Oleg Belozerov: Railways themselves must provide for their current expenses

Oleg Belozerov: Railways themselves must provide for their current expenses

Moscow. May 30. In August last year, the Russian government decided to change the leadership of the Russian Railways. The company was headed by Oleg Belozerov, the official of the Ministry of transport, who had no experience on the railroad. For the months of stay in the new position of President of the monopoly changed a significant part of senior management, gave subsidies for infrastructure, has agreed to provide benefits to reduce the burden on industry from 9% indexation of tariffs, and declared 2016 the year of the passenger. As the company copes with all this, and are there resources for further domestic reforms, the top Manager said in an interview.

– Since your arrival has intensified the debate over the role of “Russian Railways” in the structure of railway transport and the whole of the market. Recently been various proposals on configuration, is a radical variant, when the company will actually be only the rails and the adjacent infrastructure, there is an option when the Railways will be a structure with interests in all markets in their field. I personally heard the expression “the last mile”, is generally a more complex configuration of the logistics company and not just a pure train. Do you have more or less clearly defined, much still needs to move the Railways in the foreseeable future, for example, five years?

– We discussed this issue in a variety of formats, including consultants, who made a number of assumptions where we would move. I can definitely see that the Railways is including logistics structure: we definitely have to be units that integrate freight transport with the “last mile”. The Railways already own logistics company GEFCO, participate in joint transport and logistics company”. There are additional assets – the same “Federal freight company”. The synergy of these assets should be used for the benefit of end users. Therefore, the Railways still more transport and logistics holding.

Just want to say: I’m for competition. But for a reasonable competition. For the competition, which does not lead to additional costs to shippers and which would not suffer the functionality. Including that the state had a clear understanding of what is happening with the railway market segment. In the world there are different models. They tested each of them has its pros and cons for each of them has its preferred application conditions.

Let’s Take France. There is formal transportation activities are separated from infrastructure in accordance with EU requirements. The structure, which on balance has the rail infrastructure, operated by subsidies from the state, and the state provides appropriate safeguards. By the way, in almost all countries, where infrastructure is separated from traffic, it is subsidized by the state. However, recent years, the process is reversed. Infrastructure company integrated under a single holding company with a public transportation company. Because in practice, the separate structure have a lot of divergent interests, which have cost consumers at additional costs. It is a trend. However, this does not mean lack of competition. French, like all European market, has consistently opened for competition in rail transport.

Our company is a different problem. RZD together with the government needs to create conditions so that the infrastructure has deteriorated and been updated. It is necessary to develop competitive mechanisms, stimulating the renewal of all components, including the cars, locomotives, particularly of infrastructure. One company is already precisely will not work, because the country now there are private car operators, that is, created a competitive environment in this segment of the market. At the same time today, in our opinion, created too many operating companies, which hurts technology management car fleet over a network. The market is already ripe conditions for their enlargement. Antimonopoly service will give his assessment of how large can be this process and how it can be built.

If to speak about expediency of development of competition between carriers of goods, the key question is, does the state, as abroad, e.g. in Germany or France, the issue of subsidizing infrastructure and how will be based tariffs for infrastructure use, what they will stimulate carriers. Private carriers, following the rules of business, of course, trying to extract the maximum profit from those “rules of the game” in which they are located. Therefore, if we create competition between carriers in the existing conditions, the margin on the most profitable freight traffic will go to them, whereas the load on the infrastructure remains the same, and the cost of maintaining infrastructure will not change. Accordingly, ” there is a lack of funds, the condition of the infrastructure will deteriorate.

We in the company believe that the first step can be done, identify the cost of locomotive traction within the Railways, improving and making transparent the method of separate accounting. But the highlight of the locomotive traction in a subsidiary that offers of Ministry of economic development, in our opinion, quickly is impossible.

