengers, 4.8% more compared with the previous year. Of those, 114.8 million people used long-distance transportation services (i.e. the same number as in 2010), and 877.6 million passengers used suburban transportation services (a 5.5% increase).
The revenue from RZD’s basic activity amounted to RUR 1.283 trillion (over $40 billion), 1.3% more than planned, and 7.3% more than in 2010. The net profit was RUR 17.7 billion ($570 million). Not to trouble your readers with numbers, I would like to mention just the increase in labour efficiency that amounted to 7.5%, while the cost price grew by 7%. On the whole, we must admit that all basic planned tasks, set by the Government and RZD’s Board of Directors, were completed. In addition, the increase in the volume of Russian Railways’ work coincided with the national macro-economic trends. 

 – The II Railway Congress took place in Moscow at the end of the year. What was the goal of this event? Are you satisfied with its results?

– The first such congress was held in 2007. It was devoted to discussion of the Strategy of Railway Transport Development to 2030. A lot of changes have taken place in the external environment as well as in the railway sector since then. The global recession badly impacted the investment processes, and there appeared the necessity to put amendments not only to the company’s short-term programmes, but to long-term strategic ones as well. As for internal factors, in the recent years we made significant progress in terms of carrying out railway reform, particularly, in restructuring Russian Railways and the entire transportation market. So, there arose the necessity to discuss a number of urgent issues, and understand on which questions market participants and representatives of state regulators had a similar opinion, and on which problems they should hear each others’ arguments and reach a compromise. On November 18-19, 2011, the II Railway Congress was held in the Manezh Central Exhibition Hall. Over 3,000 people took part in its work, including representatives of legislative and executive powers, RZD, transport and industrial companies, scientific institutions, and, of course, our foreign partners. 
Dmitry Medvedev, President of the Russian Federation, and Vladimir Putin, Chairman of the RF Government, sent welcome letters to participants of the Congress. The most urgent and most important issues and tasks of the sector were discussed during the two days. I should say that not all speakers were of one mind. However, all railwaymen – either speaking from the tribune of the forum, or via sent messages – supported the policy of the Government, and the political powers targeted at the development and upgrading of our community. This is direct evidence that we have never been isolated from the needs of the entire society. At the Congress, we didn’t just summarise the results of the railway sector’s activity, but defined clear markers for the mid-term and long-term development of the sector as railway transport modernisation, and its move towards innovative development, when scientific and technical elaborations are an obligatory part of technology development.    

– What are the most urgent problems, on which specialists should concentrate in the framework of the railway reform?

– The most important thing is to harmonise the legislative base and the system of state regulation of tariffs on railway transportation with the new configuration of the transportation market. Unfortunately, the development of the new regulatory model fell behind the asset restructuring processes. This caused a number of negative consequences in such sectors as efficient management of the wagon park, which belongs to many owners, financing of railway infrastructure maintenance and development, transfer to a lossless operation in the separated suburban sector, etc.   

– In accordance with the Target Model of Railway Transport Services Market, adopted in 2007, and the Target Model of Cargo Transportation Market, approved by the Government in January 2011, the entire railcar park was given to daughter companies. However, efforts are being made to form a pool of universal wagons now. These railcars are supposed to operate under the control of RZD. Why?

– I would like to remind that since the start of the millennium, when the railway transportation volume started to grow after the decline of the 1990s, there has appeared the need for wagon park enlargement. A lot of industrial and transport enterprises began to purchase wagons and use them for cargo transportation. In the mid-2000s, the proportion of public (owned by RZD) and private parks was approximately 70% to 30%. At the same time, the wagon constituent of the tariff on railway transportation in the public rolling stock was harshly regulated by the state in accordance with the law “On Natural Monopolies”, while private wagon owners could regulate this constituent by themselves. This led to unequal conditions of competition between these parks, and caused a decline in the revenue rate of RZD’s cargo transportation. 
There appeared the necessity to equalise tariff conditions for all wagons, and after heated discussions in 2007, it was decided at a governmental level to bring the entire rolling stock to the market. The technologies of controlling the traffic of a public railcar and a private one are different, that is why we started to lose wagon efficiency. As a result, it was decided, on the one hand, to activate the renewal of the legal and tariff base, which would stimulate efficient use of railcars by all market players; and on the other hand, to create conditions for RZD to rent wagons from its daughter companies and other owners and to use them in accordance with a special order for tariff setting. This order envisages that the Federal Tariff Service is to set special rates, formed with consideration of market factors, and the opportunity for RZD to change them in the +10% – -30% band. Due to this, it will be possible to use such railcars efficiently and without incurring losses.

– In recent years, the wagon park has been actively renewed because a competitive market and a favourable investment climate had been formed in this sector. Mass media often name the amount of private investment attracted into the sector during the reform – RUR 400 billion. Simultaneously, judging by the speeches of senior managers at RZD, the railway infrastructure, i.e. rails and different track facilities, is badly underfinanced. What measures, in your opinion, should be taken to improve the situation?

– Really, here we also see the slippage of regulatory decisions in terms of creation of an efficient infrastructure financing model under conditions where the infrastructure belongs to the state, the company’s legal status is a monopoly, and there are legislative restrictions in terms of market turnover of assets and use of economic instruments to react to the demand.
Meanwhile, the situation with the ageing of basic infrastructure funds cannot be called “favourable.” And we don’t just need to upgrade the existing assets, but also to develop those directions where the carrying capacity is exhausted. Therefore, we think that it is necessary to strengthen such funding sources as direct investments of RZD into the most important national objects, the issue of infrastructure bonds, and different forms of public-private partnership. I’d like to say that the authorities understand the needs of the railway. At the recent meeting, headed by Vladimir Putin, Chairman of the RF Government, in Kemerovo, where the coal sector’s development was discussed, a number of decisions were made. No doubt, they will help solve transport problems more efficiently. Particularly, it is envisaged that if any infrastructure development project is unable to pay back the costs using the existing tariffs on cargo transportation, then tax funds, which will appear as a result of the development of manufacturing and new transportation volumes, will be given to compensate for the expenditures on the project. 

– You have mentioned suburban transportation. What were the major difficulties the company faced when transferring this activity into a separate business?

