Having signed the agreement, Minister of Transport and Communications Marius Skuodis stated that having a competitive railway system across the entire logistics chain is vital for the country, and, considering the current geopolitical situation, it is even more crucial to ensure efficient and safe functioning of the railway network.
“Due to various sanctions and related reasons the demand for rail freight services has been declining since the beginning of last year, which will undoubtedly have a negative impact on the company's results. The current geopolitical situation makes it even more important to ensure efficient and smooth operation of railways, increase freight volumes transported from the West, and develop new routes of rail logistics,” said the Minister.
According to M. Skuodis, there has already been a significant decrease in shipment numbers since last year due to sanctions, and the company's results will undoubtedly be further impacted by declining volumes from the East due to the Russian war in Ukraine. The geopolitical situation has only accelerated the decision making on state support. According to the Minister, essential railway operations have to be ensured in the face of declining traffic and we have to create the conditions to help the businesses that choose railways for freight transportation.
Until now, the Lithuanian railway network has only been maintained by the users of the infrastructure. According to M. Skuodis, the dedicated railway infrastructure funding is aimed to mitigate LTG Infra's revenue losses and, at the same time, meet the expectations of the state in terms of offering attractive tariffs to businesses that use railway infrastructure and avoiding abrupt changes in tariffs. In addition, the promotion of passenger and freight transportation by rail is one of the priorities of the Green Deal.
LTG Infra is losing €45 million a year in revenue since Lithuania decided to cut off the transit of Belaruskali, a producer and exporter of potash fertilisers, from February. This amount is subject to change due to the war that Russia has started in Ukraine and the sanctions imposed on companies, as well as the decline in transit volumes in Kaliningrad. The Government has already decided to allocate €20 million to LTG Infra.
“Lithuania can become a leader in green freight transportation; however, this requires financial support from the state. Partial financing of the rail infrastructure by the state is viewed as a common practice around the world. State funding allows us to keep the trains running smoothly, offer competitive rates to businesses to transport freight by rail and cover a part or an entire distance using green kilometres. Due to its versatility, the railway can carry a wide variety of freight types,” says Karolis Sankovski, CEO of LTG Infra.
According to K. Sankovski, in order to amortise its declining revenues, the company is further digitising and automating its operations, acquiring services from market players, and optimising its operational functions, which it started several years ago. LTG Infra aims to save almost €7.5 million in this year alone.
The long-term commitment of the State to balance the revenues and costs of the infrastructure manager is enshrined in the legal acts of the European Union and Lithuania. The contract will be valid for a period of five years.
Partial financing of the rail infrastructure by the state in order to facilitate greater use of railways is viewed as a common practice around the world. For example, Germany plans to offer free access to railway infrastructure and to invest as much as €40 billion.