EU Commission Takes Back in Railway Privatizations

EU Commission Takes a Step Back in Railway Privatizations: The European Union Commission announced its 31th railway package on 2013 January 4 as a precaution to some of the problems encountered during the privatization process of railways. One of the most striking points in this package was the complete separation of infrastructure management from train operating companies, and the other was the reduction of public services and state subsidies in passenger transport, allowing more operating companies to seek this transport, thus reducing the burden on the state. However, at the meeting held in Strasbourg on February 26, 2014, we voted to take a step back from the rules they see as the basis of railway liberalization, considering the problems experienced in the last 1 year and these problems will increase in the future, especially on the above two items. It was decided with the union.

Infrastructure:
One of the revision decisions in the voting was the 4th rail package directive, which required the infrastructure works to be completely separated from the business and transferred to the private sector. During the privatization process in railways, German (DB) and French (SNCF) railways have become state conglomerates, organizing many businesses such as passengers, freight and infrastructure under a single roof, as different companies are formed. Similarly, the railway infrastructure works of many countries such as Spain, Italy, Netherlands, Belgium, Austria have not completely separated from the operating companies (state companies), and a subsidiary or holding has adopted a similar structuring. Infrastructure management in railways is both the brain and the backbone of the entire system. Many sensitive issues, from regional speeds on the line, to the variety of trains that will pass through them and the determination of the train traffic that should be, concern infrastructure management. It is a fact that the most important feature that distinguishes railway transportation from other modes of transport is that the operation must be carried out completely within the criteria determined by the infrastructure. The simplest example of this is that a freight train cannot be operated on high-speed train lines. A little more detailed explanation; The slow movement of the trains going in the same direction on the same line is the factor affecting all the traffic on that line. Although it is an appropriate step to hold this train at a holding point and let the train behind pass, it will not compensate for the time lost by the waiting train. The operator of that train also promised his customers the transport time according to the continuous departure time of the train. In addition, the slow-moving train not only affects traffic but also exhausts the infrastructure system. 100km / h. If you go on a line that needs to be traveled at 60km / h, especially at the curves, the "dever", which allows the train to distribute its weight equally to the inner and outer rails, depending on the speed of the train, will be overloaded on the inner rail, which means that the rail and Together with the other equipment holding the rail, it will shorten the service life of the train wheels. Many technical details like this make the infrastructure management the "secret boss" of the railways. Besides, infrastructure maintenance, repair and construction works are the most expensive jobs of railway transportation.

With the rapid privatization of the EU after 2004, although the infrastructure seems to be separated from the business administration, the links could not be completely broken. In particular, between 2010 and 2011, complaints such as the infrastructure companies giving more priority to the transport companies they are affiliated with and the unfair treatment of line usage fees peaked. As a result, railway companies of many countries, especially German Railways, were brought to court for "non-compliance with EU railway regulations". Courts resulted in minor concessions and crashes of the defendant railway companies until the end of 2013.

The Commission said, "The infrastructure and train operators, which are mentioned in the relevant parts of the EU railway regulations, are not completely separated from each other in terms of financial functioning and company organization, so that unfair competition is created by providing an advantage by not creating equal conditions for other train operators who do not have an infrastructure partnership or connection." The defense response given to the lawsuit he filed under the main subject actually explains many things. In the general answer: “Our current structure as a holding or a subsidiary is not completely in violation of EU regulations. After all, it has the status of a separate company, as desired. Considering that infrastructure companies are completely separate in terms of both management and finance means that the basic dynamics of railway transportation are not fully understood. Railway transport is a type of transport that is more dependent on infrastructure rules than other transport modes due to many technical details. In addition, the infrastructure is the part of the railway transportation where the expenses are the highest. When we only consider the issue of expenses, even students in the economics department of universities can easily calculate that it is impossible for a company that is independent in its own way to undertake the infrastructure management. We see it as a utopian situation to have a company that can both do great things financially and that will not be affiliated to any big holding or similar structure in any way. The consequences of the infrastructure management, which is the most strategic point of railway transportation, to be a little close, let alone share ownership, to any rival transportation company, should be carefully questioned. Will the brokerage prevent this? Or, according to the free trade laws put forward by the free market economy, will it be regarded as normal by saying that anyone can get what they want? According to the rail transport approach, this kind of approach is not normal. Moreover, even in the railway system of the USA, which is shown as an example, which is very different from Europe in terms of social, economic and transportation corridors, the infrastructure is under the control of train operating companies.

Even the summary defense statement above is sufficient to demonstrate the importance of the issue. In addition, one of the lawsuits is that other train operator companies are not treated fairly with regard to line usage fees. Although there are defenses such as “more users pay less”, in this part of the case, the request of the EU commission to make financial accounts transparent and to audit these accounts separately was accepted by the court. As a footnote, no matter how "transparent" companies are, can't they find a solution to such situations? It is also necessary to ask the question.

