How many people are needed to change a 300kg railway track? The answer is six. This takes several hours and involves pickaxes and a great deal of physical exertion from the workers. In effect, this has always been the modus operandi within the Bulgarian railways sector - using working methods dating back to the beginning of the 20th century - as well as a highly inefficient allocation of resources.

Recently, there's been yet another attempt to devise a new state policy for Bulgaria's railways. To this end the state wants to allocate 6.5 billion leva over the next five years towards improving railway infrastructure and passenger services. The programme is based on the performance of the two state-owned companies operating the sector - the National Railways Infrastructure Company (NRIC), which takes care of train stations and infrastructure - and Bulgarian State Railways (BDZ).

The political council of the ruling coalition is still to discuss the plan, but it will decide within one month whether it could be implemented.

Currently, the Finance Ministry's calculations for next year's spending in the sector are 75 per cent less than stipulated under the strategy. According to Transport Minister Petar Moutafchiev, however, "there is no other alternative for the development of the sector" if we agree that this is (excuse the pun) the "last train" for Bulgaria's rail network. Moutafchiev also said that the allocation of billions of leva should be an economically viable proposition that must guarantee tangible improvements. The programme in question, however, offers no guarantees that the billions of leva invested in the sector will change the situation or that the two state-owned companies would cease to be a burden on the state budget. This can only happen by optimising the activity of the two companies or changing the sector's decision-makers.

A matter of infrastructure
Railway transport should be subsidised by the state because much of its service is motivated by the desire to meet society's needs. But experts posit that the model by which the sector operates should be completely revamped. The sector should no longer focus on people with low incomes but should instead target the middle classes, the business community and the environmentally aware. This is evidenced in economies where train travel has managed to become a competitive alternative to other transport and has managed to attract well-heeled passengers.

But there remains a major obstacle: affluent passengers are hardly likely to be attracted to trains that travel at an average speed of 47.7 km/h. Again, according to experts, high speed is pivotal to the sector's development, hence most investment should be directed at improving infrastructure. These investments should not be simply aimed at repairing sections of the track but instead at renovating entire routes to generate traffic and income.

Unfortunately, the programme does not provide any of this for Bulgaria's current major train routes, specifically the routes between Sofia and the two Black Sea cities of Varna and Bourgas which generate one third of the traffic served by the BDZ (33 million passengers a year or 10 million trips). "Currently, there are no plans for full-scale renovations of these routes," the NRIC said. Instead, the company says that plans only involve "emergency repairs on certain sections", citing the lack of technical capacity for such a large-scale operation.

If one considers that the renovation of one kilometre of railroad currently costs about one million leva and that the Sofia-Varna distance is 543km and the Sofia-Bourgas track is 450km, then the complete renovation of the two routes would cost about one billion leva. The state - in the form of the Transport Ministry and its programme - wants to invest 1.2 billion leva in the passenger services of the loss-making BDZ. The programme envisages the purchase of 20 locomotives for long-distance routes and 50 for short-distance routes as well as 220 carriages.

The fastest wins
Instead of using these funds to improving infrastructure, the NRIC offers calculations about achieving an average speed of 88.2 km/h for passenger trains on major routes by 2013. According to experts, however, locomotives can easily achieve an average speed of more than 120 km/h when their top speed is projected to be between 200-220 km/h.

Shortening travel time will attract those passengers who traditionally use buses and also decrease the number of trains. Higher speeds will most probably have a positive impact on the whole sector, especially in terms of cargo where four private companies are already operating. Passengers in transit through Bulgaria will also benefit from improved rail infrastructure. The flow of more well-heeled customers will also make train stations attractive to investors. In this respect the ministry's programme envisages allocating eight million leva to train stations annually.

Bulgaria currently has 340 train stations and it is still unclear how this money will reach its target. Furthermore, liberalisation of the passenger train market combined with upgraded infrastructure could lure private companies who could find a niche in the market by offering quality services to wealthier customers on more lucrative routes.

Alone in the boat

Thanks to the agreement the state will sign with BDZ by the end of the year the current situation will be secured at least for the next 15 years. No one is mentioning privatisation of BDZ at this point. According to Moutafchiev, the purpose of the investment in BDZ is for the company to start making a profit. However, calculations show that if, currently, the BDZ needed 180 million leva in subsidies to support its socially orientated services, then by 2012 it will need 246 million leva.

The programme does not even mention "staff cuts" even though the BDZ heads the list of the largest employers in the country with more than 17 000 staff as of last year. This would not have been such an issue if labour productivity were better. The numbers, however, tell a different story. Reports from one of the sector's private cargo companies reveal them to be twice as efficient as BDZ's transport arm. The private company has a staff of 200 people while the BDZ subsidiary employs a total of 3846 people.

The programme also mentions nothing about optimising the railway's activity. In 1998, World Bank experts said that nothing could be done unless BDZ stopped servicing loss-making routes. Since then, however, the company has stopped servicing a mere 32.8km of railroad.

The programme
The plan proposed by Transport Minister Petar Moutafchiev and the chairperson of Parliament's transport committee, Yordan Mirchev, has Bulgaria injecting 6.5 billion leva in upgrading the country's railways by 2013.

Moutafchiev presented the plan on October 17 and said that the figure was based on "detailed calculations" of how many new train engines, coaches and wagons needed to be bought, as well as the exact cost of repairing or replacing existing railway infrastructure. Unless an "aggressive investment strategy" was pursued, the two loss-making state-run companies would have to reduce services, Moutafchiev said.

The plan envisages the allocation of 3.94 billion leva to operator Bulgarian State Railways (BDZ) and a further 2.56 billion leva for National Railways Infrastructure Company. The bulk of the funds would come from the state budget, but 1.4 billion leva in European Union funds were also pencilled in, while 360 million leva are expected to come from a World Bank loan.

The plan has been submitted to Prime Minister Sergei Stanishev and is expected to be discussed by the three leaders of Bulgaria's ruling coalition later this month. There was no guarantee that the plan would be adopted, but the ministry would ask that its allocation of funds in the 2009 Budget be increased by 70 per cent, Moutafchiev said.

The number of people served by BDZ has dropped to about 35 million a year from more than 110 million in the early 1990s, mainly due to declining quality, Reuters reported.

Source: Kapital weekly
Issue 43