– Out of all arising problems here, I would highlight two. These are participation of the federal and regional budgets in financing the operation of suburban passenger companies and ticketless travel. It is common knowledge that suburban transportation is one of most socially vulnerable transport modes in the world, and as a business it is unprofitable. Budget subsidies are needed to keep the optimal ratio between the volume of this transportation and cost of travel. Last year, a very important question was solved at a federal level, i.e. to allocate RUR 25 billion to RZD for the suburban companies to pay for the infrastructure supply services. Also, the company found a way to cut the size of payments on other parameters by RUR 9 billion. 
Nevertheless, we have not still succeeded in getting an adequate participation of regional authorities in transportation financing. Last year, regional subsidies to compensate for revenue lost to state regulation of tariffs amounted to about RUR 6 billion, while the required sum was RUR 14.5 billion. However, there are some positive dynamics. Suburban transportation reached break-even point in just five subjects of the Federation in 2010, and there were 25 such subjects in 2011. And their figures make up the larger share of all 73 regions, where suburban passenger transportation services are provided, including: wagon-kilometre operation – 65%; passenger turnover – approximately 70%; revenue – 75%. As a result, 10 suburban companies, which service 37 regions, operated without loss in 2011. 
Nowadays, there are 26 suburban companies, and we will continue to cooperate with regions to make their operations lossless. As for ticketless travel, there are gaps in the legal base as well as some definite peculiarities in the mentality of a significant share of passengers. Since “elektrichka” (a suburban train) used to be owned by the state not so long ago, which meant it was “nobody’s”, a lot of people think travelling without a ticket is not disgraceful. Consequently, such passengers try not to pay for the travel.  

– In your speeches you declared the necessity to increase the social responsibility of businesses under market economy conditions. What is your evaluation of the social responsibility of RZD? 

– Relations between the employer and its employees are based on the Collective Employment Agreement. It is a rather functional system of social partnership, a mutually beneficial one, because it makes for the attraction, training, and motivation of the company’s employees. We use principles of responsibility of managers for the creation of the necessary conditions for work, and those of responsibility of personnel for the results of their labour. As a result, our company has one of the most comprehensive level of social protection for employees in the Collective Employment Agreement in Russia. I would like to emphasise that approximately one third of social benefits and guarantees envisaged in the document are set in national labour legislation, and the rest is what the company adopted in addition to the federal legislation, based on the strong belief that the social side of our economic activity is of primary importance to the company. We are holding rather active youth, housing, retirement, and other social policies. And company employees regard this favourably.             

– Are you satisfied with the level of salaries in the company?

– It is RUR 33,500 for people engaged in transportation. That is more than $1,000. It is 40% more than the average salary in the Russian economy. In line with the Collective Employment Agreement, the salary rates are indexed in accordance with inflation in the state and the growth of labour efficiency in the company. For example, real earnings increased by 5% last year. We think that it would be economically justified to enlarge the ratio between this figure in the company and the average figure in the Russian industry to 1.5.  

– Nowadays, much is said about modernisation and the necessity of innovation. What is your evaluation of these processes in the railway transport sector?

– We have a number of programmes in the sector of carrying out scientific and technical elaborations, united in the so-called White Book of RZD. Russian Railways is one of a few companies in Russia, whose expenditure on scientific and technical research may be compared to that of foreign corporations in terms of percentage of revenue. 
In the near future, we will increase this expenditure, so that by 2015 they will amount to 1% of the revenue. In recent years, we achieved a significant success in the creation of new pulling rolling stock, in cooperation with leaders in the international transport machine building sector. We launched high-speed communication on the Moscow – St Petersburg line more than two years ago, and since then the “Sapsan” train has not just come into life, but has entered the mentality of the citizens of these two Russian cities. Russian engineers took an active part in the development of this product of Siemens. The “Allegro” high-speed train services the St Petersburg – Helsinki line. It was built as a result of our cooperation with Alstom. 
Last year, for the first time a cargo train weighing 9,000 tons ran from the North Siberian Railway (an affiliate of RZD) to the Ust-Luga port via the Urals. It was pulled by a modern electric locomotive “Granit”. Ural Locomotives started to produce such locomotives in Verkhnyaya Pyshma town (the Sverdlovsk region) last year. It is a joint venture of Siemens and Sinara group of companies. The first electric train of the “Lastochka” (“Swallow”) series was completed in Germany recently. RZD ordered these trains to use them during the Olympic Games in Sochi in 2014. At the end of January in Madrid, the company and Patentes Talgo signed a framework agreement to adapt the passenger rolling stock made by Talgo to the 1520 mm broad gauge rail system. I must mention such innovative products as the gas turbine locomotive manufactured on the initiative of RZD at the Voronezh Diesel Locomotive Repair Plant in 2007. It was demonstrated at the Innotrans-2008 exhibition in Berlin, and on September 7, 2011, the gas turbine locomotive set a world record by pulling a train that weighed 16,000 tons. A lot of innovative solutions were developed in the sectors of transportation process informatisation, service quality management, monitoring of basic assets and production processes. We presented innovative elaborations at the Expo-1520 in Scherbinka last year, at the test ring of the Science and Research Rail Transport Institute (VNIIZhT). Also, last August, the company launched a special mobile exhibition and lecture unit, which demonstrates RZD’s best innovative achievements as well as the elaborations of other Russian companies.

– Such a train is an interesting innovative product itself. Could you talk more about it?

– The mobile exhibition and lecture unit comprises three office-cum-residential carriages and eight exhibition cars, each of which is dedicated to an innovative project or company presenting its projects. In particular, there are scale models of Russian Railways’ modern rolling stock – gas turbine locomotive, a cargo railcar for coal transportation, a passenger electric locomotive and diesel locomotive, and a double-deck passenger wagon. Also, in the wagons visitors can learn about the history of Russian railway transport development, and the modern infrastructure of the network. The train visited the territory of 15 railways in Russia, having run more than 23,000 kilometres. Over 100,000 people visited the unit. Of that, approximately 50% were young people and children. Local authorities also had a look at the exhibit in the unit, which is very important for us. In early February, the train started another trip. 
This time its route lies via the territory of five railways in Russia. In three months, the train will make over 40 stops in the largest settlements. On the whole, I would like to say that RZD is successfully fulfilling the task of innovative development. Also, as I mentioned at the meeting of the company’s Board in December 2011, there is a harsh necessity to increase radically the efficiency of all resources, labour efficiency, renewal of basic assets and changes in their structure. 