– So usually this is done with monopolies – first, do separate accounting, then make a decision to allocate or not to allocate…

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– Doing differently. Railways offer a sensible approach: felt, looked, assessed – went forward. Reform principles seems to be for all countries and industries are the same, but, however, there are nuances. And these nuances collectively give a totally different result than in the neighboring country. I take the position that we need to move, if there is a clear understanding of areas for further development and confidence in a positive result. Otherwise, it can cause a setback. In fact, so the consultants now all these things are studying.

With regard to the key participants within our target model of the railway market should not suffer neither the state nor the shippers, nor the Railways. If any of the participants due to the imbalance will begin to incur losses, it is unfair. Based on this principle, we try to draw our version of the model. To get to the destination state, there is an auxiliary formats: this is the price list of the regulated tariffs and the willingness of the state to subsidize the maintenance and development of infrastructure. In the same Germany, for example, to maintain infrastructure annually allocates billions of euros. We came to the conclusion that the Railways themselves must provide for their current expenses.

Besides, Russia has its own technological and geographical features: we have combined cargo and passenger movement. Because of this often there is no alternative for the movement from point “A” to point “B”, the alternative to build or impossible, or expensive. All this limits the competitive formats.

– You said that you should not suffer the state and the shippers, because if the reform it became worse – the meaning of such a reform there. At the same time, you say you don’t have to suffer and Railways. What does this mean?

– The issue is about infrastructure. We are now puzzled by the revision of the price list, and think it should be fair. Railways as the carrier shall be responsible only for transportation and must not pay or senders of high-yield cargo to subsidize coal or other customers with cheap goods. From our point of view, this should be handled by the state, if so decides, but not through us. Our task is to efficiently transport goods. Now the situation is different: there are discounts on cheap goods so-called “first” class and the margins on high value cargo “the third”. At the same time to retain high-value goods, the company can not, because it immediately enters into an artificial competition with road transport or aviation.

Schematically explain. Here, for example, there’s a load of coal, a kilogram of which, conventionally, costs 10 rubles And is “more expensive” TV. Transportation and coal, and the TV, in principle, is the same – RUB 2 Coal as bulk cargo by anything else other than railway, no luck. We say – here you have an adjustable rate, you take this coal is not for 2 RUB, 1 RUB. and for A lost ruble take carriage of the TV. That is, the TV we have to take is 2., and in 3 RUB But with no “ties” with the TV to the railway, and he chooses a plane or car because it is cheaper. As a result, the ruble crashed and burned, and the railroad coming to the government asking for money to fill up this ruble. So now does the price list.

Railways of the money by and large is not necessary. Let subsidies directly given to those who are now supported through this scheme. We need to support coal miners – even the coal miners, through the Ministry of energy according to certain rules will receive subsidies and will pay us a fair rate – relatively speaking, these two ruble – to further Railways are not “loaded” the owner of the TV.

– That is actually making the monetization of benefits and to equalize transportation rates for everyone, making it “flat”?

– Yes.

– Do you think it can be done in the next couple of years, given that the need of physical money to the state?

– The transition to the new price list is one of those serious issues, which in any case will need to be addressed. Something you can do in the short term, but something we will do more for a long time. Yes, this approach could change the landscape of the economy. Now our rate is largely focused on the existing geography of production and their markets – taking into account the distance of transportation, set discounts or surcharges. Of course, changes need to be done very carefully, because the producers might also change the cost. Soon we will begin the discussion of the principles of menu with FAS, Ministry of economic development. And then will need to do the calculations, it is a very large, heavy work. And on the basis of these calculations should be considered when such decisions are to enter.

To do this, in particular, the need in the light of the intentions of the government on the privatization of Russian Railways. The company is in the plans of privatization and must pass certain stages of preparation. At the same General economic laws has not been canceled: the investor will join the company only on condition that it generate profits. And here it is important to move away from cross-subsidization within the company. The funds that will be paid out as dividends, you can increase the subsidization of industries.

– How much time can take a “recalculation” of the economy?

