It is assumed that they will be provided by a separate company dealing exclusively with passenger transportation. A model contract of relevant services between the Ministry of Infrastructure and Regional Development and an economic entity was approved by the cabinet on October 8.
The contract can be signed with a railway company that specializes exclusively in providing passenger transport services and does not perform the functions of railway infrastructure maintenance and/or freight transportation. It will receive compensation from the state budget for performing a public service. The level of this compensation is defined as the difference between the carrier’s costs of providing the service and its revenues from providing the service, with an agreed profit margin added.
To date, there is no such enterprise in Moldova. It can be created as a result of the division of the state enterprise “Railroad of Moldova”. Recall that the reorganization process of the Railways of Moldova envisages its division into three separate legal entities: state-owned enterprises for infrastructure, passenger and freight transport.
The draft contract establishes the conditions for tariffs, compensation from the state, carrier obligations, penalties and incentives, as well as reporting and control procedures.
The authors of the project note that contracting out such services is a common practice in many countries and is used to improve the safety of citizens, reduce traffic jams, optimize intercity passenger road transport, improve the quality of passenger traffic and reduce the cost of transport services. The Government hopes that in this way sufficient conditions will be created to ensure passenger mobility and redirect flows from road to rail passenger transport. As a consequence, the load on public roads will be reduced, which will lead to lower maintenance and repair costs.
According to the government, losses of Railways of Moldova due to cross-financing of passenger railway transportation and lack of interest of the state in co-financing this type of service amounted to about 1.7 billion lei.
Liberalization of the passenger transport services market and the possibility to conclude state contracts for such services increase the attractiveness for business to invest in rolling stock. At the same time, there is a potential for increasing the volume of passenger transportation on local railway routes.