– You spoke about joint projects with foreign companies in the machine building sector. What other forms of international cooperation are a high priority for RZD today?   

– First of all, I would like to mention that February 14, 2012, was the 20th anniversary of the Railway Transport Council of the CIS and the Baltic States, which is chaired by the President of RZD. This form of cooperation between the administrations of the national railway systems on the 1520 area has proved to be an efficient mechanism to coordinate international transportation. The launch of the Common Economic Space on the territory of Russia, Kazakhstan, and Belarus, sets railwaymen new tasks and enlarges opportunities to cooperate and to compete for customers. Nowadays, we are actively participating in development of certain legal, tariff-related, technological and other conditions in the framework of the Common Economic Space. 
Moreover, we think that we will need to form a new, perhaps commercial, structure for the cooperation between the three railways. Cooperation in the framework of the International Union of Railways (the UIC) and other organisations is developing fruitfully. One of the recent joint projects is the launch of regular trains between Moscow and Nice, and Moscow and Berlin. We have started a number of infrastructure projects, particularly, construction of a terminal in the Rajin port and strengthening approaches to it in North Korea, modernisation of tracks and hubs in Mongolia, construction of a broad gauge line to Vienna. I hope we will be able to continue construction of the Sirt – Benghazi railway in Libya. Also, we intend to continue development of joint projects in Iran, Serbia, Qatar, the United Arab Emirates, Kuwait, Indonesia, and other states. 

– What are RZD’s basic tasks in 2012? What are the results of January?

– We started the year in conditions of global economic ambiguity and a high level of risk. Nevertheless, when planning, we chose a rather optimistic mid-term 2012-2014 forecast made by the Ministry of Economic Development as the basis. The planned cargo loading is +2.8% year-on-year. Last January, cargo transportation volumes grew by 4.8%. One of significant trends is the increase in export transportation. Here are some results. Transportation to the Far Eastern ports in January 2012 increased by 31% compared with the same period the previous year; that to southern ports of Russia grew by 50% and to north-west ports – by 13%. 
On average, transportation to all Russian ports increased by 30%. At the same time, the cargo flow via border crossings destined for Ukrainian ports plummetted 50%, while that destined for the Baltic ports grew by 70%. Thus, one of the most important targets is to provide export freight flows with all necessary transport resources. Another priority is to continue to carry out the tasks of the fourth stage of structural railway reform in accordance with the decisions of the Government. It is necessary to balance structural changes and the formation of an adequate regulating model, especially in terms of the legal base and tariff regulation system. One more priority is to make interaction with authorities more flexible, to form long-term relations with state regulators to develop a clear and predictable prospect for railway infrastructure development. Simultaneously, this year we are to complete the creation of a new organizational structure of RZD, to develop and adjust all regulations for interaction between the company’s units – both vertical and horizontal. 
Other priorities include improving work quality, traffic safety; the competitiveness and attractiveness of long-distance passenger transportation, and transport infrastructure for the Olympic Games in Sochi in 2014 and for the Universiade in Kazan in 2013, etc. This year, we will celebrate the 175th anniversary of Russian Railways. It is a very important date for us, taking into account the geopolitical importance of railways for Russia, this event will be celebrated at the state level. In their turn, railwaymen will do their best to fill their forebears’ shoes.
Interviewed by Andrey Guryev
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    [DETAIL_TEXT] => – Mr Yakunin, could you please outline the company’s main results of 2011? Were all planned corporate budget figures reached? Are you satisfied with the company’s work in the different fields of its activity?

– The company completed all key budget tasks. 1,241.6 million tons of cargo were transported last year, a 3% increase in comparison with 2010. Meanwhile, the planned growth was 2.8%. As for freight turnover (i.e. tons multiplied by kilometres), the figure of 2010 was exceeded by 7%, and the railway’s share in the Russian transport system’s freight turnover structure grew from 42.5% to 43.2%. In 2011, Russian Railways transported 992.4 million passengers, 4.8% more compared with the previous year. Of those, 114.8 million people used long-distance transportation services (i.e. the same number as in 2010), and 877.6 million passengers used suburban transportation services (a 5.5% increase).
The revenue from RZD’s basic activity amounted to RUR 1.283 trillion (over $40 billion), 1.3% more than planned, and 7.3% more than in 2010. The net profit was RUR 17.7 billion ($570 million). Not to trouble your readers with numbers, I would like to mention just the increase in labour efficiency that amounted to 7.5%, while the cost price grew by 7%. On the whole, we must admit that all basic planned tasks, set by the Government and RZD’s Board of Directors, were completed. In addition, the increase in the volume of Russian Railways’ work coincided with the national macro-economic trends. 

 – The II Railway Congress took place in Moscow at the end of the year. What was the goal of this event? Are you satisfied with its results?

– The first such congress was held in 2007. It was devoted to discussion of the Strategy of Railway Transport Development to 2030. A lot of changes have taken place in the external environment as well as in the railway sector since then. The global recession badly impacted the investment processes, and there appeared the necessity to put amendments not only to the company’s short-term programmes, but to long-term strategic ones as well. As for internal factors, in the recent years we made significant progress in terms of carrying out railway reform, particularly, in restructuring Russian Railways and the entire transportation market. So, there arose the necessity to discuss a number of urgent issues, and understand on which questions market participants and representatives of state regulators had a similar opinion, and on which problems they should hear each others’ arguments and reach a compromise. On November 18-19, 2011, the II Railway Congress was held in the Manezh Central Exhibition Hall. Over 3,000 people took part in its work, including representatives of legislative and executive powers, RZD, transport and industrial companies, scientific institutions, and, of course, our foreign partners. 
Dmitry Medvedev, President of the Russian Federation, and Vladimir Putin, Chairman of the RF Government, sent welcome letters to participants of the Congress. The most urgent and most important issues and tasks of the sector were discussed during the two days. I should say that not all speakers were of one mind. However, all railwaymen – either speaking from the tribune of the forum, or via sent messages – supported the policy of the Government, and the political powers targeted at the development and upgrading of our community. This is direct evidence that we have never been isolated from the needs of the entire society. At the Congress, we didn’t just summarise the results of the railway sector’s activity, but defined clear markers for the mid-term and long-term development of the sector as railway transport modernisation, and its move towards innovative development, when scientific and technical elaborations are an obligatory part of technology development.    

