Russian Railways: Phenomenon and Problems of Natural Monopoly

Most economists subdivide existing in the world economies three major types of monopolies: closed (state) monopolies, which exist due to legal restrictions associated with protection from possible competition; open, appearing for a relatively short period of time due to the natural situation on the market; natural monopolies that arise in situations where demand is met more efficiently in the absence of competition due to the technological features of production.

In the Russian Federation, the activities of such companies are regulated by the legal norms of Federal Law No. 147 "On Natural Monopolies" dated August 17.08.1995, 6011. This legal act determines the functioning of subjects of natural monopolies in many areas of the economy, including rail transportation. The Federal Antimonopoly Service controls the activities of such enterprises. At the moment, there are XNUMX companies in the register of natural monopolies. In addition, obligations to comply with the requirements of this law may also be imposed on organizations that actually carry out activities provided for by the above-mentioned Federal Law, which has repeatedly led to various conflicts in the final definition of a company as a subject of the natural economy.

If we continue talking specifically about rail transportation, we can come to the conclusion that the creation of several firms in this industry instead of one firm will automatically lead to an increase in production costs and prices, which is disadvantageous neither for the firm, nor for the state authorities, nor for the public interest.

Open Joint Stock Company "Russian Railways" started its activities on October 1, 2003. The sole shareholder and founder of Russian Railways is the Russian Federation. The powers of the shareholder on behalf of the state are exercised by the government of Russia. At the moment, the company is almost an absolute monopolist providing freight and passenger rail transportation services. Russian Railways owns the world's third longest rail network and related infrastructure in the Russian Federation. At the end of 2020, the company and its subsidiaries employed more than 0,8 million people (over 1% of all employed in the domestic economy), which makes the holding the largest employer in the Russian Federation.

President of the country Vladimir Putin in 2022 noted that in modern conditions the company performs the most important functions, working as efficiently as possible, emphasizing that highly qualified people work in the management of the holding, who must be given their due.

It is also worth clarifying that, despite the monopoly position in the railway services market, Russian Railways strives to create a more efficient holding management structure and maintain high standards for the provision of services. The development of the company will contribute to the successful implementation of the entire reform of railway transport in the Russian Federation, which should bring positive results both for the organization itself and for consumers.

However, at the same time, the status of a natural monopoly for Russian Railways is the reason for low competition in the freight transportation market and its virtual absence in the passenger transportation sector in Russia. The main goal of the company, like any commercial organization, is to extract financial profit. Here lies one of the main problems of this economic phenomenon, which consists in the fact that the relevant Federal Law, which was discussed above, imposes various restrictions and social functions on Russian Railways that are not characteristic of business entities. For example, the tariffs for suburban rail transportation, which the company provides, are controlled by regional authorities, when they are set, they try to achieve a balance between social interests and break-even transportation. There is no longer any talk of making a profit here. One of the few legitimate ways to solve this problem can be the creation of subsidiaries by Russian Railways, the establishment of dependent companies allows you to cope with the negative consequences of shifting state responsibilities in the field of social policy.

In addition, at the moment, the domestic railway industry is in dire need of reform for a number of reasons, one of which is precisely the monopoly position of Russian Railways in the market. In Russia, there is a rather low level of technical condition of rolling stock (many wagons and locomotives are subject to replacement due to their long service life and poor technical condition). To solve these problems, it is possible to consider the creation of other state vertically integrated organizations that will be engaged in rail transportation. You can think about the formation of the necessary economic conditions for the emergence of commercial companies at the regional level of rail transport. A rather deplorable situation is also observed with the state of the railway track in some regions, there are actually abandoned roads.

Summing up, it should be emphasized that the implementation of various economic and social programs aimed at the development of Russian Railways is extremely important for the entire domestic economy, since the effective functioning of this company plays a key role in the existence of railway transport in Russia. In addition, it is necessary to improve state regulation in the field of natural monopolies, it should be aimed at improving competitive mechanisms, which will give this sector of the economy a more market character.
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  1. Sergey Latyshev Offline Sergey Latyshev
    Sergey Latyshev (Serge) April 4 2023 14: 37
    What is this about?

    Now other sites are sounding the alarm that effective RZD managers are cutting jobs at the expense of safety. Here - not a word.
    Not a word about the fur coat storage and the withdrawal of money by the former official-vadel. Not a word about his sons and business with NATO passports over the hill.

