Estonian Railways needs millions more from government to cover losses
The Ministry of Economic Affairs and Communications submitted a request to the government to allocate €8.7 million from the reserve to Estonian Railways (EVR), which would go toward covering the state-owned company's €20 million loss from last year.
EVR's expenditures exceeded income by €20.7 million last year, and by law, the state has to compensate this loss. The ministry had prudently already been allocated additional funding to cover losses in last year's state budget, but only €12 million. Thus, it needs another €8.7 million.
The government has already drawn up a draft order for covering these losses which notes that as the Ministry of Economic Affairs and Communications doesn't have free funds in its budget to balance EVR's income and expenses, the only option is to allocate the necessary funds from the government reserve.
Pursuant to the Railways Act, the state must ensure that, under normal business conditions, the income and expenditures of the railway infrastructure manager managing public railways — i.e. EVR — are balanced in terms of a five-year period.
By the end of 2020, EVR's income and expenditures from the preceding four years achieved balance with targeted financing of operational costs from the state budget. That year, the state paid more than €24 million in support, €7 million of which was allocated to cover the company's 2019 deficit.
In 2022, €14.6 million was allocated from the government reserve to balance the previous year's income and expenses.
The Ministry of Economic Affairs and Infrastructure forecast last April already that the complete loss of Russian freight would end up costing the Estonian state around €10 million.
In 2022, EVR's sales revenue fell by approximately one tenth on year.
EVR CEO Kaido Zimmermann told ERR last August that freight volumes on Estonian railways had more than halved. Passenger rail traffic, meanwhile, had remained steady on year, but he noted that it wouldn't be possible to raise infrastructure fees by much to compensate for the loss of freight transport.
"Some of these goods are price-sensitive, and what little Russia is allowing through... This is competition between Estonia, Latvia and Lithuania," he explained.
State will have to pay increasing support in coming years
The Estonian government's draft order regarding the allocation from the reserve notes that over the past five years, i.e. from 2018-2022, EVR's operating costs have gone up nearly 10 percent, which is low considering the consumer price index (CPI) has gone up some 40 percent and average gross wages around 28 percent in the same time period.
As former freight volumes aren't anticipated to recover, however, EVR will need increasing amounts of money from the state in the years ahead.
"Freight volumes on EVR infrastructure will not exceed the 5.5 million ton mark in the near future (in 2021, freight volumes totaled 12.76 million tons), and passenger transport will continue to dominate," the draft order reads. "Due to the sanctions imposed on Russia and Belarus as well as continued pressure on energy prices and labor costs, an increase in the support needed to ensure the balance of income and expenses can be expected in the following years."
The €12 million earmarked for support to EVR in last year's state budget pales in comparison to this year's €25.9 million. Planned support in 2024 is in the same ballpark as this year's, but EVR's support needs are projected to increase to nearly €30 million in 2025 and €32.3 million in 2026.
EVR's losses are forecast to total €30.2 million this year, €32 million in 2024, €34 million in 2025 and €38 million in 2026.
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Editor: Aili Vahtla