– What are the most urgent problems, on which specialists should concentrate in the framework of the railway reform?

– The most important thing is to harmonise the legislative base and the system of state regulation of tariffs on railway transportation with the new configuration of the transportation market. Unfortunately, the development of the new regulatory model fell behind the asset restructuring processes. This caused a number of negative consequences in such sectors as efficient management of the wagon park, which belongs to many owners, financing of railway infrastructure maintenance and development, transfer to a lossless operation in the separated suburban sector, etc.   

– In accordance with the Target Model of Railway Transport Services Market, adopted in 2007, and the Target Model of Cargo Transportation Market, approved by the Government in January 2011, the entire railcar park was given to daughter companies. However, efforts are being made to form a pool of universal wagons now. These railcars are supposed to operate under the control of RZD. Why?

– I would like to remind that since the start of the millennium, when the railway transportation volume started to grow after the decline of the 1990s, there has appeared the need for wagon park enlargement. A lot of industrial and transport enterprises began to purchase wagons and use them for cargo transportation. In the mid-2000s, the proportion of public (owned by RZD) and private parks was approximately 70% to 30%. At the same time, the wagon constituent of the tariff on railway transportation in the public rolling stock was harshly regulated by the state in accordance with the law “On Natural Monopolies”, while private wagon owners could regulate this constituent by themselves. This led to unequal conditions of competition between these parks, and caused a decline in the revenue rate of RZD’s cargo transportation. 
There appeared the necessity to equalise tariff conditions for all wagons, and after heated discussions in 2007, it was decided at a governmental level to bring the entire rolling stock to the market. The technologies of controlling the traffic of a public railcar and a private one are different, that is why we started to lose wagon efficiency. As a result, it was decided, on the one hand, to activate the renewal of the legal and tariff base, which would stimulate efficient use of railcars by all market players; and on the other hand, to create conditions for RZD to rent wagons from its daughter companies and other owners and to use them in accordance with a special order for tariff setting. This order envisages that the Federal Tariff Service is to set special rates, formed with consideration of market factors, and the opportunity for RZD to change them in the +10% – -30% band. Due to this, it will be possible to use such railcars efficiently and without incurring losses.

– In recent years, the wagon park has been actively renewed because a competitive market and a favourable investment climate had been formed in this sector. Mass media often name the amount of private investment attracted into the sector during the reform – RUR 400 billion. Simultaneously, judging by the speeches of senior managers at RZD, the railway infrastructure, i.e. rails and different track facilities, is badly underfinanced. What measures, in your opinion, should be taken to improve the situation?

– Really, here we also see the slippage of regulatory decisions in terms of creation of an efficient infrastructure financing model under conditions where the infrastructure belongs to the state, the company’s legal status is a monopoly, and there are legislative restrictions in terms of market turnover of assets and use of economic instruments to react to the demand.
Meanwhile, the situation with the ageing of basic infrastructure funds cannot be called “favourable.” And we don’t just need to upgrade the existing assets, but also to develop those directions where the carrying capacity is exhausted. Therefore, we think that it is necessary to strengthen such funding sources as direct investments of RZD into the most important national objects, the issue of infrastructure bonds, and different forms of public-private partnership. I’d like to say that the authorities understand the needs of the railway. At the recent meeting, headed by Vladimir Putin, Chairman of the RF Government, in Kemerovo, where the coal sector’s development was discussed, a number of decisions were made. No doubt, they will help solve transport problems more efficiently. Particularly, it is envisaged that if any infrastructure development project is unable to pay back the costs using the existing tariffs on cargo transportation, then tax funds, which will appear as a result of the development of manufacturing and new transportation volumes, will be given to compensate for the expenditures on the project. 

– You have mentioned suburban transportation. What were the major difficulties the company faced when transferring this activity into a separate business?

– Out of all arising problems here, I would highlight two. These are participation of the federal and regional budgets in financing the operation of suburban passenger companies and ticketless travel. It is common knowledge that suburban transportation is one of most socially vulnerable transport modes in the world, and as a business it is unprofitable. Budget subsidies are needed to keep the optimal ratio between the volume of this transportation and cost of travel. Last year, a very important question was solved at a federal level, i.e. to allocate RUR 25 billion to RZD for the suburban companies to pay for the infrastructure supply services. Also, the company found a way to cut the size of payments on other parameters by RUR 9 billion. 
Nevertheless, we have not still succeeded in getting an adequate participation of regional authorities in transportation financing. Last year, regional subsidies to compensate for revenue lost to state regulation of tariffs amounted to about RUR 6 billion, while the required sum was RUR 14.5 billion. However, there are some positive dynamics. Suburban transportation reached break-even point in just five subjects of the Federation in 2010, and there were 25 such subjects in 2011. And their figures make up the larger share of all 73 regions, where suburban passenger transportation services are provided, including: wagon-kilometre operation – 65%; passenger turnover – approximately 70%; revenue – 75%. As a result, 10 suburban companies, which service 37 regions, operated without loss in 2011. 
Nowadays, there are 26 suburban companies, and we will continue to cooperate with regions to make their operations lossless. As for ticketless travel, there are gaps in the legal base as well as some definite peculiarities in the mentality of a significant share of passengers. Since “elektrichka” (a suburban train) used to be owned by the state not so long ago, which meant it was “nobody’s”, a lot of people think travelling without a ticket is not disgraceful. Consequently, such passengers try not to pay for the travel.  

– In your speeches you declared the necessity to increase the social responsibility of businesses under market economy conditions. What is your evaluation of the social responsibility of RZD? 

