Government support for Russian Railways

Government support for Russian Railways from all budgets totalled RUB 112.2 bln in 2014, including federal budget subsidies of RUB 110.7 bln.

Government projects continued in the reporting year to develop railway transportation infrastructure funded by the Russian Railways budget through contributions to the Company’s charter capital. Total contributions to Russian Railways charter capital amounted to RUB 29.8 bln in 2014, including:

• for measures to develop the transport industry of the Moscow Region — RUB 18.4 bln (including RUB 12.1 bln from the Moscow budget);
• for the development of public railway infrastructure on the Mezhdurechensk-Tayshet section — RUB 8.5 bln;
• to build the Moscow-Kazan High-Speed Railway — RUB 0.02 bln;
• for the comprehensive reconstruction of the M. Gorky-Kotelnikovo-Tikhoretskaya-Krymskaya section with a bypass of the Krasnodar hub — RUB 2.9 bln.

In 2014, the Russian Government continued its regulation of tariffs for Russian Railways services to use the infrastructure of public railway transportation for suburban traffic. Subsidies earmarked in the 2014 federal budget to compensate for losses by Russian Railways associated with the provision of such services under a regulated tariff totalled RUB 24.4 bln and were received by the Company in full.

In addition, given the absence of tariff indexation for freight transportation, the Company experienced a shortage of funding sources in 2014 for major repairs on public railway transportation infrastructure. Subsidies have been allocated from the federal budget in 2015 as compensation for the shortfall in funds by Russian Railways in order to provide financial support for the safety of public railway transportation infrastructure through major repairs of such infrastructure in the amount of RUB 56 bln. Of this amount, RUB 30 bln were allocated in December 2014 as compensatory measures associated with the indexation of tariffs for freight transportation in 2015 below an economically viable level.

The government provided support to consignors and the public in 2014 via the Russian Railways budget in the form of subsidies amounting to RUB 0.5 bln to compensate for the shortfall in the Company’s income resulting from the transportation of cargo to heavily flooded areas of the Far East without charging freight rates.

The Company also received public support from regional budgets and extra-budgetary funds in 2014 in the amount of RUB 1.5 bln, including:

• RUB 1.0 bln under an agreement with the City of Moscow to reimburse expenses on work related to the construction of the Moscow Little Ring Railway;
• RUB 0.09 bln in subsidies granted in connection with the regulation of electricity and heat supply tariffs;
• RUB 0.09 bln in subsidies from the Krasnodar Region budget to reimburse lost revenue from the state regulation of tariffs for suburban railway passenger transportation;
• RUB 0.003 bln in subsidies to support the sustainable operation of public utilities;
• RUB 0.02 bln in subsidies for maintenance on low-density railway sections;
• RUB 0.3 bln in funding from the Social Insurance Fund for preventive occupational injury measures.