In addition, the commission's demand to reduce state subsidies in infrastructure works, in order to further move companies apart from the state administration, was not accepted. The reason is that the cost of infrastructure construction, maintenance and repair works is high and this cost will lead to a decrease in the interest in railways with its direct reflection on line usage fees. In short, just as in the state administration, private companies will continue without reducing state subsidies in order to provide affordable transportation. Well, as an excuse for privatization, “The state is too burdened. If it privatizes, it will take the state tax, the rest will be completed by companies. Thus, productivity will increase and taxes will not be wasted. " Wasn't it called?

Thus, 26 February 2014 decisions have been largely grounded. One of the most basic elements of the privatization process in the railways is the separation of infrastructure and train operation companies from each other and the reduction of state subsidies for infrastructure works.

Passenger Transport:
In railway transportation, the highest transportation mode is freight transportation. If the privatization process is taken into consideration, this is the reason why companies prefer the most freight transportation. For this reason, passenger transport is still continuing as a public service in some places. In the case of passenger transport in the form of a privatized or state-owned company, a substantial amount of government subsidies is required to provide acceptable ticket prices.

Private companies carry out passenger transportation in England. By 2008, the amount of subsidies made to these companies caught the attention of the EU Commission and warned the UK to “correct this situation and reduce the burden of companies on the state”. The UK government decided to reduce the subsidies to a certain extent. This time, transportation companies increased their ticket prices gradually in order not to lose their income. This situation has caused a serious reaction among the people using the railways, including today.

Germany freed bus transport by annulling the law that came into force at the beginning of World War II and lasted until 2, banning intercity bus transportation. The reason is the adjustments made in 2012 to reduce subsidies and increase efficiency, by warning the full 2010 EU countries, including themselves, by the commission and even taking them to court. As a result of these adjustments, ticket fares have gradually increased, more standing passengers were purchased for efficiency and subsequently, the use of the road increased.

In the 31th rail package issued on January 2013, 4, it was decided to support the companies for a specified period of time only for their establishment and development, in order to have stricter sanctions on passenger transportation and to include more private companies in this transportation. However, since the privatization process of passenger transportation, which started in England in 1994, until today, the situation of providing cheap and high quality transportation by competing fiercely between the same line and the same stations in the EU has not been achieved due to the technical details of the railways, which are still unclear. Even if companies used the same line for a certain period of time, they left later and made trips between different stations, which confirmed the regional corporate monopoly. It was said that when the railways became privatized, "the state monopoly would disappear". But now, regional corporate monopolies have emerged.

No progress has been made on competition and subsidies in passenger transport, from the release of the 31th rail package on 2013 January 4 to the date of the decision on the revision of the package and rail privatizations on 26 February 2014, as the EU commission warned about passenger transport and initiated the court process. It did not get results from the railway companies either. Thus, on February 26, 2014, it was unanimously decided to subsidize passenger transport and the continuity of public service.
Considering the subject statistically;

In the graph above, the bars show the high-speed train lines built from 1990 to 2008. The slight decrease in passenger transport compared to the increasing high speed lines summarizes the situation.

In this graph, the development of 12-15 between the EU 1995 region member countries and the private vehicle, bus and railway transport between the EU 2010 region member countries is seen.

Generally, the statistics on railway passenger transport statistics show rising figures on a yearly basis. The reason for this is the inclusion of new urban rail systems with increased capacity or capacity. In short, what comes to mind as a rail system, its sum is included in the statistics. An example of this is on the following web page.

data.worldbank.org

In the above web page, clicking on the year intervals, the statistics for those years can be seen.

Problems:
- The privatization process of the European railways started with the EU regulation 91/440 in 1991, and the issue of the complete separation of the infrastructure and train enterprises stated in this regulation was not as desired, although many regulation revisions and sanction packages were issued. In many European countries, infrastructure maintenance / repair work was outsourced to be cheaper, which created new problems, especially in terms of worker employment and safety. The fact that this situation contradicts the labor standards previously set by the EU commission and causes internal debates is one of the reasons for the insistence on infrastructure segregation.

