UPT CURRENT STATUS AND UPT REFORM EVOLVING IN RUSSIA

Transcription

1 1 MINISTRY OF TRANSPORT OF RUSSIAN FEDERATION FEDERAL STATE ENTITY "«TRANSINVEST" UPT CURRENT STATUS AND UPT REFORM EVOLVING IN RUSSIA The Study under patronage of Ministry of Transport of RF, of Ministry of Finance of RF and World Bank Task 6 Report. The Role of Federal, Regional and Municipal administrations and associations and trade-unions in UPT services. Draft for discussion Moscow 2001

2 CONTENT INTRODUCTION 4 1. SEPARATION of POWERS of UPT REGULATING STATE AUTHORITY AND MUNICIPALITIES, INFLUENCE OF PUBLIC ORGANIZATIONS AND PROFESSIONAL ASSOCIATIONS IN UPT POWERS of UPT REGULATING STATE AUTHORITIES AND MUNICIPALITIES IN RUSSIAN FEDERATION PUBLIC AND PROFESSIONAL ORGANIZATIONS INFLUENCE IN REGULATION OF UPT OPERATORS SOCIALLY FOCUSED REGULATED MARKET OF UPT SERVICES, AS A GUIDELINE OF UPT REFORM NATIONWIDE UPT REGULATING LEGISLATION ANALYSIS UPT FINANCING ANALYSIS: SOURCES And MECHANISM: UPT EXEMPTIONS AND CONCESSIONS ANALYSIS UPT OPERATIONAL FINANCING ANALYSIS OTHER UPT STATE REGULATING AUTHORITY AND MUNICIPALITY ISSUES UPT EVOLVING UPT EXEMPTIONS CONCLUSIONS RECOMMENDATIONS. 63 THE APPENDIXES 65 Appendix Appendix Appendix Appendix Appendix Appendix Appendix Appendix Appendix Appendix Appendix Appendix Appendix Appendix Appendix Appendix Appendix

3 3 INTRODUCTION UPT is an important factor in more than 1,300 Russian cities. UPT daily conveys more than 120 million passengers. Urban citizens make about 450 trips a year and the number is still increasing. The share of UPT in public transport is about 90%. Although the number of privately owned cars is increasing, this does not have much influence on city transportation. Municipalities and transport enterprises are doing their best to adapt UPT to recent market changes. Despite the heroic efforts of municipal transport managers there are still some negative trends in UPT. Cities do not have financial or other resources or the required level of experience to overcome these negative trends. If these negative trends are allowed to continue, it will result in the following: The quality of UPT is decreasing but the demand for mobility is increasing The carrying capacity of UPT is decreasing and the unfulfilled demand is not met by the increasing involvement of private sector route taxis (nor by private cars); Sharply increasing expenditure is required to keep the aging fleet operational; Passengers' transport expenditures grew because fares 2-3 times over flew cost price of operations; Fare evasion is extensive; Compensation from the budget does not meet the loss of potential and actual revenue from the carrying of exempt passengers; Procedures for access to the market are ill defined. The procedure of competition for the transport service market and organization-legal forms of enterprises competition in the market is ill ordered; The gray market has a significant share of UPT; UPT service differs greatly from city to city; and The carrying capacity and state of city streets is insufficient for desirable urban population's mobility. 50% of the urban transport fleet is over 8 years old and, with little or no replacement, the number of operative vehicles is declining; More detailed UPT current status and operation analysis is given in Appendix 1. To overcome these negative trends there are no financial and other sources enough in most municipalities, nor skills. UPT legal framework is ill defined also on federal level and it hurts to solve the issue. If these negative trends are persisting for the next 3-5 years, it will make real following challenges: Decreasing population mobility will adversely affect national economic growth; The Federal government will have to provide lump sum subsidies to help UPT recover from the present crisis. If not provided today, the Federal government will be faced with massive increased needs in the near future; There will be a lack of UPT sustainability and a decline in UPT safety; and

