Railcar Conspiracy

16.10.2014 — Analysis

Against the Russian Industry

In August 2014 the member countries of the Customs Union enacted the technical regulations addressing safety of railway rolling stock. However, in October railcar builders declared that the new rules were impractical and near-impossible to obey.

As the RusBusinessNews columnist has found it out, the problem does not boil down to the mere unavailability of the standards railroad freight cars must meet. Everything is much more complicated: Since 2005 the industry has been facing the situation when manufacturing of innovative products is slowed down and the market is destabilized because of unreconciled interests of rolling stock manufacturers and consumers.

At the meeting held in Gomel, Vasily Varenov, the executive director of the Railcar Builders’ Association, Non-Profit Partnership, said that the standards list approved by the Customs Union Commission did not have any national standard that could be used for assessment of the rolling stock for durability and fatigue resistance in the load-up condition. As it turned out, the requirements set by the technical regulations could not be applied to facilities subject to technical regulation.

Varenov states that the absence of standards and their incompliance with the certification parameters impede severely the work of designers who do not have any idea which direction they should be heading. The present-day situation is very unique: To be able to compete with foreign manufacturers railcar builders must make innovative products; however, the requirements applicable to such products have not been defined yet.

In this situation, the RF Ministry of Transport decided to enhance the efficiency of the Russian railcar fleet (according to the statistical data of RZhD, OJSC, as of May 2014 the surplus of freight cars was 300 thousand cars). To implement its plans, the administration drafted amendments to the older directive of 2005, suggesting that numbers should be assigned only to the innovative rolling stock. Numbers can also be assigned to standard new cars when the older cars are written off the inventory. 

What does the adoption of the declared amendments mean? First of all, it means that they have been lobbied through by the operators who have quite an old railcar fleet (the most "outdated" rolling stock belongs to the largest players – the Federal and the First Freight Companies). The operators whose rolling stock is new will not be able to expand their railcar fleet. Secondly, the Tver Railcar Building Plant is going to be the winner – as it is the only Russian factory that, at the discretion of the All-Russian Research Institute of Railway Transport, is authorized to identify its gondola cars as innovative.

Amsted Rail awarded the Tver Railcar Building Plant a license for manufacturing of a truck with improved performance, due to which the sales increased considerably: RZhD gives discounts for freight transportation to the operators who bought innovative railcars from the plant. In the meantime, the Uralvagonzavod Corporation, which in 2008 designed its own (!) truck bearing a load of 25 tons per axle and extended run-life, has not been able to get any tariff allowance so far.

If the situation remains unchanged in the near future, the initiative of the Ministry of Transport will mean that the officials are lobbying interests of a particular company. Employees of the All-Russian Research Institute of Railway Transport are involved in the "conspiracy"; they are suspected to give preferences based on theoretic expert reviews.

The existing situation looks extremely odd: There are no national standards and durability assessment criteria, though innovative products are available in the country. However, the main problem is much wider: The "well-coordinated" actions of the Ministry of Transport and RZhD can destabilize severely the industry and the entire economy.

The Railcar Builders’ Association, Non-Profit Partnership, is concerned that the enactment of the amendment masterminded by the Ministry of Transport will result in a sharp reduction in the output in the entire sector. It will take long to write off older railcars, thus only about 3% of the existing stock capacity will be used. The expectations that manufacturers will plunge into making innovative gondola cars are groundless: Most of the factories will not be able to find investment and are most likely to wind up their operations.

The situation is going to cause adverse consequences that will hit manufacturers of special-purpose rolling stock, which, for some reason, is not seen as innovative, though its upgrading requires a lot of work. For example, Uralvagonzavod has manufactured high-capacity truck-based grain carriers from composite materials. However, these grain carriers will be bought only by those who have railroad vehicles "to write off", because the innovativeness criteria for special-purpose vehicles have not been defined and the types of cars, which are not subject to the new regulations, have not been selected.

All these "oddities" may result in the situation when factories manufacturing special-purpose rolling stock will have to be closed down. The most peculiar thing is that, having signed "death-warrant" to them, the Ministry of Transport will still not be able to accomplish its initial objective – reduction of the redundant railcar fleet, for the restriction on the issuance of numbers does not apply to… upgraded railcars.

"Upgrading" shall mean nothing but measures aimed at extending service live of the rolling stock after "band-aid" overhaul in repair shops. It was not very difficult until recently; that is why railway tracks are cluttered with "junk".

The operation of "upgraded" railcars is fraught with accidents. For example, in August in Penza a gondola car made in 1992 ran off the track; its service life was extended after its "upgrading" in December 2013. The expert examination revealed that personnel of the repair depot had "hung" the truck in the wrong way, which impaired the mobility between the truck and the car body. There were also other defects, which caused the crash.

Due to multiple violations of the guidelines by repair personnel, the RF government decided to bring in certification of "upgraded" railcars. The novelty was not appreciated by the rolling stock owners, who, probably, instigated the campaign for "reduction" of the railcar fleet. 

In the meantime, the railcar builders think that there are other ways to fight against the surplus of rolling stock: For example, demurrage charges and the car run-life limit of 2.6 million kilometers. Representatives of the Railcar Builders’ Association think that such measures will help to write off immediately about 180 thousand freight cars or, in other words, nearly the entire surplus.

Viktor Stepanov