A year and a half. Some part of this work we do ourselves, but develop a price list Railways is responsible for the Federal Antimonopoly service. The company prepares materials, organizes discussions, a decision will be taken by the state.

– Then there is another point. There is still transportation for the defense Department. What to do with them in terms of pricing?

– The same principle that I talked about above. Part of the solution, by the way, already adopted by the government. The Railways, of course, be prepared to provide these services at cost, but everything has to be right.

Another aspect relevant to tariff history. “There are assets that have only indirect relevance to the main transportation activities, and some require permanent financing, which ultimately also laid in the tariffs. Many of the group’s structure, of course, play a supporting role as suppliers of materials and services, but, in fact, they are still non-core. Should the company “cleaned” from such assets or, for example, they must exist somewhere on the periphery?

– Mainly in the group are subsidiaries that either generate income or will to do it, or are strategic in the framework of the chosen model. GEFCO, for example, interesting to us within the holding. The Railways are now trying to move to a more progressive delivery systems, including in the framework of the group is to provide not only transportation, but also manage inventory, optimize routes within their supply chains. At this the company does not want to restrict GEFCO, as the company has a large contract with PSA Peugeot Citroen, a large volume of traffic and services for General Motors, and in General 40 branches worldwide. It turns out that this subsidiary works on us, and on the market, providing additional income. Therefore, we believe that this format is the correct one at the moment.

Or take the “United transport and logistics company”. This is a project of the railway administrations of Belarus, Russia and Kazakhstan, organized to promote transit between China and Europe with uniform rates on the route. Outside the “perimeter” of the Railways, without the dedicated work of the railway administration, the project will not work.

With regard to non-core structures, the company is now preparing a map of these assets and plans to submit it to the consideration of the Board of Directors.

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– With the sale of assets is clear, and whether the desire in the light of the logistic strategy, the strategy for the development of multimodality, on the contrary, to buy something? Maybe there is ambition to do the car transport directly to the structure of the Railways or to become the operator of some port terminals?

– First of all, the Railways would be willing to participate in the creation of conditions for increasing the traffic. Field, special economic zones, ports – all, what generates the traffic.

– At the same time, if something somewhere goes wrong, and the investments of Russian Railways will be risky?

And this is also true. Although we have a mechanism for hedging risks. Any participant of the investment project must calculate it. We need a comprehensive approach to financial models. For example, the story of the “Mechel”. Branch to its Elgin field they built themselves. But while the Railways are interested in the cargo database. In the process of discussing the fate of this thread we said that you can give the market valuation of this asset, the risks, and on this basis to draw conclusions about our willingness to participate. Based on this logic, we continue to move.

– New price list, if adopted, would reduce the indexation of tariffs? And may it happen so that the Railways are first tightened the belt, and then it will podrastet?

– The rates depend on market prices. The RZD tariff is cost of company, it infrastructure maintenance, wages, fuel, electricity, a certain amount of overhead. We need to understand how much in the long term will cost the rails for the modernisation of the infrastructure, their cost is established not we. There are external factors that affect the formation of values. There is inflation. At the time decisions were made that rates should be indexed for inflation. I think it will be possible to consider the reduction of these tariffs for a limited period of time in a transparent and balanced picture, without excessive costs. All our specialists are now studying.

RZD analyze new technology to, again, to have a more efficient domestic economy. Example: single rail can be used to pass 750 thousand tons, and we now offer a product that can transmit 1.5 million tons of cargo. This rail will cost more, but it would be more profitable, because we should be spending less money on maintaining infrastructure, although here too there are features that need to be considered.

In my view, the Railways should have the rate of “inflation minus”. “Minus” is improving productivity, increasing efficiency, that is, normal economic approach. But there is a caveat: the company is not able to influence their suppliers – below its cost they can’t sell.

– Ministry of economic development Prime Minister Medvedev talked about the fact that the Railways should be enough 3% indexation of tariffs in 2017. You have enough?

