One of the most important areas of tariff regulation in 2014 involved preparations for the signing of the Eurasian Economic Union Treaty, which took effect in January 2015. The signing of the Treaty finalised the establishment of a regulatory legal framework to ensure the execution of the international treaties of the Russian Federation on WTO accession and the establishment of the Common Economic Space as regards defining approaches for the implementation of the tariff policy on railway transportation.

In accordance with the Eurasian Economic Union Treaty, tariffs for railway transportation via the territory of Treaty member nations are unified by transportation mode (export, import and domestic) and a procedure has been established to set tariffs on transit freight shipments via the territory of Treaty member nations.

A unified tariff in the national currency under Section 2 of Price List No. 10–01 is applied to freight shipments on the Russian railway network as of 1 January 2015 under the Eurasian Economic Union Treaty.

In accordance with WTO requirements, the tariff policy of the railways of CIS member nations for international freight shipments involving Russian Railways contains only base transit tariff rates starting in 2014, while special tariff conditions (descending indices and special rates) are established by the resolutions of the Russian Railways Management Board.

Freight charges for transit shipments on Russian railways are calculated using the tariff currency of Swiss francs, which are then converted into roubles at the exchange rate set by the Russian Central Bank as of the acceptance date of the freight for shipment.

In 2014, it was decided to set the level of transit tariffs on Russian railways at the rates of 2013.

Starting in 2013, Russian Railways was granted the right under government decisions to independently modify tariff levels for freight shipments within the price limits set by the federal executive authorities. The principles whereby Russian Railways may alter the tariff level are strictly regulated by the rules established by the Russian Federal Tariffs Service for changing tariff levels within price limits.

The practice of applying the tariff corridor for a previous period of its validity has proven to be an effective mechanism. In particular, the tariff corridor resulted in additional shipments of 6.2 mln tonnes and additional income for the Company of RUB 12.2 bln in 2014, including RUB 7.1 bln from the decision to alter tariff conditions for the shipment of oil, petroleum products and diesel fuel (starting 9 August 2014).

The federal executive authorities of the Russian Federation regulate the activities of natural monopolies as regards setting tariffs on suburban passenger railway transportation in accordance with Resolution No. 950 of the Russian Government dated 10 December 2008.

The primary method of tariff regulation for suburban passenger transportation is the method of economically viable expenses, which ensures a break-even point for suburban railway transportation (Resolution No. 643 of the Russian Government dated 5 August 2009). According to federal law, the loss of income by railway transportation organisations shall be fully reimbursed by budget funds from the appropriate level of the government budget system. However, compensation from the constituent entities of the Russian Federation for losses incurred by Suburban Passenger Company in 2014 totalled only RUB 8.3 bln, or 56% of the required level.

In accordance with clause 23 of the Rules for the Railway Transportation of Passengers, Baggage and Cargo Luggage, which were approved by Order No. 473 of the Russian Ministry of Transportation dated 19 December 2013, the following tariffs are in effect for suburban railway passenger transportation:

• zone tariffs — in the form of a fixed rate for a tariff zone;
• tariffs per km — in the form of a fixed rate per 1 km;
• combined tariffs — (amount of the fixed rate per 1 trip for a certain tariff distance and when travelling above this tariff distance — payment at a fixed rate for each km).

The average tariff on the network was RUB 21.13 per 10 passenger km over the 12 months of 2014, a 7.2% increase over the tariff level of 2013.

Tariffs for long-haul passenger transportation in the regulated sector are set in accordance with Resolution No. 643 of the Russian Government dated 5 August 2009 “On the government regulation and monitoring of tariffs, fees and payment for the work (services) of natural monopolies in railway transportation”

In 2014, tariffs for travel in second-class sleeping railcars and sitting railcars were indexed at 4.2% under an order of the Russian Federal Tariffs Service. In addition, the regulator set indices for seasonal tariff regulation in order to even out passenger traffic.

In order to stimulate demand for transportation, tariffs for travel in first-class sleeping railcars and compartment railcars were kept at the 2013 level in 2014. However, Federal Passenger Company was forced to index tariffs for travel in compartment railcars at 5% in September 2014 due to decreased income from passenger transportation in the de-regulated segment.

Using a more flexible pricing system made it possible to not only retain but also increase transportation volume in the higher-margin segment.

When formulating the tariff policy for 2014, specifically the ‘Sales Depth’ campaign, which allows passengers to purchase tickets at a 50% discount for early travel dates based on the existing elasticity in demand for transportation, Federal Passenger Company expected a two-fold increase in transportation volume during the ‘discounted’ period. However, the number of passengers wishing to purchase tickets under the reduced tariffs turned out to be three times greater than the expected results, thus triggering an increase in transportation volume in this segment.