The long-term development program of Russian Railways is finally approved
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From 2019 to 2025, 8.66 trillion rubles will be invested in Russian railway projects from which 4.67 trillion rubles will be invested from the funds of the Russian Railways. This is suggested by a baseline scenario for the Long-Term Development Program of Russian Railways which was approved by Prime Minister Dmitry Medvedev. The document is posted on the government website. Under the optimistic scenario, the investment will amount to 9.77 trillion and 5.79 trillion rubles respectively.
Oleg Belozerov, the general director of Russian Railways, commented that they would get the remaining 4 trillion rubles from investors.
The list of major investment projects includes the development of the Central Transport Hub, BAM and Transsib, access to the ports of the North-West and Azov-Black Sea basins, the construction of high-speed highways, the construction of the Northern Latitudinal Railway and many others.
The development program states that suggested improvements will increase cargo traffic by 18.6% to 1.53 billion tons while passenger traffic will increase by 24% to 1.4 billion people by 2025.
The anticipated net profit of Russian Railways will increase
up to 186.2 billion rubles by more than five times while its revenue will
increase by almost 50% to 3.51 trillion rubles. The cost optimization program
will reduce the cost of rail transportation by 13%, and the total savings will
amount to 1 trillion rubles.
Russian Railways will cut costs by increasing productivity at least 5% per year by using new technologies including resource-saving ones, improving transportation performance, selling non-core assets, restraining supplier prices and reducing staff numbers. The holding is going to reduce the number of employees by 8% from 921,200 people to 848,400 people. The head company will reduce staff by 6.7% to 709,000 people.
The long-term development program of Russian Railways had been developed over several years. It was introduced to the government in the summer of 2018. This document eliminates the necessity to develop other industry-based strategies that includes a new target model for the freight market. The experts remind that the disputes around those documents were painful for the monopoly and specifically, there was a risk that Russian Railways would only remain the owner of the infrastructure without a monopoly on transportation, i.e., ownership of locomotives. This statement is not provided in the approved development program.
The development program mainly focuses on investments, which is quite justified when considering the state of the infrastructure and large number of bottlenecks that limit traffic growth. At the same time, it is important that the company intends to actively develop concession agreements with third-party investors. Russian Railways also highlights the necessity to apply changes in legislation. The development program also states that almost all of its profits should go to the investment program and not to governmental dividends. The company has been seeking this for a long time, but the authorities have not yet adopted a final decision.
Information source: "Медведев утвердил долгосрочную программу развития РЖД”