– This will depend on changes in the consumer price index. For example, if the cost of electricity that the company buys at 140-150 billion roubles each year, to be indexed above inflation, we do not meet our costs. We discussed this issue with the head of the FAS Igor Artemyev, hope will find a consensus.

This year, the Railways gave discounts on transportation, to support the producers. The result was a greater volume of goods. That is why now the volume of production falls, and transportation is growing. The company was able to compensate for those missing costs that fell with discounts.

Improved bankruptcy procedures, we are optimizing and improving efficiency in all areas. Increased speed and processing of the traffic volumes at the junctions of, the company gradually began to understand the technology of transportation.

– Increased movement speed?

– Last year the rate grew by almost 15%, from 328 to 372 km per day. Since the beginning of this year it exceeded 400 km.

– How did this happen? This is some old program or you something systemically changed?

– Key emphasis we made on a systematic approach. Consulted with various experts and then tried to dock. It is, in General, a regular management activity, but it was concentrated in a very small period of time. Could the same stretch, but the company tried to do everything faster. We compare ourselves to other Railways and accordingly understand where at the moment there is a limit.

– Russian Railways is still far from it?

– Groundwork for the development of the company. Although now the Railways are in the leading position among the railroads of the world.

– By your words it turns out that the Railways have delayed part of the goods from some other types of transport, or is it a new product?

– The Railways have tried to create conditions for export, because steelmakers have greatly subsided, and we wanted them to support. In order to maintain the level of shipments the previous year, the company gave them a discount. Coal transportation while growing up themselves.

On the other hand, the transport service centre, Russian Railways notes that due to the tax maneuver changed the structure of the railway transportation in the oil sector.

There was a “fork” is to produce light oil or sell oil. By rail traditionally was carrying light oil products, oil pipe went. When the taxation has changed, and it became more profitable to simply sell the oil, the oil left in the pipe, and light oil products not produced in such quantities as before.

– Your Deputy, Vice-President traffic safety Shevket Shaydullin said that a decisive factor of risk on the railway infrastructure in Russia remains the state of the rail sector. Do we have a difficult situation with rails across the network? Or is it the history of certain regions?

– The situation with the defective rails really easy. We have more than 20 thousand km of Railways is not repaired within the scheduled period is a quarter of the length of paths. And just this year, the situation began to improve, despite the fact that the company renounced relevant subsidies.

The programme of procurement of rails for this year started with 640 thousand tons, now reached 850 thousand While the Railways have downloaded almost all the factories for the production of rail – and Evraz and Mechel. I think that next year may be even more.

– Recently, the chamber blamed the Railways that you earn on deposits, rather than investing money in upgrading the TRANS-Siberian and Baikal-Amur railroads. Do you think these claims reasonable?

– Money from the national welfare Fund were transferred to us on account in the prescribed manner and in the prescribed order placed in the Bank. In the Bank they earn interest. If the Railways had not received the money, is not placed in the Bank and have not received a cent, the chamber would consider that the company uses them inefficiently. From their point of view it would be correct to do so: the money came immediately and must be sent for payment. This is logical. But the question is, how were decisions made on the allocation of this money when we received them. Railways have in a certain period of time was not design documentation, needed to conduct a bidding for contract work.

Because we were told that it is impossible to earn money, you should divide them according to the objects and enter the Treasury account. In the second half of last year were provided Treasury and accounting, and separate accounts. The funds were lying without interest. In the end, the money went nowhere, stayed in our program, and its approved by the government. The government said Yes, the money you earned, but once earned point to another point.

– Can we assume that the formation of the Railways completed?

– In my understanding of the changes in the structure and in personnel can occur always. This is due to different factors: people retire, move on to a new job. We are in RZD dynamically carry out changes in the structure of departments, functionality. Occur move, but deliberately wishes to personally fire someone there. The staff is good, able-bodied, can solve tasks of any level.