– Relations between the employer and its employees are based on the Collective Employment Agreement. It is a rather functional system of social partnership, a mutually beneficial one, because it makes for the attraction, training, and motivation of the company’s employees. We use principles of responsibility of managers for the creation of the necessary conditions for work, and those of responsibility of personnel for the results of their labour. As a result, our company has one of the most comprehensive level of social protection for employees in the Collective Employment Agreement in Russia. I would like to emphasise that approximately one third of social benefits and guarantees envisaged in the document are set in national labour legislation, and the rest is what the company adopted in addition to the federal legislation, based on the strong belief that the social side of our economic activity is of primary importance to the company. We are holding rather active youth, housing, retirement, and other social policies. And company employees regard this favourably.             

– Are you satisfied with the level of salaries in the company?

– It is RUR 33,500 for people engaged in transportation. That is more than $1,000. It is 40% more than the average salary in the Russian economy. In line with the Collective Employment Agreement, the salary rates are indexed in accordance with inflation in the state and the growth of labour efficiency in the company. For example, real earnings increased by 5% last year. We think that it would be economically justified to enlarge the ratio between this figure in the company and the average figure in the Russian industry to 1.5.  

– Nowadays, much is said about modernisation and the necessity of innovation. What is your evaluation of these processes in the railway transport sector?

– We have a number of programmes in the sector of carrying out scientific and technical elaborations, united in the so-called White Book of RZD. Russian Railways is one of a few companies in Russia, whose expenditure on scientific and technical research may be compared to that of foreign corporations in terms of percentage of revenue. 
In the near future, we will increase this expenditure, so that by 2015 they will amount to 1% of the revenue. In recent years, we achieved a significant success in the creation of new pulling rolling stock, in cooperation with leaders in the international transport machine building sector. We launched high-speed communication on the Moscow – St Petersburg line more than two years ago, and since then the “Sapsan” train has not just come into life, but has entered the mentality of the citizens of these two Russian cities. Russian engineers took an active part in the development of this product of Siemens. The “Allegro” high-speed train services the St Petersburg – Helsinki line. It was built as a result of our cooperation with Alstom. 
Last year, for the first time a cargo train weighing 9,000 tons ran from the North Siberian Railway (an affiliate of RZD) to the Ust-Luga port via the Urals. It was pulled by a modern electric locomotive “Granit”. Ural Locomotives started to produce such locomotives in Verkhnyaya Pyshma town (the Sverdlovsk region) last year. It is a joint venture of Siemens and Sinara group of companies. The first electric train of the “Lastochka” (“Swallow”) series was completed in Germany recently. RZD ordered these trains to use them during the Olympic Games in Sochi in 2014. At the end of January in Madrid, the company and Patentes Talgo signed a framework agreement to adapt the passenger rolling stock made by Talgo to the 1520 mm broad gauge rail system. I must mention such innovative products as the gas turbine locomotive manufactured on the initiative of RZD at the Voronezh Diesel Locomotive Repair Plant in 2007. It was demonstrated at the Innotrans-2008 exhibition in Berlin, and on September 7, 2011, the gas turbine locomotive set a world record by pulling a train that weighed 16,000 tons. A lot of innovative solutions were developed in the sectors of transportation process informatisation, service quality management, monitoring of basic assets and production processes. We presented innovative elaborations at the Expo-1520 in Scherbinka last year, at the test ring of the Science and Research Rail Transport Institute (VNIIZhT). Also, last August, the company launched a special mobile exhibition and lecture unit, which demonstrates RZD’s best innovative achievements as well as the elaborations of other Russian companies.

– Such a train is an interesting innovative product itself. Could you talk more about it?

– The mobile exhibition and lecture unit comprises three office-cum-residential carriages and eight exhibition cars, each of which is dedicated to an innovative project or company presenting its projects. In particular, there are scale models of Russian Railways’ modern rolling stock – gas turbine locomotive, a cargo railcar for coal transportation, a passenger electric locomotive and diesel locomotive, and a double-deck passenger wagon. Also, in the wagons visitors can learn about the history of Russian railway transport development, and the modern infrastructure of the network. The train visited the territory of 15 railways in Russia, having run more than 23,000 kilometres. Over 100,000 people visited the unit. Of that, approximately 50% were young people and children. Local authorities also had a look at the exhibit in the unit, which is very important for us. In early February, the train started another trip. 
This time its route lies via the territory of five railways in Russia. In three months, the train will make over 40 stops in the largest settlements. On the whole, I would like to say that RZD is successfully fulfilling the task of innovative development. Also, as I mentioned at the meeting of the company’s Board in December 2011, there is a harsh necessity to increase radically the efficiency of all resources, labour efficiency, renewal of basic assets and changes in their structure. 

– You spoke about joint projects with foreign companies in the machine building sector. What other forms of international cooperation are a high priority for RZD today?   

– First of all, I would like to mention that February 14, 2012, was the 20th anniversary of the Railway Transport Council of the CIS and the Baltic States, which is chaired by the President of RZD. This form of cooperation between the administrations of the national railway systems on the 1520 area has proved to be an efficient mechanism to coordinate international transportation. The launch of the Common Economic Space on the territory of Russia, Kazakhstan, and Belarus, sets railwaymen new tasks and enlarges opportunities to cooperate and to compete for customers. Nowadays, we are actively participating in development of certain legal, tariff-related, technological and other conditions in the framework of the Common Economic Space. 
Moreover, we think that we will need to form a new, perhaps commercial, structure for the cooperation between the three railways. Cooperation in the framework of the International Union of Railways (the UIC) and other organisations is developing fruitfully. One of the recent joint projects is the launch of regular trains between Moscow and Nice, and Moscow and Berlin. We have started a number of infrastructure projects, particularly, construction of a terminal in the Rajin port and strengthening approaches to it in North Korea, modernisation of tracks and hubs in Mongolia, construction of a broad gauge line to Vienna. I hope we will be able to continue construction of the Sirt – Benghazi railway in Libya. Also, we intend to continue development of joint projects in Iran, Serbia, Qatar, the United Arab Emirates, Kuwait, Indonesia, and other states. 

