Competition, Latvia, Lithuania, Railways, Transport

Latvijas Dzelzcels representative Ella Petermane told BC that the Lithuanian rail company has just started its reorganization in accordance with the European Union’s (EU) regulatory requirements, but that LDz completed the process 12 years ago.

The restructuring of LDz began shortly after Latvia’s accession to the EU and was completed in July 2017. Lietuvos Gelezinkeliai, by contrast, is just beginning to restructure its business.

“Lietuvos Gelezinkeliai had not taken any steps to meet the EU’s requirements until 2017 - Lithuania’s rail infrastructure was managed and passengers and freight were carried by the same company, which did not allow to make sure that the decisions were taken independently, the cash flows were properly separated and there was no cross-subsidization of certain types of transportation services in the rail company,” Petermane said, adding that the Lithuanian government approved the plan drafted by Lietuvos Gelezinkeliai in 2018, and it was not until late 2018 that Lietuvos Gelezinkeliai announced the establishment of a separate company, LG Cargo, and a spin-off of two more enterprises – in charge of passenger services and transport innovation - at the beginning of this year.

Citing studies conducted by Ernst&Young Baltic auditors and PRIME, the Platform of Rail Infrastructure Managers in Europe, the LDz representative said that the volumes, load and costs of maintenance and the infrastructure managers’ additional services are roughly the same for both countries, but that the security level of Latvijas Dzelzcels is significantly higher.

Furthermore, since the reorganization of Lietuvos Gelezinkeliai is still in its early stages, an objective comparison of the two rail companies’ financial results is not yet possible, Petermane said.

The annual number of rail passengers carried on Latvijas Dzelzcels infrastructure is 3.5 times higher than the number of rail passengers carried on Lietuvos Gelezinkeliai infrastructure. In Latvia, these are more than 18 passengers a year as compared to 5 mln in Lithuania, and in Latvia each rail passenger costs the state budget three times less than in Lithuania. The annual government subsidy in Latvia is EUR 38 mln, thus, the cost per passenger is EUR 2.1. In Lithuania, the subsidy is EUR 27 mln, or EUR 6.28 per passenger.

As reported, during his recent visit to Lithuania, Latvian Transport Minister Talis Linkaits said that Lietuvos Gelezinkeliai might became a good role model for Latvia.

"I'm quite impressed by the changes that have been made (...) actually, I was told it was reflected in the financial situation in terms of profit and loss. Lithuanian Railways for us Latvians is a good example to learn from, to study. Probably there are similarities and there are differences but I really feel impressed," the Latvian minister told a press conference in Vilnius after visiting the Lithuanian railway company with his Lithuanian counterpart Rokas Masiulis.