4 4 In the longer term, as in other countries, UPT will become less and the car more attractive. This will result in an increasing road accident toll, environmental situation worsening, and increasing road congestion. In small and medium cities, the switch back from car to UPT will be almost irreversible. Although the provision of UPT is a municipality responsibility, with the social and - economic outcomes now so great, the UPT decline has reached out nationwide and needs also to be addressed at Federal level The Federal government has already faced similar problems in Housing and Communal Services sphere. The only way to solve the wide-scale problems of such complexity is to implement nationwide an UPT systemic reform program. All managerial levels, from federal to municipal and all functioning aspects, from legal to technological should be subject to reforming. A detailed study of a role of federal, regional and city administrations, and trade unions and professional associations in UPT regulation has been completed by consultant s team of FSE "«TRANSINVEST" in the period of Jan to Dec, with appropriate federal legislation data, and regional and local legislation studies by «TRANSINVEST " and indepth Russian cities, carried out(spent) "«TRANSINVEST " (Task 3). Thus, major emphasis was placed on following institutional and legal issues of UPT regulation: An efficient UPT legislation at federal, regional and local levels; Responsibilities of UPT authorities of all levels Basis principles of UPT activity in the emerging UPT market; Principles, procedures and tools for recovering the costs of carrying exemptions; UPT operational financing and its matching with market driven economy; 1.POWERS AND COMPETENCES DELIMITATION AMONGST FEDERAL, REGIONAL AND LOCAL AUTHORITIES. PUBLIC AND PROFESSIONAL ORGANIZATIONS INFLUENCE ON UPT REGULATION POWERS OF FEDERAL AUTHORITIES AND LOCAL SELF- GOVERNMENT BODIES IN RUSSIAN FEDERATION. As there is no clear legislation principles set on federal level, which would define UPT regulation, thus there is neither clear delimitation of rights and responsibilities for those involved with UPT. Thus there is no effective coordination as on all Executive s hierarchy vertical from federal to city administration level- as well as amongst local self governments, UPT services customers, and UPT operators and passengers. It results in federal authority role being reduced mostly to allot not subsidized social mandates as the legal decisions made on granting exemptions, which are to be paid off by regional and local authorities, UPT enterprises and finally population itself. In turn regional, and municipal competencies are reduced to administering urban, suburban and inter-city transportations, while permanently lacking subsidies covering the

5 5 federally budgeted exemptions. As transport legislation differs a lot for both regions and municipalities, there are differences referring to how appropriate authorities should draft and pass the UPT legal norms (for example, UPT rules), set up and cancel the routes, acknowledge the time-table changes to the public, create new UPT enterprises with municipal capital participation, allocate budget subsidies and set fares. Major distinction concerns competences to subsidize UPT municipal enterprises, operating within the city and in suburban commuting. So UPT operation is subsidized at the expenses of both municipal and regional budgets with a different participation share (. Yekaterinburg, Omsk etc.). The suburban operation might be sometime subsidized at the expense of regional budget, and sometime at the expense of city budget (Rostov Oblast ). UPT fare setting is another subject of differences in competences. There are mostly regional administrations (Bryansk, Kaluga, Tula, Samara Oblast ) to set fares. However, some regions are delegating these regulating functions to municipalities (Krasnoyarsk region, Rostov Oblast etc.). UPT legislation of most cities (except for Kaluga) places major emphasis on municipal mandate forming and allotting issues. This municipal mandate is mostly used only UPT bus services, where several operators are sharing total amount of transport services to be performed. The UPT legislation in some regions (for example, Rostov Oblast ) requires the city administration will need to register municipal mandate as a single document. In other regions such norm is inexistent (Sverdlovsk Oblast ). There are many cities where UPT regulation bodies are charged with some additional functions. Most often they are selling tickets to the operators, they are selling monthly travel tickets to the population (Bryansk, Tula, Togliatti). The UPT regulation body in Tula is busy with fare collection in trolley buses and ménages also the service car operation provided to the city administration officials, car fleet maintenance included. The major problem of regional and municipal transport legislation that it formally nonconsistent with federal legal acts. Most controversial issues are: - competitive procedures while accessing the route; - contracting private operators, as an obligatory term of access to a route network; - operator identifying procedures, which are absent from federal law (route number registering in a license card, use of route maps), - fare regulation on routes serviced by private operators; - free travel identifying procedures, which are absent from federal law ( special coupons, use of plastic cards etc.); - exempt travel right cancellation for some categories of the citizens, entitled by the federal legislation to free travel According to the UPT development Program, the municipality establishes a route network for each UPT mode. A route network with competitive environment available, could be accessed mainly through open bidding or tendering procedures, regulated by municipality or an entity, authorized by it. Winners of bidding sign a civil-law agreement (or contract), which awards to operator the right of running transport service to the population on a route (group of routes) to the deadline set. An efficient contract performance would help to pay