– What are RZD’s basic tasks in 2012? What are the results of January?

– We started the year in conditions of global economic ambiguity and a high level of risk. Nevertheless, when planning, we chose a rather optimistic mid-term 2012-2014 forecast made by the Ministry of Economic Development as the basis. The planned cargo loading is +2.8% year-on-year. Last January, cargo transportation volumes grew by 4.8%. One of significant trends is the increase in export transportation. Here are some results. Transportation to the Far Eastern ports in January 2012 increased by 31% compared with the same period the previous year; that to southern ports of Russia grew by 50% and to north-west ports – by 13%. 
On average, transportation to all Russian ports increased by 30%. At the same time, the cargo flow via border crossings destined for Ukrainian ports plummetted 50%, while that destined for the Baltic ports grew by 70%. Thus, one of the most important targets is to provide export freight flows with all necessary transport resources. Another priority is to continue to carry out the tasks of the fourth stage of structural railway reform in accordance with the decisions of the Government. It is necessary to balance structural changes and the formation of an adequate regulating model, especially in terms of the legal base and tariff regulation system. One more priority is to make interaction with authorities more flexible, to form long-term relations with state regulators to develop a clear and predictable prospect for railway infrastructure development. Simultaneously, this year we are to complete the creation of a new organizational structure of RZD, to develop and adjust all regulations for interaction between the company’s units – both vertical and horizontal. 
Other priorities include improving work quality, traffic safety; the competitiveness and attractiveness of long-distance passenger transportation, and transport infrastructure for the Olympic Games in Sochi in 2014 and for the Universiade in Kazan in 2013, etc. This year, we will celebrate the 175th anniversary of Russian Railways. It is a very important date for us, taking into account the geopolitical importance of railways for Russia, this event will be celebrated at the state level. In their turn, railwaymen will do their best to fill their forebears’ shoes.
Interviewed by Andrey Guryev
    [~DETAIL_TEXT] => – Mr Yakunin, could you please outline the company’s main results of 2011? Were all planned corporate budget figures reached? Are you satisfied with the company’s work in the different fields of its activity?

– The company completed all key budget tasks. 1,241.6 million tons of cargo were transported last year, a 3% increase in comparison with 2010. Meanwhile, the planned growth was 2.8%. As for freight turnover (i.e. tons multiplied by kilometres), the figure of 2010 was exceeded by 7%, and the railway’s share in the Russian transport system’s freight turnover structure grew from 42.5% to 43.2%. In 2011, Russian Railways transported 992.4 million passengers, 4.8% more compared with the previous year. Of those, 114.8 million people used long-distance transportation services (i.e. the same number as in 2010), and 877.6 million passengers used suburban transportation services (a 5.5% increase).
The revenue from RZD’s basic activity amounted to RUR 1.283 trillion (over $40 billion), 1.3% more than planned, and 7.3% more than in 2010. The net profit was RUR 17.7 billion ($570 million). Not to trouble your readers with numbers, I would like to mention just the increase in labour efficiency that amounted to 7.5%, while the cost price grew by 7%. On the whole, we must admit that all basic planned tasks, set by the Government and RZD’s Board of Directors, were completed. In addition, the increase in the volume of Russian Railways’ work coincided with the national macro-economic trends. 

 – The II Railway Congress took place in Moscow at the end of the year. What was the goal of this event? Are you satisfied with its results?

– The first such congress was held in 2007. It was devoted to discussion of the Strategy of Railway Transport Development to 2030. A lot of changes have taken place in the external environment as well as in the railway sector since then. The global recession badly impacted the investment processes, and there appeared the necessity to put amendments not only to the company’s short-term programmes, but to long-term strategic ones as well. As for internal factors, in the recent years we made significant progress in terms of carrying out railway reform, particularly, in restructuring Russian Railways and the entire transportation market. So, there arose the necessity to discuss a number of urgent issues, and understand on which questions market participants and representatives of state regulators had a similar opinion, and on which problems they should hear each others’ arguments and reach a compromise. On November 18-19, 2011, the II Railway Congress was held in the Manezh Central Exhibition Hall. Over 3,000 people took part in its work, including representatives of legislative and executive powers, RZD, transport and industrial companies, scientific institutions, and, of course, our foreign partners. 
Dmitry Medvedev, President of the Russian Federation, and Vladimir Putin, Chairman of the RF Government, sent welcome letters to participants of the Congress. The most urgent and most important issues and tasks of the sector were discussed during the two days. I should say that not all speakers were of one mind. However, all railwaymen – either speaking from the tribune of the forum, or via sent messages – supported the policy of the Government, and the political powers targeted at the development and upgrading of our community. This is direct evidence that we have never been isolated from the needs of the entire society. At the Congress, we didn’t just summarise the results of the railway sector’s activity, but defined clear markers for the mid-term and long-term development of the sector as railway transport modernisation, and its move towards innovative development, when scientific and technical elaborations are an obligatory part of technology development.    

– What are the most urgent problems, on which specialists should concentrate in the framework of the railway reform?

– The most important thing is to harmonise the legislative base and the system of state regulation of tariffs on railway transportation with the new configuration of the transportation market. Unfortunately, the development of the new regulatory model fell behind the asset restructuring processes. This caused a number of negative consequences in such sectors as efficient management of the wagon park, which belongs to many owners, financing of railway infrastructure maintenance and development, transfer to a lossless operation in the separated suburban sector, etc.   

– In accordance with the Target Model of Railway Transport Services Market, adopted in 2007, and the Target Model of Cargo Transportation Market, approved by the Government in January 2011, the entire railcar park was given to daughter companies. However, efforts are being made to form a pool of universal wagons now. These railcars are supposed to operate under the control of RZD. Why?

