Information published on 23 July 2019 in the UIC electronic newsletter "UIC eNews" Nr 656.

Latvia: On the comparison of the performance and management of Latvijas Dzelzceļš and Lietuvos Geležinkeliai

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SJSC Latvijas Dzelzceļš (LDz) would like to provide detailed information on the operations and reorganization of the Latvian and Lithuanian railways in line with the European Union’s (EU) regulatory documents, as well as the corporate management processes implemented in the companies.

Reorganisation in line with the European Commission’s requirements

Since 2001, the European Commission (EC) has been implementing a consistent policy aimed at the rail industry’s liberalisation, promoting competition in freight transportation and enhancing corporate management. To that end, the EC has adopted a number of documents in the past 18 years, and the member states are now in the process of transposing the 4th Railway Package, facilitating the attainment of the aforementioned goals. Among other things, the documents oblige the member states to separate the management of pubic rail infrastructure from commercial freight operations, as well as to work out infrastructure development strategies or plans and mechanisms to ensure the financial stability of the infrastructure manager.

The reorganisation of Latvijas Dzelzceļš was started in accordance with the EC’s requirements shortly after Latvia’s accession to the European Union and was completed on July 4, 2007 with a respective entry in the Register of Enterprises. It is therefore today, July 4, 2019, that we are marking 12 years since the reorganisation of the Latvijas Dzelzceļš Group in accordance with the EC’s requirements, whereas Lietuvos Geležinkeliai has only started the process.

Lietuvos Geležinkeliai, which now is being publicly named as a role model for Latvia, had not taken any steps to meet the EU’s requirements until 2017 – Lithuania’s rail infrastructure was managed and passengers and freight were carried by the same company, which did not allow to make sure that the decisions were taken independently, the cash flows were properly separated and there was no cross-subsidization of certain types of transportation services in the rail company.

As it ruled in 2017 on the dismantled tracks in the Reņģe-Mažeiķi section, the European Commission also noted a non-compliance with the EU regulation on the part of Lietuvos Geležinkeliai, calling on the Lithuanian company to work out a reorganisation plan. The Lithuanian government approved the plan drafted by Lietuvos Geležinkeliai in 2018, and it was not until late 2018 that Lietuvos Geležinkeliai announced the establishment of a separate company, LG Cargo, and a spin-off of two more enterprises – in charge of passenger services and transport innovation - at the beginning of this year.

Consequently, Lietuvos Geležinkeliai has only started taking steps towards reorganisation, which Latvijas Dzelzceļš completed already 12 years ago. Of course, Latvijas Dzelzceļš continues work to enhance its operations, develop business in its target markets, upgrade rail infrastructure, introduce innovations and increase efficiency, and we are glad that our work is yielding positive results.

(Source: LDz)