6 6 back the investments. The contract stipulates rights and mutual responsibilities of the parties contracted. Such local decisions all over the regions repeatedly became a subject matter of case of Judiciary and Law Enforcement bodies. Private operators, public organizations and individuals initiated those claims. In some regions (Kaluga and Tula Oblast s, Krasnoyarsk region,) it resulted in canceling or suspending of several transport legal acts. Nevertheless, in other regions similar norms and rules have remained lawful procedures (Bryansk and Rostov Oblast s). In connection with above-mentioned it is necessary to note, that because of absence of basic legislative base at a federal level the effective system of bodies of state and municipal regulation by activity UPT, providing its steady functioning and development was not built. At reforming system of state and municipal regulation UPT it is expedient first of all to provide optimum separation of powers between federal and municipal authority levels, including: UPT regulative competences of federal authorities UPT regulative competences of regional authorities; UPT regulative competences s of municipalities.. Powers of federal authorities in UPT regulation. The federal authorities in Russian Federation are charged with following responsibilities: 1) Design and implement State decision-making in UPT regulation; 2) Develop UPT State regulation basics; 3) Draft UPT regulation normative legal acts of Russian Federation; 4) To develop systemic UPT regulation national standards and supervise its respect; 5) To supervise UPT safe operation national requirements; 6) To Form state support sources and control its appropriate use; 7) To categorize citizens entitled to concessionary travel, and provide compensating procedures covered from the budget of Russian Federation; 8) Other function, if established by Government of Russian Federation according to the current legislation. Powers of regional authorities in UPT regulation. Executive regional authority of the Subject of R F is charged with following responsibilities: : 1) To implement state UPT regulation policy within the limits of competence; 2) To pass the normative legal acts within the limits of powers given by the legislation of Russian Federation; 3) To form state support sources from the budgets of the subjects of Russian Federation and control of its use;

7 7 4) To categorize citizens entitled to concessionary travel and provide compensation procedures covered from the budgets of the subjects of Russian Federation; 5) UPT regulation additional requirements due to specificity of subject of Russian Federation in limits given by the Federal Legislation; 6) UPT operational coordination of municipal operators in suburban zone and in neighbouring municipal route network area; 7) Regional UPT operation road safety. UPT regulation powers of municipalities. The municipalities is charged with following responsibilities: 1) UPT services administering to the population; 2) To form UPT regulation additional requirements in limits established by the Oblast legislation of Russian Federation; 3) UPT operation management in appropriate municipality; 4) To categorize citizens entitled to concessionary travel and provide compensation procedures covered from the city budget. As object competences of State authority in UPT regulation should be mentioned: Object competences of the Executive authority of Russian Federation in UPT regulation; Object competences of the Executive authority of the subjects of Russian Federation in UPT regulation; Object competences of municipality in UPT regulation. Object competences of the Executive authority of Russian Federation in UPT regulation. Major legislation issues include on federal level: 1) UPT licensing; 2) UPT standardization and certification; 3) UPT development federal program; 4) Setting up uniform rules of passenger and cargo carriage by each UPT mode ; 5) Social standards and norms of UPT vehicle fleet availability and its maintenance; 6) Developing basics of municipal mandate to UPT operation; 7) UPT safe operation requirements and labor protection; 8) Standard requirements of the UPT statistic data and UPT operation reporting; 9) UPT vehicle fleet technical requirements and UPT staff professional adequacy; 10) Uniform insurance rules for vehicle fleet and passengers; 11) Metro operation subsidizing, UPT infrastructure and vehicle fleet procurement; 12) Penalties for UPT infringement; 13) UPT passenger standard duties and responsibilities; 14) Increasing environmental friendly UPT; 15) Standard UPT operating procedure in emergencies; 16) Standard procedure of UPT legislation supervision and implementing. Object competences of the Executive authority of the subjects of Russian Federation in UPT regulation. Major legal issues of the executive authority of the subjects of Russian Federation include following:

