In only a few months, our country will accede to the EU. Are our national railways ready to integrate into the common transport market and the EU railway network? This means not only to ‘get attached’ to this network but to become fully integrated and contribute in actual terms to the solution of Europe’s transport problems. What should our national transport strategy be and which should be its priorities in compliance with the framework, outlined in the new European transport policy and aimed at overcoming the lack of balance in the transport sector and the ensuring of sustainable mobility? We shall try to find the answers to these fundamental questions within the discussion, organised by our magazine, which (we do hope) will be attended by the most prominent experts in this field in our country. The initial input comes with the article of Prof. Iordan Mirchev, Ph.D., Chairman of the Parliamentary Committee for Transport.


Let us not risk the future of the railways

Prof. Iordan Mirchev, Ph.D.

Chairman of the Parliamentary Committee for Transport

The institutional reform as of 2002 and the establishment of the National Railway Infrastructure Company and ‘BDZ’ EAD, as well as the fact that private operators can be licensed for access and usage of railway infrastructure, led to no significant changes in the competitiveness of railway services. The freight services reached stable levels of 20 million tons per year – this is mainly mass cargo from ports and transports between industrial centres. Passenger services lost a significant market share to road services, and currently are shrunk to 34 million passengers per year – these are mainly services between the larger towns as well as suburban services. International traffic, including transit transports, either goes round the country or is taken up by road hauliers. In the last five years, the state has invested nearly BGN1 billion in the railways in the form of capital costs, compensations and subsidies, including the cancellation of liabilities amounting to BGN140 million.

As a whole, the current model for railway management just does not work. The reason for this is that the larger segments of the service market remained untouched by the reform, as the latter was mainly focused on administrative restructuring, rather than on technological restructuring.

The key issue is the railway policy, i.e. the attitude of the state. The railway services are a product of the whole railway policy. Furthermore (particularly in the case of freight transport), it is particularly important to integrate railways with ports, intermodal terminals, domestic waterways and strategic transport operators. Only the involvement of these actors will make it possible to implement the long-term objectives for a larger share of the railways in the transport service market.

It is necessary to introduce a serious change in the methodology for the calculation of the infrastructure charge. The new methodology should ensure a better utilisation of the railway network capacity. Otherwise, there would be a great risk. The national carrier, BDZ EAD, will be ousted by other commercial freight carriers because their services will be cheaper due to their smaller operational costs for personnel, locomotives and wagons.

The Bulgarian railways are in a complicated situation as to the achievement of financial stability, the introduction of new technologies and services and the status of the infrastructure. In the coming years, the railways will receive approximately EUR1 billion for the modernisation of the business routes Mezdra-Sofia, Plovdiv-Bourgas, Mezdra-Gorna Oryahovitsa in addition to the investments for the modernisation of the Plovdiv-Svilengrad section and the construction of the infrastructure adjacent to Danube Bridge 2. The risk here is related to the need for the urgent elaboration of necessary projects for participation in the distribution of European funds in the period 2006-2013, as well as for the establishment of the administrative capacity necessary for the acquisition of these funds and project management. The modernisation of railway line sections with funds from the Cohesion fund, ISPA and EIB will make it possible to increase speeds up to 160 km/h, but in order to implement a new type of services, further investments in trains designed for such speeds will be necessary.

If the required infrastructure is not constructed, the specialised wagons are not made available and national policy on this matter is not adopted, then transit cargoes will continue to go round Bulgaria. For the above matters, which are of crucial importance for the railways, it is necessary to look for investment, mainly from strategic operators of such services which know the market and are able to invest in new technologies. The large forwarders as well as the large customers of the railways should be more actively involved in the enhancement of service quality, which will motivate them to attract more cargo via Bulgaria. This can be carried out by means of establishing joint ventures with BDZ EAD, or granting concessions for services, which the new Concession Act allows. The Railway Act is of key importance for the future of the railways. Many of the issues, stated hitherto, are mostly related to the management model. Recently, much was said on the establishment of a new management structure and new independent companies for passenger services, freight services and locomotives. Each new structure, though, should be based on the market principles for business with other companies. Therefore, it is of vital importance to take no hasty or ungrounded decisions but to follow clear-cut objectives of the reform.

Whether we shall adopt one management model or another depends on the role of the state. If the state undertakes the commitment for direct investments in new technologies and if strategic investors are involved with passenger services, intermodal transports and modernisation of the locomotive fleet, then it would be possible to implement a working and efficient management model for the railways. Until then, though, it is necessary to accomplish the technological restructuring of the railways on the basis of the actual accounting separation of all segments of the railway services, adoption of a political decision on loss-making activities and line sections and a definition of services which will withstand market competition.

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