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Russian Railways Wants Commodity Link to Freight Charges

OAO Russian Railways is proposing the government link freight rates to global commodity prices to better balance payments for customers and counter a decline in total rail volumes, a proxy for economic growth.

“We don’t see any positive signs in the economy yet,” Chief Executive Officer Vladimir Yakunin said in an interview in Sochi, a Black Sea resort town.

The Russian government is considering slowing annual tariff increases for state-run monopolies to help rein in inflation and revive the economy. Consumer prices jumped 7.4 percent in May from a year earlier, the fastest pace in 21 months, while the Economy Ministry has cut its 2013 growth forecast to 2.4 percent. The government’s proposal to slow tariff growth won’t extend to Russian Railways, Deputy Economy Minister Andrei Klepach said on April 26.

Russian Railways’ freight volumes fell 3.4 percent in May, the sixth month of decline, according to an e-mailed statement on June 3. Volumes will probably drop 2.4 percent this year, compared with a previously forecast increase of 0.7 percent, two people with knowledge of the matter said May 6.

“We agree with a tariff formula that takes into account global market conditions and the prices of the freight that we carry,” Yakunin said. Rail transportation costs account for more than 40 percent of the coal prices while their share in crude and refined products is “too small,” Yakunin said.

The government should make a “balanced” decision on the tariff policy, President Vladimir Putin said May 23 during a meeting with entrepreneurs. The final decision will be “very similar” to a proposal by billionaire Oleg Deripaska who asked to keep tariffs from exceeding inflation, Putin said.

“If we increase tariffs today by 10 percent, it will result in 0.1 percent inflation growth,” Yakunin said of the possible tariff caps.

The company’s financial plan will be ready by the end of October, he said.

To contact the reporter on this story: Ekaterina Shatalova in Moscow at eshatalova@bloomberg.net

To contact the editor responsible for this story: Denis Maternovsky at dmaternovsky@bloomberg.net

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