8 8 1) Legislation - drafting regional UPT development plans, additional normative legal acts; 2) Administration - route network coordination of adjacent municipalities located in subject of Russian Federation; 3) Technical issues road safety control and UPT vehicle fleet technical status; 4) Infrastructures urban road network and suburban zone control; 5) Finance metro subsidizing, UPT vehicle fleet and UPT infrastructure procurement; 6) Sustaining of equal UPT availability conditions for citizens of appropriate subjects of Russian Federation. Object competences of municipality in UPT regulation. 1. Major legal issues of municipalities include following: : 1) UPT management; 2) Drafting UPT development program; 3) Definition of the UPT customer; 4) Payable UPT demand survey; 5) Designing, approving and updating of the comprehensive UPT route network; 6) Rationalizing municipal route network; 7) UPT mode choice and coordination matching the local conditions; 8) Vehicle fleet amount needed to ensure safe and environmental friendly UPT operation; 9) Developing UPT municipal mandate; 10) UPT route network bidded access for operators; 11) UPT Schedule developing; 12) UPT ticketing; 13) Facilitating UPT travel by disabled; 14) Acknowledging the population on UPT operation information; 15) UPT performance supervising according to local conditions; 16) UPT availability and operation in emergency. 2. UPT maintenance and infrastructure development issues the municipalities are charged with: 1) Fuel and energy resources for UPT; 2) Maintaining UPT parking and terminals, rail and roads, and other infrastructure objects; 3) An effective UPT operation management. 3. UPT operational financing issues: 1) Fare setting on social important routes; 2) Lost revenues coverage to the enterprises and individuals which is due to the low fares of concessionary carriage compared to fares set; 3) Cost and payment of municipal mandate justification under UPT fare calculated; 4) Fare setting according to municipal mandate; 5) Penalties for fare evasion travel and cargo carriage on UPT; 6) Investments in UPT development; 4. UPT supervising issues the municipalities are charged with: 1) Meeting Federal requirements of UPT safe operation, management, and sound environment by all UPT operators;

9 9 2) Respecting passenger rights and responsibilities; 3) Rules of passengers carriage by each UPT mode PUBLIC And PROFESSIONAL ORGANIZATIONS INFUENCE IN UPT OPERATOR SELF-REGULATED ACTIVITY. The activity of public and professional organizations in Russian Federation is carried out on the basis of the Constitution of Russian Federation, and their legal rule is determined: by the Civil code of Russian Federation; by the Federal Law of Russian Federation On non commercial organizations ; by the Federal Law of Russian Federation On consumer cooperation ; by the Federal Law of Russian Federation On public associations ; by the Federal Law of Russian Federation On professional unions, their rights and guarantees of activity ; Etc. Being non-commercial, funds, associations and unions are not targeting to maximalize the profit and belong to NGO s and professional organizations. Created in February 1999, Russian motor transportation union (RACES) is one of the largest voluntary associations of the juridical persons. According to its charter, RACES has the following major purposes and tasks: The RACES purposes and major tasks: - To coordinate, to represent and to protect interests of the Union s members, and also to favor conditions for developing of motor transportation in Russian Federation; - To assist to developing normative legal base framework in motor transportation regulation; - To optimize co-operation in social - labour force relations in motor transport; - To develop motor transport infrastructure and of organizations meeting needs of motor transportation complex; - To develop and assist implementing of scientific decision-making in automobile transportations, vehicle fleet maintenance, and investment in motor transport; - To increase and to sustain road safety; - To expand and to improve cooperation amongst the Union s Members; - To sustain Union s Members steady economic growth and regenerate their investment activity; - To maintain a fair competition of all operators on equal conditions for the market of motor transportation services; - To train professionally Union s Members staff; - In interests of the Union s Members majority to make operation and

