Russian Railways and its efficiency

How the financial success of Russian Railways is connected with the skills of the management of the state corporation.
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The Russian Railways published financial results for the first half of 2017 under IFRS. At first glance, things are going well for the state-owned company. Nevertheless, some analysts believe that the welfare of Russian Railways is based largely on the ability to negotiate with the authorities and on government support.

Unremarkable dynamics

Net profit of the holding RZD in the first half of 2017 under IFRS increased by 17.8% compared to the same period last year - up to 53 billion rubles. Total revenues also increased by 4.1% to 1.08 trillion rubles, revenue from freight traffic increased by 10.5%, to 717 billion rubles, due to a 7% increase in freight turnover. Finally, incomes from passenger transportation increased by 10.5% - to 102 billion rubles. But the major indicators of the Russian railways, on closer examination, to link with the successful management of the leadership and personally with the president of the Russian Railways Oleg Belozerov can be a stretch.

The sources of success appear to be the ability to negotiate with the authorities and state support. For example, the rate of VAT on passenger transportation for RZhD was reduced from 18 to 10% last year, and in this case it left 0%. In the Ministry of Transport, the additional income of the Federal Passenger Company (the "daughter" of the Russian Railways engaged in transportation over long distances) from zeroing of VAT was estimated at 15.7 billion rubles a year, while ticket prices remained unchanged.

But the average cost of travel also increases. In February of this year, RZD announced an increase in the cost of tickets for long distance trains by 3.9 percent. True, Oleg Belozerov said that this would be lower than the projected inflation. At the same time, as the newspaper "Our Version" reported, it is known that this year the tariffs of the monopoly increased by 6%. And this is 2% more than the forecasted inflation. Almost every year, RZhD invariably warns the government that without indexation of tariffs, the affairs of state corporations will go very badly. Last year, for example, the Russian Railways prepared a report for an interdepartmental working group, in which it was said that the company could finish 2017 with a loss of 142.4 billion rubles.

At the same time, the Ministry of Economic Development assured that RZD does not face a loss even without indexation of tariffs. But, apparently, the company's management managed to convince the authorities of its rightness.
In addition, RZD has tax privileges for property tax, which also gives considerable cost savings. Remained and state support. Last year 25 billion rubles were contributed to the capital of the carrier, in 2015 - more than 121 billion rubles, and slightly less than 29 billion rubles - in 2014. So there is no need to talk about a breakthrough in governance, and if something happens, the state always puts its reliable shoulder at the right time.

Amazing generosity

It has been said more than once that Russian Railways spends money on an excessive scale. For example, auditors Deloitte (Deloitte) found that the optimization of expenses alone would allow the Russian Railways to save from 95 to 130 billion rubles. RZhD, for example, shows excessive generosity in procurement. So, the average size of discounts on contracts is only 1.8%, and this is the worst indicator among the largest state companies. According to the auditors, the low efficiency of the tenders can be the result of "potential deals with interest". Auditors believe that the non-market nature of relations between customers in RZhD and applicants for government orders can be traced both at the stage of preparation of tender documents and at the stage of competitive selection.

The topic of passenger transport safety can not be ignored. In early August Rostransnadzor published the results of the inspection of suburban electric trains. This was due to the incident when a passenger electric train and freight train collided in the Kuntsevo region. As a result of the accident, 30 people applied for medical care, eight were hospitalized. The inspection revealed numerous violations of the operation of electric trains, in particular, brake and fire fighting systems. There were also problems with "formal" repairs of electric trains in railroad depots of Russian Railways. According to Mikhail Burmistrov, the head of Infoline Analytics, in this case, one can speak either of corruption, or of an official discrepancy, or of a mutual responsibility in the repair complex of JSC Russian Railways and the CTC.

In other words, for half a billion passengers who use the services of Moscow electric trains a year, such trips can be unsafe. RZhD, in turn, seems to have done nothing to dispel these fears.

Constant scandals

The attention of law enforcement bodies to the management of the state company remains unchanged. Scandals here phenomenon, unfortunately, often. So, the TFR initiated a criminal case against four ex-officials of RZD, who are suspected of fraud. We are talking about former top managers - Vladimir Gats, who served as deputy head of one of the branches of JSC Russian Railways, as well as Dmitrii Suprun, Elena Dorozhevich and Ekaterina Krasninihina. A criminal case has now been instituted against them under Article 160 of the Criminal Code (misappropriation and embezzlement). Investigators believe that officials with the help of "left" tenders and front companies managed to inflict damage to the state hundreds of millions of rubles.

And the Prosecutor General's Office started a pre-investigation check in the Railways, a month after which the head of the property management department of the Russian Railways Pavel Potopov was dismissed. There is a likelihood that in the future RZD will leave and another top manager - first deputy head Pyotr Katsyv. His son Denis in the US does not get out of the courts, he is the owner of the company Prevezon Holdings, which was suspected of withdrawing money from Russia. Disagreements with the law of the Katsyv family are not only in the US, but also in Israel: local law enforcement officers suspect that the Katsyivs were engaged in "laundering".

However, Russian passengers are not interested in such sessions with exposure, where convenience and comfort are more important. They will be able to appreciate the successes of the state company in the event that the trips are safe, ticket prices will stop growing, and the cars from old and foul-smelling will turn into new and clean ones.