Russian Railways intends to significantly increase freight tariffs in 2025

According to the publication’s interlocutors, the company is considering two options: indexing the rates by 17.2%, with a 3.6% indexation starting from November 1, 2024 and the remaining 13% starting from January 1, 2025, or making a one-time increase of 22.7% from the beginning of next year.

The first option will allow financing the investment programme for 2025 in the amount of 1.1 trillion rubles, which the company considers the minimum necessary, and the second option will allow financing the total amount of 1.8 trillion rubles.

Currently, indexation is carried out according to the formula “inflation minus 0.1%”, which means the arithmetic average of the consumer price index for four years (the previous two, the current one and the next) with a deduction of 0.1%. The new principles involve the use of a composite index of price pressure and the consideration of the annual increase in Russian Railways’ debt obligations, one of the sources noted.

The company has long been pushing for price pressure to be taken into account, which includes in tariffs not only consumer inflation but also industrial inflation, such as rising prices for materials, fuel and electricity. The additional revenue generated by such a system is estimated at about 30 billion rubles a year, although until now the growth of debt obligations has not been taken into account.

The company also proposed maintaining long-term target tariff surcharges, not restoring preferential rates for the transportation of coal for export, and increasing tariffs for the transportation of containers, construction cargo, and empty cars. An increase in benefits for coal miners was discussed both with the companies themselves and with the Ministry of Energy, although Russian Railways estimated its losses at 295 billion rubles a year.

In 2022, tariffs were indexed twice: 6.8% at the beginning of the year and 11% in June, which in total increased by 18.6% compared to 2021. In 2024, the indexation was 10.75%.

According to one interlocutor among the transporters, the high demands on the Russian Railways would be understandable if it were not for the deterioration in the quality of services and the slowdown in traffic. Another interlocutor notes that in recent years, large customers are less likely to protest against tariff changes than they were in the late 2010s.

At a recent meeting, major carriers agreed to indexation, but proposed to reduce its second part or postpone it until March, or reduce the minimum investment program of Russian Railways. In exchange, they want an increase in the volume of exports of their products, tariff preferences on non-premium export routes, and compensation for the increase in tariffs by abolishing export duties.

Infoline-Analytics director Mikhail Burmistrov noted that for export-oriented industries, the ability to cope with such indexation depends on the devaluation of the ruble: if the ruble weakens by 10% in six months, this will be quite acceptable.

He assumes that the government will meet the demands of the Russian Railways and that exporters will accept the conditions, but will try to improve them, for example by increasing the volume of exports of products. The analyst also warned that the increase in tariffs could lead to an increase in the outflow of cargo to road and inland water transport.