10 10 services more performant. Since February 1999, it has been accumulated a legislation and management experience. On that basis Union s Members could be more active and regular in developing legislative normative acts. Held on February , the III congress of RACES has prioritized for 2001 following Union s activity guidelines: - To prevent road incidents within the measures of federal and regional programs; - To create test stations for checking vehicle fleet within the framework of the SUBSYSTEM service and logistics centers; - To develop information structure and qualification system for staff training and professional skill improved for motor transport; Since February 1999 the Union has had certain experience of lawmaking and organizing activities. All these allowed the members of the Union to more actively and systematically join the process of development of the legislation and standards. Thereupon the III Congress of RAS held on February determined for 2001 the priority directions of its activity - For safe motor transport operation: - Active realization of measures to prevent road accidents according to federal and regional programs; - Assistance in creating technical inspection stations for checking motor vehicles within the framework of the service subsystem and logistic centers; - Development of information structure and systems of functioning of the Union divisions for preparation and professional training of the staff; For building a civilized market of motor transport services: - Assistance in creation federal and regional target funds for stabilization and development of public passenger transport with allotment of basic budget and off-budget sources; - Assistance in ensuring wider attraction of domestic operators to the market of international transport services and increasing of their competitiveness through application of a preferential taxation, restrictive measures to foreign operators on transport services in the third countries and strengthening of control of their activity; - Support of transition to cheaper kinds of motor fuel (liquid natural gas); - Support of development of forwarding companies and transport exchange to search the customers, to provide additional services (terminal cargo processing); - Participation in development of the uniform conditions in the transport and forwarding market for all subjects of motor transport, irrespective of their ownership and legal status; - Wide dissemination of best practice of maintenance, repair and operation of the route buses, cargo and taxis of the individual operators; - Attraction of the individual operators to public organizational structures, creating for them favorable conditions for their vehicles' maintenance and operation; - Assistance in introducing a uniform primary accounting on transport for all subjects of the market to maintain a fair competition, and also the control of

11 their application by the interested bodies of state administration and regulation; - Participation in formation of the passenger transport market on exclusively competitive basis with wide attraction of operators of any ownership; - Support in creation of the centers of passenger transport operation control in large cities, administering the passenger traffic, revival of forwarding services for the customers and truck operators; - Promoting the step-by-step local and regional tax exemption for the public passenger transport companies; For improving motor transport management: - Assistance in building and strengthening management structures carrying out state regulation of motor transport operation, organization of closer interaction between them at federal, regional and municipal levels; - Participation in development and appraisal of new forms of transportation; - Developing the documentation responding today's market and management, perfection of the operators' primary accounting; - Support to development and introduction of state standards regulating transport operation, technical maintenance and safety of vehicles; - Assistance in perfection of the taxation of the manufacturers producing and owners operating the vehicles not complying with the requirements of passive, active and ecological safety; - Participation in perfection of pricing, economic substantiation of the tariffs; For promoting investments and material support to the operators: - Assistance to enhance investment capacities of the transport companies, to rationally reallocate their fixed capital, to apply the accelerated amortization method, tax and other exemptions, and also regular and full subsidies through the budgets of all levels on passenger and freight traffic, the tariffs being regulated by the state authorities; - Assistance in wider introduction of the best practices of rational financial and technical support to the motor transport operators regardless their ownership, including the centralization of deliveries of the appropriate resources, using the facilities of the Association "Auto Resource"; For increasing the coordinating role of branch associations, for developing social partnership: - Assistance in upgrading the regional motor transport associations and unions, increasing their coordinating role in mutual relations with authorities and municipalities, trade unions and public organizations; - Measures to introduce professional days support to the retired workers and students of the youth automobile schools. - Participation in ordering system of realization of fare privileges, first of all for citizens who were granted exemptions in connection with their professional activity; - Development of fleet renewal through leasing schemes; - Development of the draft of the Federal Law "Basics of Motor Transport Activity"; - Participation in development of basic administration decrees and acts concerning the motor transport and forwarding, development and upgrading of 11

12 12 passenger of cargo traffic organization in motor transport; - Initiatives on development of the legislation on motor transport activity quota, on perfection of its licensing, and introduction of normative methods of its regulation; - Assistance in creation and support to regional motor transport associations with attraction into them, alongside with the branch companies, the associations of private operators; - Initiation to transfer to associations and unions the functions of pre-licensing inspection of the applicants' facilities for providing motor transport services; - Development of a mechanism of better reproduction of motor transport industrial base, maintenance of the transport infrastructure, fleet replacement. The all-russian motor transport and road-building trade union seriously influence the self-management of UPT operators and the conditions of managing. Its structural divisions work in all regions of the country, and its local organizations are formed practically in every municipal company. The basic functions of regional divisions of trade unions are: - Development and conclusion of regional tariff agreements; - Development, conclusion and control of performance of individual and collective labour agreements; - Control of observance of the appropriate requirements on safety and working conditions; - Organization of rest of the workers and members of their families; - Material support to families in need; In some regions the above-mentioned organizations are directly participating in the UPT management. For example, in Krasnoyarsk the representatives of the regional committee of motor transport and road-building trade unions are the members of the route bidding commission. Over the last few years practically in all cities of the case study, public organizations uniting private operators were created. In most cities they have passed state registration that allowed them to officially represent interests of the members. In some cities (Rostov-on-Don) such organizations work actively though have not been legally established so far. The creation of "new" trade unions has some purposes. First of all, their activity is aimed at the protection of the interests of private business in official structures. These associations actively participate in development of local transport legislations, in route bidding, in negotiations for fare revision and the imputed revenue tax rate. They are also planning a company for cancellation of cash-registering ticket machines required by tax administrations. The public associations use various forms to expression the opinions and requirements - from participation in sessions of various commissions to the actions of protest such as strikes. One more direction of activity is the protection of interests of the trade union members against the employers. First of all, this activity is aimed at establishing in all private companies a uniform minimally allowable level of drivers' wages, and also control of the operation conditions on the route, as provided for by the legislation.

