The Lithuanian government, railway sector and various business associations have signed an agreement to boost rail freight in the country. They aim to do so via a stabilisation of rail freight rates. What’s more, Lithuania may even reduce freight rates in the future.
The parties signed the agreement on 31 August. It should help secure “consistent and predictable rail service rates” according to Lithuania’s transport ministry. Signatories include the ministry itself, rail holding LTG Group, as well as industrial, agricultural, stevedoring, freight forwarders and quarry associations.
Transport Minister Juras Taminskas emphasises that long-term forecasted rates for public rail infrastructure and service facilities are necessary to attract business investments and encourage freight growth.
“This is a historic agreement between the state, the railway sector and business, in which everyone wins. It provides more clarity and stability for business — the ability to plan financial flows, investments and a long-term operational strategy. For the railway sector, this means greater cargo volumes on the rails, and for society – less environmental pollution, safer and less congested roads in the country”, Taminskas said.
Pricing only clear after signing
A stabilisation of prices is much-needed, follows from a comment by the Grain Processors and Traders Association. Its president Karolis Šimas said that companies have to enter into long-term wagon rental contracts to make use of the railways, but the price is only revealed later.
“We only found out the price before Christmas. Pricing changes, then you change your methodology, switch to road transport again, and the railways don’t receive cargo again. And so it’s a vicious circle”, Šimas is quoted as saying by local publication LRT. “Moving now towards the memorandum and other steps will perhaps allow us to see the future more stably.”
Beyond the long-term stabilisation of rail freight rates, the signing parties agreed to strengthen dialogue. The businesses have committed to finding ways to move additional freight flows to the railways. The transport ministry will examine how it can improve the legal framework for freight operations, infrastructure financing and pricing.
A rail freight price reduction possible?
If successful, the scheme could ultimately lead to a reduction in freight prices, says Minister Taminskas. “The first step is to avoid raising fares, because they are raised by several percent every year. They will not be raised. In the long run, the more the railways are loaded, the more opportunities there will be to possibly reduce fares”, Taminskas is quoted as saying by LRT.
Moving freight from road to rail has become increasingly important to Lithuania in recent years. In part due to the implementation of sanctions against Russia and Belarus, a lot of freight disappeared from the country’s railways. National rail freight operator LTG Cargo only moves about 25 million tonnes annually, but there is capacity to handle between 50 and 70 million tonnes.
All the while, Lithuania pays for infrastructure maintenance and investments. Increasing the railways’ income could help cover those fixed costs.