  • Since the issue of full privatization of the infrastructure came out, especially the German and French railways, they have opposed the private sale of state-owned and strategically important lands, station / station buildings, outbuildings and all their lands. After this objection, the Commission changed the decision and requested that only infrastructure management be separated and transferred to the private. However, as mentioned above, the segregation has not been fully achieved, nor the infrastructure works, which are the most costly arm of rail transport, have not been fully removed from state subsidies or state administration. The issue that a healthy operation cannot be carried out with "top down" rules without understanding the operating and technical understanding of railway transportation is the result of the fact that it was not taken into consideration, although it was discussed by the railway operators and experts before. With this experience, the commission returned from this insistence.
  • While the privatization advertisements were made, it was said that "when the railways are privatized, the competition of the companies that will get rid of the state monopoly will provide cheaper and quality transportation". However, in this process, regional corporate monopolies emerged by seizing the strategic points of powerful states and state companies not only in their own countries but also in the transportation of other countries. While strong companies added strength to their power by transporting at strategic points, other companies have started to transport on certain lines by establishing strategies or partnerships with large companies. Different companies could not compete with each other on the same line and route. This is due to the railway operating and technical parameters. Since many competition issues such as speed, the amount of freight / passengers to be transported, the train standards to be used on the line depend on the technical parameters of the infrastructure, in short, on a railway line, the desired train cannot run at the desired speed and length, and because of the high transportation costs, there is competition. there are no parameters to be used. In this case, companies mainly started to transport in their own regions, in partnership with large foreign or domestic companies. Many lawsuits, including the issue of regional company monopolization, could not be concluded due to the "criteria of free market economy". This has led to new discussions and questions about privatization.

  • The most income generating rail of the railway transportation is freight. During the privatization process, the companies were predominantly directed to the companies with passenger transportation, more public services or serious state subsidies, mainly by directing them to this branch. The Commission has issued directives to reduce subsidies and to reduce state influence, but with increased ticket prices and low comfort travels, passenger transport challenges have begun. In this regard, the commission has taken a step back. In the case of freight transport, major companies have achieved success in joint transport with line traffic, line usage fees and other modes of transport, while smaller companies have not fully established their organization. For this reason, in addition to cheap transportation, longer-term transportation has emerged. In the case of freight transport, no target could be achieved across Europe. Despite the fact that the commission has highlighted economic conditions and environmental factors, the increase in road transport has not been prevented. Although multimodal, transportation, new routes and adjustments in the direction of railroads and trade between countries increase, railway remains a bit behind. The relevant situation is also observed in the following statistics.

    In 2010, the commission announced that in 2014, it would adopt a practice to reduce the amount of tax-free diesel for those who only carry out road transport over long distances and to increase the tolls on toll highways, and the above mentioned in transportation by railway transfer. Even in 2010, objections were raised against this decision. Throughout the objections, it is said that “in order to prove that the privatization policies are good, the coercive policies made to shift the share of road transport to the railway”. This has led to serious controversy. In fact, with Germany liberating intercity bus transport, "is that your green approach?" It is said that the objections have increased once more. As of today, the development of the railway is behind the highway, according to the increasing trade volume. In addition, since this type of application on highways will further endanger the already fragile economy, although we passed the first quarter of 2014, the commission did not make any pre-announcement or study regarding this decision.

With the decisions taken on February 26, 2014, a step back in some rules that are seen as the basis of privatization conditions, some foreign-sourced columns, "Is the liberalization of the railway ending?" and comments such as “there is still hope” by the proponents of liberal politics were added to these articles. However, I tried to explain in detail above the concerns that they also know and are considered very brief. One of the goals of the EU in the privatization process was the development of the railway industry. As the transportation and infrastructure companies increased, there would be renewals in the railway system, which had been neglected for years due to transportation policies, thus increasing the number and capacity of companies producing for increasing vehicle and other material needs. It would be like the creation of a giant road industry, with transport diverted to the road in the 1950s. This is partially achieved. However, these companies generally preferred countries where labor, energy and raw materials were cheaper. This situation adversely affected the employees of companies with their headquarters in countries with stronger economy such as England, Germany and France. Especially since the Chinese factor is also involved, the problem has grown a bit larger.

In addition, great progress is seen in urban rail systems, which are largely in the hands of the public or as a state company. However, in an evaluation made on February 26, as some people have stated before, the construction of rail systems in some of the inner-city regions, where there is no need for rail systems according to technical calculations, is in mind, "Is it unfair support to companies by the public or with taxes paid? provided? " Formed the question. Thereupon, the commission initiated an investigation, even if it was small.

Raising rail awareness can be seen as the most positive development in the process. However, despite its supposed privatization, there has also been an increase in state support or subsidies. Although the Commission brought 13 countries, including Britain, France and Germany, to court on this issue, no results came out. This time, "if the state would be in this game, why was privatization?" He was asked. In fact, the question was answered from another angle. "When it becomes a state company or a private company, a system covering more flexible working hours was introduced by reducing the wages of employees for the sake of efficiency." It has been called. As a result, it caused strikes and other discussions in the process.

Since 1950, with the change in the transportation concept all over the world, as a result of the orientation towards the highways, the railways have been thrown into the background. When it came to the 1990s, with the changing economic understanding, it was called “railway again” and the reason why the railways did not develop was not as if the demand for the railroad decreased with the understanding of transportation in the past, but the state monopoly was shown. Keeping this in mind, it seems certain that the EU will deal with privatizations and many new problems today and tomorrow, instead of an efficient state management. We must think over and over again to draw important lessons for our country.

Ömer Tolga Sümerli

 

Armin

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