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Russia   Lower ex-works gravel prices in Karelia

New claimants joined case against Russian Railways and Federal Cargo Company

Russian RailwaysFAS brought the Government of the Karelia Republic, Mosenergo, OGK-2, TGK-1, Khmelnitsky Kar’er and Promnerudtrans Ltd. as claimants in the proceedings on a case against Russian Railways OJSC and the Federal Cargo Company. The grounds: petitions form the above entities.

According to Artur Parfenchikov, shortage of gondola cars in the North-Western Federal District and high prices for gondola cars, the mining companies in the Karelia Republic are non-competitive for supplying gravel to Moscow and the Moscow region, which may harm major budget revenue generating companies in the region and create preconditions for social tension.

READ MORE Russian FAS suspects stevedoring companies fix high prices at seaports

A letter from Acting Head of the Karelia Republic states: Due to misbalance of car fleet producers gravel in the Voronezh region and the Belarus Republic obtained more advantageous price conditions, while producers from the Karelia Republic were practically cut off from the market.

At lower ex-works gravel prices in Karelia – on average 370 RUB/ton (against 500 RUB/ton in the Voronezh region, 450 RUB/ton in Belarus), the costs of Karelian gravel at the destination stations are considerably higher – on average 1200 RUB/ton (against 1050 RUB/ton – gravel from the Voronezh region, 1100 RUB/ton – gravel from Belarus).

Mosenergo, OGK-2, TGK-1 complained to FAS that the Federal Cargo Company (FGK) fixed monopolistically high price for offering gondola cars to transport coal.

Mosenergo explains: FGK on the market of offering cars meets the signs of dominant position on the market, since setting rates for leasing railway other operators and owners of car fleet are guided by the rates fixed by FGK.

In October 2016 FGK notified coal suppliers on increasing the rates for gondola cars, and suppliers approached Mosenergo asking to increase the transport element on the costs of coal supplied by TETs-22 – a branch of Mosenergo, by 11%.

The actual growth of transportation costs in QI 2017 in comparison with the first six months of 2016 is already 23%.

Representatives of the generating companies also point out that being end coal consumers they have to include the increased transportation element of coal price in their tariff for generated power.

Mosenergo continues: Generating companies have, in particular, social responsibility for reliable and uninterrupted supply of heat- and electric power energy to consumers, especially in autumn-winter season.

Therefore, generating companies cannot exercise their right to unilaterally terminate coal supplies under the changed conditions – the uncontrolled growth of the transportation element.

The situation is aggravated because the increased transportation elements in the coal costs will be inevitably translated into the tariffs for end consumers, particularly, residing in the cities of federal status – Moscow and St Petersburg.

Khmelnitsky Kar’er and Promnerudtrans Ltd. state that FGK fixed monopolistically high price for gondola cars for transporting mineral-and-construction cargo (gravel, limestone, etc.) The case upon signs of abusing dominance was opened on 18 November 2016.

According to FAS, in January 1 - August 1, 2016 the costs of services of FGK for offering gondola cars for domestic transportation of mineral-and-construction cargo increased by up to 38%.

The rates for gondola cars for particular consignors in June 2015 – June 2016 went up by 2.2 – 2.5 times. FAS intended to investigate whether such an increase was justified.




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