  2. Alexey Lan Offline Alexey Lan
    Alexey Lan (Alexey Lantukh) April 4 2023 14: 51
    The author has absolutely no information about the activities of Russian Railways. In particular, no one is forbidden to buy several tens or hundreds, and preferably thousands of wagons and engage in the transportation of goods or passengers along the tracks of Russian Railways.
    1. Viktor Anufriev Offline Viktor Anufriev
      Viktor Anufriev (Victor) April 5 2023 14: 55
      As the author of the article, I want to ask, where in the publication it is indicated that this is prohibited?
      1. Alexey Lan Offline Alexey Lan
        Alexey Lan (Alexey Lantukh) April 10 2023 22: 44
        It's just that transport companies may not be part of the Russian Railways structure. Those. not everything depends on RZD. In particular, if for some reason there is no transportation of goods or passengers or they are inactive, then Russian Railways can dismantle these tracks if the state does not need them either.
        1. Viktor Anufriev Offline Viktor Anufriev
          Viktor Anufriev (Victor) April 22 2023 13: 34
          Again, you speak in such a way as if the article states the opposite.
  3. Jacques sekavar Offline Jacques sekavar
    Jacques sekavar (Jacques Sekavar) April 4 2023 17: 20
    Passenger transportation is unprofitable all over the world and Russian Railways is no exception and is separated into a separate independent legal structure of JSC Russian Railways
    Considering the density of the transport network and the availability of movement, the social significance of railway passenger transportation is exceptionally great as nowhere else in the world, and therefore the state cannot release them to the carriers, and this automatically implies limiting arbitrariness in the pursuit of profit
    The condition of the railway infrastructure is one of the best in the world, but there are no problems without problems - even in the sun they say there are dark spots. Therefore, in 2022, Vladimir Putin rightfully noted that in modern conditions, Russian Railways performs the most important functions, working as efficiently as possible.
    The undermining of Anufriev and his accomplices in the workshop under the natural monopolies of the Russian Federation aims to redistribute property and violate the established parity of interests of the state and capitalists in favor of capitalists who are not averse to tidying up state property, which is one-time according to the information of the vice-president of the Center for Strategic Development (CSR) Boris Kopeikin in 2021 was 56,2% and includes companies with state participation, the public administration sector, SUEs. The era of V.V. Puin will end, and then the capitalists will tear and divide among themselves the remnants of state property, and the population, as always, will be left with nothing and will pass on the golden time of V.V. Putin’s rule by word of mouth.
    1. hell MASTER Offline hell MASTER
      hell MASTER (Hell MASTER) April 4 2023 19: 34
      The golden rule of V.V. Putin? Hmm, what reality are you from? The average pension is 226 bucks, and the average salary is 700 bucks.
      Germany: pension 1300 euros, salary 2700 euros.
      Germany is forced to buy gas and oil, they do not sell natural resources.
      The golden time of Putin's rule, hmm.

      Veterans of the database receive a payment of 3500 rubles per month. 40 bucks. What did the US veterans do if they received this?

      Russia will remember the golden years, the best president in history at the moment is Medvedev. The country has flourished, for the first time the country's GDP has exceeded 2 trillion dollars.
      1. Alexey Lan Offline Alexey Lan
        Alexey Lan (Alexey Lantukh) April 11 2023 13: 31
        Germany: pension 1300 euros, salary 2700 euros.

        In Germany, there are completely different price tags for goods and services. If food in supermarkets is a little more expensive on average than in our country, then gasoline is 3 times more expensive, utilities are more than 2 times more expensive, renting an apartment is more than three times more expensive, etc.
        Of course the Germans live better than the Russians. It's always been that way. Even in imperial times. And now I will advise you to compare the standard of living of Russians with the standard of living in Ukraine, Congo, etc. Everyone lives differently and there is nothing to engage in anti-Russian propaganda.
  4. unc-2 Offline unc-2
    unc-2 (Nikolai Malyugin) April 5 2023 07: 33
    The state share in the railway is 51%. The rest is private. Having railway tracks does not mean keeping these tracks in their original form. Does the state control private traders in this respect? After all, optimization has gone through all the structures. Now there is already talk of removing the assistant driver. No matter how we approached what the United States approached, where derailment of trains is in the tens.
    1. Viktor Anufriev Offline Viktor Anufriev
      Viktor Anufriev (Victor) April 5 2023 09: 09
      You can familiarize yourself with the Charter of Russian Railways, which clearly states that the sole shareholder of the company is the Russian Federation.
  5. Scharnhorst Offline Scharnhorst
    Scharnhorst (Scharnhorst) April 5 2023 18: 01
    One and a half pages of typewritten text, nine paragraphs and 688 words from an upstart author under a shocking headline

    Russian Railways: Phenomenon and Problems of Natural Monopoly

    look as funny and sad as "War and Peace" from Olga Buzova. Sorry for wasted minutes.
  6. Dmitry Buller Offline Dmitry Buller
    Dmitry Buller (Dmitry Buller) April 6 2023 03: 52
    Yes, everything is fine in Russian Railways, but the fact that the salary fell by 4 times or the inflation of the salary amounted to 425 percent in relation to the MPS is cool, with a salary of 17 tr for locomotive maintenance mechanics, you yourself understand that it’s better not to ride trains
    1. Alexey Lan Offline Alexey Lan
      Alexey Lan (Alexey Lantukh) April 11 2023 13: 43
      Salaries in the Ministry of Railways have never been high, but 17 tr is absolutely. Perhaps in some wilderness? If on the Moscow railway, then who can work there? Unclear.
      1. The comment was deleted.