– I would like to remind that since the start of the millennium, when the railway transportation volume started to grow after the decline of the 1990s, there has appeared the need for wagon park enlargement. A lot of industrial and transport enterprises began to purchase wagons and use them for cargo transportation. In the mid-2000s, the proportion of public (owned by RZD) and private parks was approximately 70% to 30%. At the same time, the wagon constituent of the tariff on railway transportation in the public rolling stock was harshly regulated by the state in accordance with the law “On Natural Monopolies”, while private wagon owners could regulate this constituent by themselves. This led to unequal conditions of competition between these parks, and caused a decline in the revenue rate of RZD’s cargo transportation. 
There appeared the necessity to equalise tariff conditions for all wagons, and after heated discussions in 2007, it was decided at a governmental level to bring the entire rolling stock to the market. The technologies of controlling the traffic of a public railcar and a private one are different, that is why we started to lose wagon efficiency. As a result, it was decided, on the one hand, to activate the renewal of the legal and tariff base, which would stimulate efficient use of railcars by all market players; and on the other hand, to create conditions for RZD to rent wagons from its daughter companies and other owners and to use them in accordance with a special order for tariff setting. This order envisages that the Federal Tariff Service is to set special rates, formed with consideration of market factors, and the opportunity for RZD to change them in the +10% – -30% band. Due to this, it will be possible to use such railcars efficiently and without incurring losses.

– In recent years, the wagon park has been actively renewed because a competitive market and a favourable investment climate had been formed in this sector. Mass media often name the amount of private investment attracted into the sector during the reform – RUR 400 billion. Simultaneously, judging by the speeches of senior managers at RZD, the railway infrastructure, i.e. rails and different track facilities, is badly underfinanced. What measures, in your opinion, should be taken to improve the situation?

– Really, here we also see the slippage of regulatory decisions in terms of creation of an efficient infrastructure financing model under conditions where the infrastructure belongs to the state, the company’s legal status is a monopoly, and there are legislative restrictions in terms of market turnover of assets and use of economic instruments to react to the demand.
Meanwhile, the situation with the ageing of basic infrastructure funds cannot be called “favourable.” And we don’t just need to upgrade the existing assets, but also to develop those directions where the carrying capacity is exhausted. Therefore, we think that it is necessary to strengthen such funding sources as direct investments of RZD into the most important national objects, the issue of infrastructure bonds, and different forms of public-private partnership. I’d like to say that the authorities understand the needs of the railway. At the recent meeting, headed by Vladimir Putin, Chairman of the RF Government, in Kemerovo, where the coal sector’s development was discussed, a number of decisions were made. No doubt, they will help solve transport problems more efficiently. Particularly, it is envisaged that if any infrastructure development project is unable to pay back the costs using the existing tariffs on cargo transportation, then tax funds, which will appear as a result of the development of manufacturing and new transportation volumes, will be given to compensate for the expenditures on the project. 

– You have mentioned suburban transportation. What were the major difficulties the company faced when transferring this activity into a separate business?

– Out of all arising problems here, I would highlight two. These are participation of the federal and regional budgets in financing the operation of suburban passenger companies and ticketless travel. It is common knowledge that suburban transportation is one of most socially vulnerable transport modes in the world, and as a business it is unprofitable. Budget subsidies are needed to keep the optimal ratio between the volume of this transportation and cost of travel. Last year, a very important question was solved at a federal level, i.e. to allocate RUR 25 billion to RZD for the suburban companies to pay for the infrastructure supply services. Also, the company found a way to cut the size of payments on other parameters by RUR 9 billion. 
Nevertheless, we have not still succeeded in getting an adequate participation of regional authorities in transportation financing. Last year, regional subsidies to compensate for revenue lost to state regulation of tariffs amounted to about RUR 6 billion, while the required sum was RUR 14.5 billion. However, there are some positive dynamics. Suburban transportation reached break-even point in just five subjects of the Federation in 2010, and there were 25 such subjects in 2011. And their figures make up the larger share of all 73 regions, where suburban passenger transportation services are provided, including: wagon-kilometre operation – 65%; passenger turnover – approximately 70%; revenue – 75%. As a result, 10 suburban companies, which service 37 regions, operated without loss in 2011. 
Nowadays, there are 26 suburban companies, and we will continue to cooperate with regions to make their operations lossless. As for ticketless travel, there are gaps in the legal base as well as some definite peculiarities in the mentality of a significant share of passengers. Since “elektrichka” (a suburban train) used to be owned by the state not so long ago, which meant it was “nobody’s”, a lot of people think travelling without a ticket is not disgraceful. Consequently, such passengers try not to pay for the travel.  

– In your speeches you declared the necessity to increase the social responsibility of businesses under market economy conditions. What is your evaluation of the social responsibility of RZD? 

– Relations between the employer and its employees are based on the Collective Employment Agreement. It is a rather functional system of social partnership, a mutually beneficial one, because it makes for the attraction, training, and motivation of the company’s employees. We use principles of responsibility of managers for the creation of the necessary conditions for work, and those of responsibility of personnel for the results of their labour. As a result, our company has one of the most comprehensive level of social protection for employees in the Collective Employment Agreement in Russia. I would like to emphasise that approximately one third of social benefits and guarantees envisaged in the document are set in national labour legislation, and the rest is what the company adopted in addition to the federal legislation, based on the strong belief that the social side of our economic activity is of primary importance to the company. We are holding rather active youth, housing, retirement, and other social policies. And company employees regard this favourably.             

– Are you satisfied with the level of salaries in the company?

– It is RUR 33,500 for people engaged in transportation. That is more than $1,000. It is 40% more than the average salary in the Russian economy. In line with the Collective Employment Agreement, the salary rates are indexed in accordance with inflation in the state and the growth of labour efficiency in the company. For example, real earnings increased by 5% last year. We think that it would be economically justified to enlarge the ratio between this figure in the company and the average figure in the Russian industry to 1.5.  

– Nowadays, much is said about modernisation and the necessity of innovation. What is your evaluation of these processes in the railway transport sector?

