Russia





After the dissolution of the Soviet Union, the Russian railway industry entered challenging times. Freight volumes declined, loss-making passenger market share increased, financial losses mounted, assets continued to deteriorate, and operational productivity declined precipitously. Government embarked on an ambitious railway reform program to tackle these challenges. This case study summarizes the reforms and their impact on the Russian railways industry.


Before the Reform Process

Railway transportation is critical to the Russian economy. At the beginning of the 1990s, railways transported 70 percent of surface freight and 40 percent of public passenger service.



The Soviet collapse caused economic dislocations that had catastrophic consequences for the rail industry. During 1990-95, freight traffic plunged 52 percent and passenger traffic, 30 percent (Figure 1). Prior to that, freight traffic had been profitable enough to cross-subsidize the loss making passenger traffic. In order to compensate for the overall losses, railways raised freight tariffs, and that depressed traffic even further. Freight modal share declined, and modal share of loss-making passenger traffic increased from 40 to 49 percent (Figure 2).



Significant traffic declines without corresponding operational reforms reduced asset and staff productivity. Track and staff productivity declined by 50 percent; wagon productivity increased by a modest 10 percent (Figures 3 and 4).





Investment declined for new equipment and maintenance, and new equipment deliveries fell by over 30 percent as some former Soviet republics refused to supply Russia. As assets and infrastructure deteriorated, the number of track kilometers subject to speed restrictions increased by about 30 percent.176 Clearly, without reforms, railways could not maintain their pivotal role in the economy.

    
176 Transport Strategies for the Russian Federation (World Bank)
 
 
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