13 13 The third direction is the transport management. In some cities trade unions participate in definition of the optimum number of operating buses and in route distribution among the collective vehicle owners (Bryansk, Kaluga). The trade unions make contracts with individual businessmen for medical surveys of the drivers, maintenance service and repair of buses. They organize terminal dispatching stations to control the regularity of bus schedules (Bryansk, Kaluga). They also give the individual businessmen juridical assistance. The plans of some trade unions include creation of own information systems allowing the drivers to receive the real-time information on passenger congestion on the bus stops (Kaluga). 2. PROVIDING CONDITIONS FOR THE SOCIALLY- ORIENTED UPT MARKET AS PRIMARY TASK OF AL UPT REFORM NATIONWIDE The formation of a socially oriented adjustable market of transport services is impossible without certain market conditions providing competition between the sellers (transport companies) and the customers (population) depending on quality and price of UPT services. The creation of market conditions of administration must be a corner stone of national UPT reform policy. It would be expedient to address some basic market conditions necessary for formation of the socially oriented adjustable market of transport services. The overall legal regulation of the competition in the Russian Federation is based on the article 8 of the Constitution of the Russian Federation, a number of antiexclusive norms contained in the Civil Code of the Russian Federation (articles 10, 57, 1033), special antiexclusive laws: "On Competition and Restriction of Monopolistic Activity on the Markets of Goods" (May 16, No.70-FZ), "Protection of Competition on the Market of Financial Services" (June 23, 1999, No.117-FZ), "On Advertising" (July ), "On Natural Monopolies" (August 17, 1995) "on Protection of the Consumer Rights" (January 9, 1996), and some other normative acts of different legal force. The base of the antiexclusive legislation is the law on competition on the markets of goods. The competition is defined as the focus of all the market economy. The sellers and the buyers compete to achieve their respective goals at the expense of the adversary (sellers wish a higher profit; buyers wish a higher utility, i.e. quality). The prices established through competition harmonize supply and demand. Through market rivalry the bargains take the form of contractual relations. According to this definition of the competition and to the specific features of market relations that have been accepted in Russia, the socially oriented adjustable market of transport services can be organized as shown in the Fig. 1. As we can see in the Figure 1, the market relations between the sellers of transport services (transport companies) and their customers (population) should develop independently of state support to the population (in the form of money reimbursement for the social exemption passengers and money payment to the professional exemptions). At the same time the volume of state support to the population depends both on the number of the concerned categories of the population, and on the applicable commercial fares. On the other hand, an independent market attitude of the population independent of state

14 14 support should ensure effective transition of the transport companies to market-driven management and large social security of the population both at the expense of address subsidizing, and at the possibility to travel without restrictions on every kind of routes, social or commercial. It is notable that the Ministry of Labour and Social Development with participation of the Ministry of Transport are preparing on behalf of the Government of the Russian Federation the federal draft law "On Substituting some Natural Social Exemptions with Money Compensation, and Amendments to the Legislation of the Russian Federation". The concerned federal authorities are approving this bill. It substitutes UPT exemptions with various kinds of money reimbursement to the citizens whose privileges have a social status. The reimbursement volume should be established by the Russian Government differentially for various categories of citizens according to their incomes. The reform of the financing of exemptions will concern more than for 38 million people. The administration bill is going to be brought in the State Duma in The medium-term program draft of social and economic development of the Russian Federation (till 2004) provides for the transition from natural privileges of professional categories of citizens to money payments added to the wages or money allowances. According to the Figure 1 the necessary preconditions for establishing the adjustable limited competition and thus the necessary market conditions are: Contractual relations between the transport companies, municipalities and population; State regulation of competition; Economic independence of transport companies; Adjustable market prices. Contractual relations between transport companies, municipalities and population. The contractual relations between transport operators, municipalities as buyers of transport services on behalf of the population, and population - passengers, should be established proceeding from the following basic legal and economic concepts and definitions describing the UPT: Urban Passenger Transport: the transport that provides public services in a conurbation zone on the basis of the contracts of transportation of the passenger and municipal contract; Contract for passenger transport service: a public contract determining the conditions of the UPT services; Municipal contract: an agreement between municipality and operators that determines the conditions of the UPT route operation and stipulates the procedure of providing public transport services by the operators; UPT activities: complex of works and transport services associated with preparation, administering and realization of UPT transport services; Customer of UPT transport services: a body of the municipality or a legal entity authorized by it, organizing and carrying out the UPT services

