In Translation: Train (Modernization) in Vain

Article by Anastasia Bedneyeva, Natalya Skorlygina, and Anatoliy Dzhumailo. Translation by Nick Trickett.

Customs Union regulations on locomotive modernization look set to be delayed. Again. (Art: Viktor Chumanev, Kommersant)

Companies may win an exemption from the Customs Union’s technical regulations for privately-owned locomotives. Their inclusion under Union regulations would threaten the use of 60% of privately-owned locomotives in the Russian Federation, and the modernization of the fleet, per analysts’ estimates, could run up to 100 billion rubles ($1.67 bln). The government plans to decide the matter at the end of year, while the regulations, yet to enter force, will again be delayed – this time until August 2018.

Privately-owned locomotives running on non-public use routes may be exempted from the Customs Union’s technical regulations, according to the minutes from a June 15th interdepartmental working group on rail transport chaired by Arkady Dvorkovich. The Ministry of Transport (MinTrans), the Ministry of Industry and Trade (MinPromTorg), and the Department of Transport Oversight (RosTransNadzor) are required to submit relevant proposals on regulations for privately-owned locomotives by December 15th of this year. Under current regulations, upgrades and maintenance for old locomotives were to be completed by August. Now the Russian government has proposed a further delay to the implementation of the regulations for privately-owned locomotives August 2nd, 2018.

The Customs Union’s technical regulations, which forbid an extension of the working lifetime for old locomotives without cost-intensive modernization, were slated to come into effect in 2014. The locomotive owners won a two-year delay in June 2014, and in June of 2016, they secured another one, until August 2017. MinPromTorg pushed for an introduction of the regulation without further delay, though was prepared to offer an exception for locomotives operating on non-public routes (see coverage from 10 June 10th, 2016).

A letter from Mintrans to the government dated August 19, 2016 cites data from Russian Railways (RZhD) to show that as of 1 August, 2016, 60% of locomotives—almost 2,000—on non-public use routes were operating beyond their service life. The letter notes that the implementation of the ban in 2017 would put 13% of the cargo base at risk, or 158 million tons per year. By 2020, 2,400 would be beyond their service lives – some 73% of the fleet – and most companies lack the means to replace them.

By 2020, 2,400 (locomotives) would be beyond their service lives – some 73% of the fleet – and most companies lack the means to replace them.

Kazakhstan, Belarus, Armenia, and Kyrgyzstan have all offered to scrap the technical regulations for rolling stock before they go into force. Industrial players, however, have led the charge against the rules. On May 11th, Russian Steel a non-commercial partnership that unites the Russian Federation’s metallurgists, requested that MinTrans exempt locomotives on non-public use routes from these technical regulations so their implementation proceeds “in a more merciful manner”. As the Russian Steel asserts, the locomotives in question – ones that have operated for 20 years or more – are in satisfactory condition and don’t require modernization, the cost of which is roughly 80% of the cost of a new locomotive. A letter with similar requests and arguments was directed to Dennis Manturov, head of MinPromTorg, by the Russian Association of Fertilizer Producers on May 18th. At the same time, chemical industry players have advocated for the exemption of locomotives that do not pass connecting stations.

A Kommersant source in the market notes that on average, company locomotives operate three to six hours a day, the non-public use routes don’t cross those of passenger trains, and that increased security requirements are not needed. He recalls that a similar decision on open cars had led to a rolling stock deficit and tripling of operating rates to 1,.5 thousand rubles per diem. Aleksei Belinskiy, General Director of the LocoTech Group, believes that if the operation of privately-owned locomotives on non-public use routes were to be immediately effectively immediately, their owners would “flock to buy new ones” and existing industrial production capacity would not be able to meet the avalanche of demand. Conversely, demands leading to a planned changed for the sector would allowed this demand to be absorbed without issue.

Mikhail Burmistov, head of the Infoline Analytics agency, says that the modernization of switch engines (the affected locomotives) could, on average, cost between 25 and 30 million rubles per unit. With around 4,000 units making up the fleet and in need of modernization, the process could require 100 billion rubles. Besides that, the introduction of the technical regulations this year carries the risks the collapse of loading and unloading centers as well as a widespread deficit of wagons due to a slowdown in turnover. In the Burmistov’s opinion, the modernization of the private locomotive fleet must be stimulated in a manner similar to newer railway wagons and that subsidies should be no less than 1 billion rubles a year.

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