„The European Commission tries to address the obstacles of EU railway market”

Interview with Enrico Grillo Pasquarelli, Director Inland Transport, DG MOVE

In his interview for Railway Pro, Enrico Grillo Pasquarelli, Director Inland Transport, DG MOVE, talked about the importance of recasting the First Railway Package that needs to be simplified, clarified and modernised. Enrico Grillo Pasquarelli has stressed the fact that unclear conditions in the access of operators to an opened transport market is still an obstacle that prevents the efficient development of the profile market which could only reduce the railway transport competitiveness compared to other transport modes.


Railway Pro: Why does the European legislation on railway transport need to be amended?

Enrico Grillo Pasquarelli: The EU railway market suffers from three major problems: (1) low levels of public and private investments with the quality of infrastructure declining in many Member States, (2) lack of competition, with unclear market access conditions and the continuation of discriminatory practices, in particular for access to rail related services, and (3) inadequate regulatory oversight by national authorities with insufficient independence, competences and powers. To address properly these problems, implementation of existing EU rules is necessary but not sufficient. These European legislation needs to be simplified, clarified and modernised. This is the main purpose of the recast proposal.

Railway Pro: How can the new European legislation ensure an appropriate legal framework to sustain a high level of competitiveness in passenger rail transport?

Enrico Grillo Pasquarelli: Unclear market access conditions, possible conflicts of interest or, conversely, collusion between infrastructure managers and railway undertakings as well as discrimination in access to rail-related services still represent significant barriers to competition on the rail transport market. The Commission proposal tries to address these obstacles: if adopted, it will set out clearly the information that has to be made available to all operators by infrastructure managers, reinforce the existing provisions on the necessary separation of accounts between the various types of activities (freight and passenger transport, with or without subsidies for public service obligations…) carried out by railway undertakings in order to avoid cross-subsidisation and increase the independence of infrastructure managers’ functions, in particular concerning the collection of charges, from railway operators. The revised rules would also do away with conflicts of interest in the management of rail-related services and increase their availability for operators entering on the market. These achievements will benefit both rail freight and passenger services.

Railway Pro: What measures should be adopted so that regulatory bodies and authorities could be independent of any other public authority? In what areas of competence should be expanded the powers and prerogatives of the national regulatory authorities?

Enrico Grillo Pasquarelli: An adequate supervision of the market is indispensable to ensure fair competition. This is why the Commission proposal intends to ensure that regulatory bodies are in a position to carry out their duties effectively. This implies to increase their independence, extend their competences and increase their means. Regulatory bodies should in particular be a stand-alone authority and have strict requirements for the selection of its broad members and the termination of their mandate. The competencies of regulatory bodies have to be extended to include the supervision of rail-related services. The necessary means to be made at their disposal should include audit and investigation capabilities and sanction powers.

Railway Pro: In which way will the evolution of the European passenger rail market influence the implementation of multi-annual contract agreements between the state and infrastructure managers? What is the main advantage of multi-annual contracts compared to annual contracts?

Enrico Grillo Pasquarelli: Investors in rail passenger but also freight transport need to have a clear vision of the market conditions. This includes a medium-term visibility on the development of the infrastructure and on the evolution of the level of performance they can expect. The new rules on infrastructure financing, and in particular the generalisation of multi-annual contracts, have been conceived to give market players predictability and thereby to stimulate investments.

Railway Pro: How do you think the gaps between EU passenger rail markets could be overcome in what concerns opening up markets to foreign competitors? Should the authorities impose stricter penalties for countries who don’t open up market to international competition?

Enrico Grillo Pasquarelli: We have to distinguish international and domestic passenger services here. For the international services, there is a clear obligation to ensure market opening and the Commission is determined to ensure the application of EU law. It has already launched infringement procedures against some EU Member States, when necessary. Regarding the liberalisation of domestic services, these are purely national decisions, and it is not for the Commission now to comment on the wisdom of these decisions. But this very diverse picture is a source of recriminations by railway undertakings which face competition from operators coming from countries where the market remains closed for them. The situation is unsatisfactory. So we must eventually have the same opportunities for all. This is why the Commission has announced in September its intention to adopt by 2012 a new initiative to extend market opening to domestic passenger services in a manner which genuinely improves services to the benefit of EU citizens.

Railway Pro: Which is the best way to attract more private investments in passenger rail transport and how can the new European legislation improve this situation?

Enrico Grillo Pasquarelli: Beside better regulatory oversight, transparent market access conditions and the elimination of discriminatory practices I already mentioned, charging rules need to be adapted to stimulate private investments in both passenger and freight transport. The Commission therefore proposes to clarify the principle of track access charging at direct costs level, to ensure that cost reductions are at least partially passed on to users and to modulate charges to encourage investments in greener and interoperable technologies.

Railway Pro: Can the hindrances related to opening up passenger markets for short and long-distance travel – Intercity – be overcome, since there are gaps especially when it comes to cross-border traffic?

Enrico Grillo Pasquarelli: Domestic passenger transport market opening can certainly benefit from the experience of international services and cabotage. However the issue of liberalisation of domestic passenger transport is much more intimately linked with the issue of public transport and public service obligations (PSO) which cover the vast majority of passenger traffic in Europe. The typology of lines and services (high speed, conventional, regional and suburban) has a clear effect on the attractiveness (the economic profitability) of competitive services. The choice between competition on the tracks and competition for the tracks may depend on the type of line or service open to competition. But it is clear to me that when the Commission will put forward its liberalisation proposal in 2012 it will have to revisit the EU regulation on PSO at the same time.

Railway Pro: How can the new legislation impact on simplifying customs bureaucracy and levelling up cross-border systems in EU member states, as a stimulant to cross-border railway traffic?

Enrico Grillo Pasquarelli: The first railway package and the revision proposed by the Commission do not address directly customs and interoperability issues which are regulated by other pieces of legislation. However the Commission several measures to facilitate seamless cross-border traffic, such as a better coordination between infrastructure managers on train path allocation and charging for international services, and a better cooperation between Member States and the Commission on cross-border agreements.

Railway Pro: What lessons should we have learnt from the almost 4 years since the liberalisation of freight transport and what should the passenger transport liberalisation learn from this experience?

Enrico Grillo Pasquarelli: The liberalisation of freight transport has shown that changes in the legal framework are rather slow to materialise on the market. Various factors of a structural nature can explain this, in particular the size of investments required, the availability of rolling stocks and the length of the procedures for their placing into service, the design of charging schemes for infrastructure access. There are obviously technical and administrative barriers to entry in the EU rail market which relate to safety requirements and its lack of interoperability. These issues are mainly addressed by the Commission through the progressive development of a common approach to safety and harmonised technical specifications for interoperability. The liberalisation of freight transport has also shown the difficulty for international services to deploy their full potential as long as they cannot be underpinned by an open domestic market where they could organise feeder services.

Railway Pro: How do you appreciate the passenger railway market liberalisation, compared to passenger air transport market liberalisation?

Enrico Grillo Pasquarelli: The liberalisation of the EU aviation market nearly twenty years ago is clearly a success story. There are certainly lessons to be learned for the railway sector: the end of “flag carriers” and competition had very positive effects: the efficiency and competiveness of the air transport system have greatly improved, the services offered to passengers have increased and diversified significantly and aviation is now a very democratic mode of transport. This being said, the characteristics of rail transport are different: while aviation developed from the very beginning as a global industry, the rail transport evolved for two centuries within national borders, with each State establishing its own technical and operational standards. This historical background has to be taken into account. It justified a more gradual approach to liberalisation.

by Alin Lupulescu

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