ČD on shaky rails with regions

State-owned rail operator České dráhy (ČD) continues to hit a financial roadblock with its inadequate contractual agreements relating to regional transportation. The situation escalated with the start of the new year, as the Transportation Ministry-run rail service struggles with resources that threaten to be insufficient for even basic operations.

The shortfall comes from providing regional transportation to areas that cannot fully afford the services they request. ČD is expected to lose 3.2 billion Kč ($145.2 million) in 2009 subsidizing orders for regional lines.

"Regional transport lacks money, and regions have no chance to cover their expenses from their own budgets," said ČD Deputy General Manager Jiří Kolář.

The pitfalls of financing regional transport can be traced to management changes at ČD. Under 2005 tax-code revisions, the state separated part of the budget to cover regional lines. The amount earmarked for covering the expense was not enough for the orders, but ČD still had its profitable cargo transport at the time to cover the differences. When needed, regional transport costs were balanced by revenues from the ČD cargo company. However, that safeguard was stripped away when the cargo division was privatized in 2007 and separated from ČD as one of the conditions of the European Union. Since the split, regions have been unable to pay the full amounts of their orders.

"When the state gave regions money to cover their orders, it was enough at first. But this number was never flexible to the growing inflation as well as other expenses, such as energy and wages. Regions simply don't have enough money to pay, and the government will have to do something about it - and not only for now. Change must be in the system so we don't run into this problem again," said Administrative Director Jiří Mašek of the Association of Regions CR.

Balancing debt

Regional transport posted losses that reached 7.8 billion Kč in 2008. Regions were able to cover 4.7 billion Kč from their state-allotted subsidies. However, ČD has calculated that, in 2009, regional losses will increase to 8.3 billion Kč, factoring in inflation and line changes, and debt will amount to 3.2 billion Kč.

"ČD has already sold parts of its assets in the past in order to balance the debt with regional transport. But we can't rely on this process, as it's impossible to continue," said Petr Šťáhlavský, a ČD spokesman.

The reaction from the sector of government that deals with ČD is yet to be seen as the coalition Cabinet settles in to recent leadership changes.

"The ministry will not cover the whole debt from regions, although part of it possibly will be. We are now waiting for the reaction from our new Transport Minister, Petr Bendl. I can't say how he will approach this problem at the moment," said Jakub Ptačinský, a Transport Ministry spokesman.

ČD is in the middle of discussions with regional authorities, and both parties met Jan. 16 to explore possible solutions. ČD General Manager Petr Žaluda and the regions agreed that ČD will go through their figures again to precisely state where the losses are before they meet again with the regions, and finally petition the government for system changes.

Bibiána Cunningham can be reached at
bcunningham@praguepost.com