Opening the Baltic states railway markets to competition and open access
In preparation for an upcoming meeting with European Commission representatives, three private railway undertakings operating in the Baltic States met to discuss the pending issues on free cargo flow through the three countries.
The Baltic States have been transposing European Union railway related legislation into national law well over a decade, however, the differences in complying with the legislation in each Baltic State continue to pose challenges for private railway undertakings.
The aim of the European Union railway legislation is establishing a Single European railway area. Opening up the national railway markets to the widest possible level of competition brings along an efficient freight sector across borders. Unfortunately in reality the required level of transparency and non-discriminatory access to rail infrastructure, as well as the level of market liberalisation, varies across the Baltic States, thereby undermining the achievement of a fully liberalised railway market.
Obstacles to open access become most evident in cross-border freighttransport. Equal and non-discriminatory access to providing cross-border transportation services are faced with bilateral and multilateral arrangements that grant the incumbent state railway companies exclusive rights to operate. In fact a private railway undertaking in the Baltic States is still limited to operate in its own domestic market, and trying to provide cross-border services even together with private railway undertakings from other Baltic States is met with a range of constraints that ensure dependence on incumbent state railway companies.
Private railway undertakings are bound to comply with non-negotiable terms and conditions that have brought along many years of struggles, applying to the relevant state authorities and submitting claims to courts. Such struggles serve as a constant reminder that Baltic States’ railway markets are not yet open for competition at the level prescribed in the legislative foundation.
However, every step closer to establishing a true Single European railway area and ensuring the emancipation of European “open access” principles in the Baltic States is a step closer to guaranteeing the efficient use of railways and attracting more freight from road to rail. Open access will increase the competitiveness of the region and the railway transportation sector. Opening all the railway transportation markets to competition, as required by European Union law, will benefit the communities, and being the more environmentally friendly transportation mode, it is also respectful to the environment around us.
AS “Baltijas Ekspresis” supports decision of Minister of Transport Tālis Linkaits to express distrust in LDz Management Board
AS “Baltijas Ekspresis” upholds principles of fairness and good governance, therefore intends to clarify its standpoint regarding ongoing events in the railway sector.
Latvia is a member state of the European Union. EU opened its railway freight sector for competition back in 2007, which means that any entrepreneur aiming to involve in the railway carriage business may do so. Latvia has also transposed this EU regulation: the Railway Law clearly states that any railway operator is administratively and economically independent in its operations, whereas the infrastructure manager (LDz) grants all carriage operators under equitable, non-discriminatory conditions the right to access the public-use railway infrastructure for the purpose of operating all types of rail freight services. Regardless of the fact that rail freight market is open for competition for 12 years, there is one state owned company Latvijas Dzelzceļš, which together with its subsidiary LDz Cargo may ignore completely Latvian legislation in its daily operations. Management of these companies by all means strive to retain principles of railway operations inherited from the Soviet epoch. Such an opinion AS “Baltijas Ekspresis” has developed after years of interaction with LDz and LDz Cargo.
In June, 2017 AS “Baltijas Ekspresis” together with its customers addressed a letter to LDz and LDz Cargo expressing intention to provide door-to-door delivery, i.e. from the state border-crossing station to the clients’ private tracks and thus evade from disproportionally costly LDz Cargo’s intermediary services: railway operations on the borderland tracks and wagon delivery services in public station Ventspils. Two years have passed, yet all AS “Baltijas Ekspresis” attempts to resolve this problem had been unsuccessful due to deliberate unwillingness of the senior management of LDz and LDz Cargo to provide equal rights for private operator to perform its business. Such conclusion derives from attitude of the senior management of LDz and LDz Cargo in regard to AS “Baltijas Ekspresis”.
During last two years AS “Baltijas Ekspresis” has been subject to discrimination, persistent efforts of the senior management of LDz and LDz Cargo to put obstacles in AS “Baltijas Ekspresis” operations, which further gives impression even of efforts to interrupt or terminate AS “Baltijas Ekspresis” carriage business: LDz unilaterally terminated the railway depo rental agreement effective since 2002, although the contract was prolonged until 2028 shortly before the termination. This depo is service facility operated by AS “Baltijas Ekspresis” and necessary for carriage operations. LDz put every effort to restrain the instructing locomotive drivers from probation runs which are mandatory requirement for AS “Baltijas Ekspresis” to receive the safety certificate in order to acquire access rights to additional public infrastructure tracks or extend the list of tracks in the safety certificate. Starting 2018 LDz introduced doubtful (potentially illegal) service called local wagon handling, which AS “Baltijas Ekspresis” considers as attempt to make wagon delivery services provided by AS “Baltijas Ekspresis” economically unreasonable in Ventspils public station. Starting September 2018 LDz has prohibited use of public station tracks for shunting operations by AS “Baltijas Ekspresis”, although fully paid for infrastructure access charge.
Most of all, the management of LDz and LDz Cargo continues to ignore legislation and refuse to open for competition rail operations on the borderland tracks, refuse to provide level playing field also in regard to recording operations of wagons belonging to foreign railway administrations in the territory of Latvia, and even freight documentation processing is a service exclusively provided by LDz Cargo in Latvia. It is absurd that the state of Latvia in person of the Ministry of Transport had accepted that LDz and LDz Cargo is in a position where AS “Baltijas Ekspresis” is compelled to beg its competitor LDz Cargo for provision of services.
There is an obvious reason why the senior management of LDz and LDz Cargo desperately fears competition: in AS “Baltijas Ekspresis” opinion railway operations organised by LDz and LDz Cargo are entirely inefficient, unreasonably expensive and the work organisation is archaic, therefore unable to survive any competition with other operators. In AS “Baltijas Ekspresis” opinion the outstanding financial results of LDz in 2018 were reached brutally by increasing prices for monopoly services and imposing additional pointless services to the clients. This safeguards the monopolistic positions of LDz and LDz Cargo often used for lobbying interests of individual groups of persons in our opinion. Good governance has never been observed in there, and as a result the customers overpay for railway operations.
In these circumstances AS “Baltijas Ekspresis” fully understands and supports the decision of the Minister of Transport T.Linkaits to express distrust in three members of LDz Management Board. We are convinced that this is the best start for improvements in Latvian railway system, in the result of which a truly modern railway transport will evolve. LDz should provide effective and cost efficient infrastructure management only, whereas operators on equal infrastructure access grounds provide carriage services. Competition is the driving force behind better railway operations both for freight and passengers.
AS “Baltijas Ekspresis” is a licensed private railway undertaking, the first to provide freight carriage operations on 1520mm gauge railway tracks. 20 years’ experience in the industry has resulted in annual carriage volume 8 million tons in 2018 which is 16% of the total freight volume in LDz rail network system and 20% of the total rail carriage volume market in Latvia. AS “Baltijas Ekspresis” employs 250 employees paying EUR 28 thousand per year per each employee as labour tax and contributions.