– And there may be new people? Or current managers can do more – in accordance with the settings?

– Sure, I can do more. Sometimes you just have to tell. Head for this and delivered to tell his subordinates, to guide them.

– What goal are internal changes departments?

– Specification of functionality, the elimination of duplicate functions. Unite the directions that are in the process of restructuring can give the best synergy. Nothing out of the ordinary.

– Whether to improve internal KPIs?

– KPI system was introduced last year. Now is to assess how well the indicators correspond to the current situation. Not bad, but it can be improved.

– How these changes will affect you personally?

– I had four indicators, but in General they are about 25. I thought the correct answer for all the indicators. I hope my colleagues will not fail.

– Russian Railways has declared this year the year of the passenger. This year people will see a new in connection with this program?

– First of all, attitude. The passenger needs to understand that he is happy. To do this, the company strives to create the most comfortable conditions. For example, we equip the stations, good Wi-Fi: of 79, before the end of the year I want to equip another 90. The company is developing new e-services, and some have offers in the form of pilot projects. The passenger who came in for the facilities of Russian Railways, needs to be able to connect to our free network by another station and continue to use it on the train. By the fall, I hope to be ready with a comprehensive product with a variety of choice, ticketing, movies, integration with taxi services. Being in the internal network of the train, you can read information about the area on which it rides, about historical events and so on. Installed in cars for more outlets for charging gadgets while on the station charger.

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We want to change the treatment of passengers by staff. And according to some surveys it is already possible to conclude that it is possible. The company will hold additional courses and workshops for staff involved in working with clients. The company unloads and the conductors themselves: before they were responsible for cleaning the car and for the passenger service. We now these functions will be separated: the car will engage specialized staff, and guides will focus directly on maintenance.

We conducted a survey and asked what services I would like to see our passengers. In the first places was – Wi-Fi, outlets, temperature in the carriages, the toilets, the attitude of the staff. But the main point, of course, the same – price, speed, and time of arrival of the train. And now, the Railways is working on it. For example, in Adler some trains from Moscow are coming less than a day is 23 hours and 55 minutes. In General, the passenger not only for passengers but also for us – the company itself needs to change.

– Is it possible to do passenger transportation business is really good, or for the Railways it will always be unprofitable activities?

– Long distance passenger transport bring in money, including in the deregulated segment – coupe, SV, the “Suite”. In the regulated sector – the reserved seat price set by the government. I have a question formulated like this: can the Railways provide a good service for passengers in the suburbs and long-distance? Response: I definitely can. Reserved seat and the suburbs are subsidized, because the mobility of the population gives effect to the gross regional product and gross domestic product is the state’s responsibility. It gets the money, and then partly in the form of subsidies returns on these shipments.

Can the Railways to do something for yourself? You can, but commuter traffic will still be unprofitable, and the world still has not figured out how to make them profitable and cheap at the same time. In Moscow they are not subsidized, but here the volume of traffic and the level of purchasing power is somewhat different. This question will always require special attention from the regional authorities, because this is their area of responsibility, and they are the main customer. Last year, after the aggravation of problems with the trains, heads of regions took a closer look at this problem and now treat it sensitive. The problem is solved.

This year the holding company tried to reduce its own costs. Will same way to approach this problem further. I do believe that the whiter and clearer will be the Railways, the easier it will be accepted solutions. Now all their costs, we consider together with the regional authorities, bargaining, and trying to explain. And if possible some mechanism to make more profitable, of course, listen. To bring the situation before the conflict, definitely will not.

– Are there any Russian companies that inspire you?

– I like what did Herman Gref in the savings Bank. I think this is a major breakthrough. Foreign companies, too, have they at all on hearing. I think we now have a unique opportunity to set an example to show that the Railways are an unusual company, and we need to be equal.

And after. Gref in one of his lectures said that all we do is not money and not transport, it’s the people. I agree with him. And it is important that all our people had the same goal, and not each to their own.