15 15 considering public needs for this kind of services and facilities of its financial maintenance; Tariff: the payment for travel and the UPT services within the limits of the established territory (zone) and distance. Thus it is necessary to draw a special attention, that the customer of transportation services, being a body of the executive authority of the municipality or a legal person authorized by it, carries out only organization of transportations on behalf of the public and in view of its need for this kind of services, and in all cases the passengers, i. e. the public, pay for transport services. At the same time, for the works on organization of transportation the direct contractors should be paid (divisions in the structure of the local administration or legal entities authorized by them), the executive bodies of local administration - through the local budget, and transport companies - from their incomes. State regulation of competition The state regulation of competition is carried out through the state support of certain transport companies (tax privileges, grants and soft loans) and through the redistribution of means between the transport companies in view of super profitable routes (high ridership in rush hours) and unprofitable routes (low ridership in the daytime and later evening time). The bodies of the municipalities or legal entities authorized by them according to the current legislation should carry out the redistribution of money funds between the transport companies. Thus the corresponding legislative and contractual documents should stipulate the order of definition and change of maximum profitability of routes, including: Setting of the minimum profitability, proceeding from the possibility of the company self-financing through simple reproduction; Setting of the maximum profitability, proceeding from the possibility of the company self-financing through extended reproduction. Economic independence of transport companies. As the Figure 1 shows, the economic independence of transport companies is achieved through their self-financing, self-crediting and self-insurance. The economic independence of the transport companies is realized through their maximum instantiating from the state. The self-financing is a financing by the managing subject - transport company of the productive process at the expense of own sources of financial resources. These resources also comprise depreciation charges and revenues funding enterprise accumulation fund. The self-financing means an opportunity of financial resources use, which the managing subject may reinvest, have no recourse to crediting or to shareholders help. The self-financing is just a tool of the extended reproduction at the expense of own financial resources. The self-crediting means the participation of the workers of the given transport company in the development of its business and construction of objects of social welfare crediting it by their own means. The self-crediting can be realized through issuing and distribution of the shares of labour collective as well as through an investment payment. The self-insurance of transport companies consists in creation of a separate

16 16 reserve fund for compensation of eventual losses in production and/or trade process. According to the federal law of the Russian Federation "On Joint-stock Companies", the creation of reserve funds is obligatory for joint-stock companies. Adjustable market prices. Since the demand significantly exceeds the offer (the overall carrying capacity of the UPT is 60 % of the needed), the market of transport services is mainly a market of the sellers, characterized by the increase of transport service prices without any adequate growth of their quality. So the state tariff control of transport services is required consisting in the establishment of allowable limits of change of the commercial fares to provide social guarantees of the population from the unreasonable rise in prices and minimum self-financing of the transport companies. With this purpose it is necessary to calculate and ratify the maximum and minimum fares. The maximum social level of passenger fare on motor transport (Тmax) should pay off on a basis of the payable demand of the population for this kind of services. To do that, it is necessary to calculate from federal statistics: The payable demand of the population for the UPT services through establishing a share that transport expenditures cannot exceed in the monthly average income of the population of the given city; The monthly average income of the population of the city in terms of the weighted mean income and the distribution of densities of the citizens with different income levels; The maximum social standard of fare, which increase will affect the social status of the population. The maximum transport expenses of the population are calculated by multiplication of the allowable share of the transport charges of the population in the monthly average income by the average monthly income. The share of the transport charges recommended by Department of Motor Transport of the MoT of the Russian Federation made 3 % from the average monthly income, the average monthly number of trips The social standard of ceiling fare is determined by division of allowable expenses on transport services by the average monthly number of trips (30). For example, if the federal statistics showed the monthly mean income in a given city at the rate of 2,000 rubles, the maximum social standard of fare (Т max) will make (2000*0.03) /30=2 rubles; The minimum normative fare level providing self-financing of transport companies. The minimum normative passenger fare level on motor transport should pay off the normative cost of passenger carried, cover operational expenses (taking into account the grants through the municipal budget) and the volume of passenger traffic. The fare thus designed characterizes the minimum level at which the operational expenses are covered. The commercial level of the tariff, i.e. fare level. The commercial level of the tariff should be set by transport companies, agreed with appropriate executive bodies, or legal persons, authorized by them, as passenger fare levels (T max, T min) and it should not be above maximum fare (T max) or below minimum fare (T min). The accepted commercial fare level should be rounded off to a price convenient for accounts with passengers. The relevant executive authorities or legal