– We have a number of programmes in the sector of carrying out scientific and technical elaborations, united in the so-called White Book of RZD. Russian Railways is one of a few companies in Russia, whose expenditure on scientific and technical research may be compared to that of foreign corporations in terms of percentage of revenue. 
In the near future, we will increase this expenditure, so that by 2015 they will amount to 1% of the revenue. In recent years, we achieved a significant success in the creation of new pulling rolling stock, in cooperation with leaders in the international transport machine building sector. We launched high-speed communication on the Moscow – St Petersburg line more than two years ago, and since then the “Sapsan” train has not just come into life, but has entered the mentality of the citizens of these two Russian cities. Russian engineers took an active part in the development of this product of Siemens. The “Allegro” high-speed train services the St Petersburg – Helsinki line. It was built as a result of our cooperation with Alstom. 
Last year, for the first time a cargo train weighing 9,000 tons ran from the North Siberian Railway (an affiliate of RZD) to the Ust-Luga port via the Urals. It was pulled by a modern electric locomotive “Granit”. Ural Locomotives started to produce such locomotives in Verkhnyaya Pyshma town (the Sverdlovsk region) last year. It is a joint venture of Siemens and Sinara group of companies. The first electric train of the “Lastochka” (“Swallow”) series was completed in Germany recently. RZD ordered these trains to use them during the Olympic Games in Sochi in 2014. At the end of January in Madrid, the company and Patentes Talgo signed a framework agreement to adapt the passenger rolling stock made by Talgo to the 1520 mm broad gauge rail system. I must mention such innovative products as the gas turbine locomotive manufactured on the initiative of RZD at the Voronezh Diesel Locomotive Repair Plant in 2007. It was demonstrated at the Innotrans-2008 exhibition in Berlin, and on September 7, 2011, the gas turbine locomotive set a world record by pulling a train that weighed 16,000 tons. A lot of innovative solutions were developed in the sectors of transportation process informatisation, service quality management, monitoring of basic assets and production processes. We presented innovative elaborations at the Expo-1520 in Scherbinka last year, at the test ring of the Science and Research Rail Transport Institute (VNIIZhT). Also, last August, the company launched a special mobile exhibition and lecture unit, which demonstrates RZD’s best innovative achievements as well as the elaborations of other Russian companies.

– Such a train is an interesting innovative product itself. Could you talk more about it?

– The mobile exhibition and lecture unit comprises three office-cum-residential carriages and eight exhibition cars, each of which is dedicated to an innovative project or company presenting its projects. In particular, there are scale models of Russian Railways’ modern rolling stock – gas turbine locomotive, a cargo railcar for coal transportation, a passenger electric locomotive and diesel locomotive, and a double-deck passenger wagon. Also, in the wagons visitors can learn about the history of Russian railway transport development, and the modern infrastructure of the network. The train visited the territory of 15 railways in Russia, having run more than 23,000 kilometres. Over 100,000 people visited the unit. Of that, approximately 50% were young people and children. Local authorities also had a look at the exhibit in the unit, which is very important for us. In early February, the train started another trip. 
This time its route lies via the territory of five railways in Russia. In three months, the train will make over 40 stops in the largest settlements. On the whole, I would like to say that RZD is successfully fulfilling the task of innovative development. Also, as I mentioned at the meeting of the company’s Board in December 2011, there is a harsh necessity to increase radically the efficiency of all resources, labour efficiency, renewal of basic assets and changes in their structure. 

– You spoke about joint projects with foreign companies in the machine building sector. What other forms of international cooperation are a high priority for RZD today?   

– First of all, I would like to mention that February 14, 2012, was the 20th anniversary of the Railway Transport Council of the CIS and the Baltic States, which is chaired by the President of RZD. This form of cooperation between the administrations of the national railway systems on the 1520 area has proved to be an efficient mechanism to coordinate international transportation. The launch of the Common Economic Space on the territory of Russia, Kazakhstan, and Belarus, sets railwaymen new tasks and enlarges opportunities to cooperate and to compete for customers. Nowadays, we are actively participating in development of certain legal, tariff-related, technological and other conditions in the framework of the Common Economic Space. 
Moreover, we think that we will need to form a new, perhaps commercial, structure for the cooperation between the three railways. Cooperation in the framework of the International Union of Railways (the UIC) and other organisations is developing fruitfully. One of the recent joint projects is the launch of regular trains between Moscow and Nice, and Moscow and Berlin. We have started a number of infrastructure projects, particularly, construction of a terminal in the Rajin port and strengthening approaches to it in North Korea, modernisation of tracks and hubs in Mongolia, construction of a broad gauge line to Vienna. I hope we will be able to continue construction of the Sirt – Benghazi railway in Libya. Also, we intend to continue development of joint projects in Iran, Serbia, Qatar, the United Arab Emirates, Kuwait, Indonesia, and other states. 

– What are RZD’s basic tasks in 2012? What are the results of January?

– We started the year in conditions of global economic ambiguity and a high level of risk. Nevertheless, when planning, we chose a rather optimistic mid-term 2012-2014 forecast made by the Ministry of Economic Development as the basis. The planned cargo loading is +2.8% year-on-year. Last January, cargo transportation volumes grew by 4.8%. One of significant trends is the increase in export transportation. Here are some results. Transportation to the Far Eastern ports in January 2012 increased by 31% compared with the same period the previous year; that to southern ports of Russia grew by 50% and to north-west ports – by 13%. 
On average, transportation to all Russian ports increased by 30%. At the same time, the cargo flow via border crossings destined for Ukrainian ports plummetted 50%, while that destined for the Baltic ports grew by 70%. Thus, one of the most important targets is to provide export freight flows with all necessary transport resources. Another priority is to continue to carry out the tasks of the fourth stage of structural railway reform in accordance with the decisions of the Government. It is necessary to balance structural changes and the formation of an adequate regulating model, especially in terms of the legal base and tariff regulation system. One more priority is to make interaction with authorities more flexible, to form long-term relations with state regulators to develop a clear and predictable prospect for railway infrastructure development. Simultaneously, this year we are to complete the creation of a new organizational structure of RZD, to develop and adjust all regulations for interaction between the company’s units – both vertical and horizontal. 
Other priorities include improving work quality, traffic safety; the competitiveness and attractiveness of long-distance passenger transportation, and transport infrastructure for the Olympic Games in Sochi in 2014 and for the Universiade in Kazan in 2013, etc. This year, we will celebrate the 175th anniversary of Russian Railways. It is a very important date for us, taking into account the geopolitical importance of railways for Russia, this event will be celebrated at the state level. In their turn, railwaymen will do their best to fill their forebears’ shoes.
Interviewed by Andrey Guryev
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