26 december 2008

Prime Minister Vladimir Putin chaired a meeting on the development of Russian railway transport

Vladimir Putin's opening address: 

Good afternoon, colleagues,

We shall discuss the general railway transport condition and, in greater detail, the priorities of Russian Railways, our country's largest transport company.

We approved the long-term Railway Development Strategy in June.

Still, we must review our industrial plans and amend them with the global economic and financial crisis in mind. We need to reach solutions that allow us continued progress in the current atmosphere and that will continue to guarantee that we meet our strategic targets.

The economy forces the following challenges for railway transport: it should not cut back on investment programmes, it should continue to implement technical innovation, upgrade existing roadbed and lay new roadbed, upgrade locomotives and cars, and pay due attention to the development of high-speed passenger rail transportation.

Freight traffic volume is on the decline. That is the railways' main concern. This is due primarily to shrinking demand for steel and fertiliser and for mined coal. The market is on the decline and taking Russian Railways' revenue with it.

As you know, we have decided on a more gradual increase in raising tariffs of natural monopolies. This was done in the interests of the entire economy. For example, railway freight transport rates should increase 12% at most in 2009, as opposed to the expected 18.7%. January 1 will see only a 5% rise - less than planned previously.

Understandably, this tariff increase adjustment means giving up the revenue we had planned for railway development because the previous plan was based on the extra sums necessary to implement investment programmes.

I repeat, the decision to phase in the tariff increase over the next year was made to promote the entire economy - in particular, to facilitate the business activity of the railways' primary clients.

At the same time, the Government does not intend to force the railways to bear the brunt of the burden. Federal allocations, up to 50 billion roubles, will compensate for Russian Railways' lost revenues. We will also compensate student travel discounts. We have directed the relevant instructions, as you know.

We will consider other measures to maintain railways investment potential. Analysts estimate it would take more than 100 billion roubles to implement the current investment programmes, and another 100 billion roubles to refinance Russian Railways debt.

How should we do that? I think it is possible to place Russian Railways bonds to the tune of 150 billion roubles, and then see what the budget can afford in the beginning of the year, and before February 1 make a decision on possible direct government investment in the company's capital stock. I feel obliged to stress that the matter demands the utmost accuracy and circumspection.

We expect practical initiatives from the Transport Ministry and Russian Railways to streamline the investment programme through construction cost reductions and lower prices.

We realise full well that projects should be prioritised based on costs that can be reduced. I mean construction costs and declining raw materials and other costs. We should use these declines to our advantage.

We need to implement large investment projects - those that guarantee demands for high technology. Now that traffic volume is shrinking, Russian Railways and independent traffic companies have the opportunity to inventory equipment and to discard obsolete and worn-out cars and other equipment. At the same time, they should consider purchasing new, state-of-the-art cars, which are far more efficient. This is a chance to become more competitive. These acquisitions can also give a new lease of life to Russian transport manufacturers.

As in the auto industry and the farm and construction equipment industries, the state should assist with rolling stock equipment leases.

We should not give up on our long-term plans. Today, we attended the presentation of the new Sapsan high-speed passenger train. Soon it will make scheduled Moscow to St Petersburg trips followed by a regular Moscow-Nizhny Novgorod run. We have purchased eight train sets for this purpose.

Germany has engineered these trains with Russian participation and to Russian standards. Still, we should assure that these pilot technology purchases do their part to promote an innovation restructuring of the entire transport system management and organisation. That should be one of Russian Railways' top priorities. As far as I know, the company intends to step up cooperation with its German and other partners. We have just discussed the possibility of implementing other projects, which envision large-scale acquisition of state-of-the-art equipment. This is the right thing for Russia, and the Government will promote it in every possible way.

R&D for new-generation locomotives and other equipment is also necessary.

As we know, current rail infrastructure is inadequate for high-speed service. Please analyse this issue with the Government and relevant ministries to consider what can realistically be done. A thorough analysis of required modifications to accommodate high-speed traffic should be completed well beforehand.

There is one other essential consideration. We all know the potential of Russian Railways as one of Russia's leading employers. The company accounts for major passenger and freight traffic but also possesses a vast network of educational establishments - in particular, personnel training and retraining courses for several dozen trades in high demand.

I deem it possible and necessary to use this infrastructure for personnel retraining in conjunction with regional employment programmes.

I think we should discuss the matter, and take it into consideration soon.