17 17 persons should be acknowledged about commercial fare level but they should neither set it and nor coordinate it. 3. UPT REGULATING LEGISLATION ANALYSIS. Drafted in Russia prior to 1991, legislative and normative acts, had regulated UPT operation in command-administrative economy (Motor Transport Charter of Russian Federation, Code of Transport operation rules, and etc.). The market driven economy called for an essentially new legislation, taking into account the need of competition, based on economic independence of UPT enterprises, different ownership patterns, market prices etc. First of all it is the federal level, which needed a new legislation, as it was necessary to form initial standard conception and uniform UPT standard operation principles in market driven economy at regional and municipal levels. However, the federal level still lacked for such a legislation, small wonder, some issued normative acts were often seriously contradictory. At regional and municipal levels this resulted in a legal void which was filled up with a plethora of Laws, Rules and Orders contradicting to imperatives of efficient decision-making in UPT operation. To sum it all up, the legislation failed to address a lot of major issues, including: There are no clear rights and responsibilities for those involved with UPT; There is no definition of a municipality s responsibilities in the provision of UPT; The procedure of granting exemptions and considering the level of transport services necessary to meet the needs of exempt people is not well thought out; The rights and responsibilities of Federal authorities, subjects of the RF and municipalities for designating and compensating for exempt passengers are not defined; There is no policy nor mechanism covering Federal support of UPT; There are no mechanisms to provide cost recovery for operations by different forms of UPT enterprises and individual owners who are working commercially; There are no mechanisms allowing competition for access to urban route networks nor for entering into contracts between operators and municipalities; and There are no general guidelines on UPT management and nor on setting fares based on social norms and standards.. Special emphasis should be put on basic federal legislative documents regulating UPT operation and UPT operational financing, given in Table 1. Table 1. Key legislative documents regulating UPT operation and UPT enterprise financing N Legislative act Content of the legislative act and comments

18 18 1. Civil Code of Russian Federation (. The federal laws from ФЗ, from ФЗ) 1.1 Clause 786. The passenger carrying contract.p.2 It is set «Contracting of passengers carrying is acknowledged by the ticket, and passenger luggage delivery by luggage receipt». Fare evasion travel of the passenger is not provided. 1.2 Clause 790. Fares.p.5. It is set that «in cases, when according to the law or other legal acts, there are exemptions or concessionary travel or free cargo carriage, passengers entitled to, are compensated by transport organization at the expense of means of the appropriate budget» 2. The federal Law «About municipal financing bases in Russian Federation» from item 4 3. Federal laws UPT exemption granting to some categories of the citizens chosen through social and professional features. 4. Budget Code of Russian Federation. The federal law from ФЗ 4.1 Clause 238. The rights of the budget subsidies addressees, while budget exercise.p Clause 99. The state debt of the region (Subject of RF).п Clause 100. The municipal debt s п.3 It is set, that «accrued local budgets expenses due to the decisions made by of State authority organizations or by regional authorities, is covered by the decider of the specified decision. The amount of compensation should be stated simultaneously with the appropriate decision». The mechanism of compensation of the specified expenses is not provided. Concessions or travel exemptions are granted to some categories of the citizens. No clear specifications are mentioned about financing sources to cover expenses of carrying specified exemptions Deadlines of budgetary liabilities are set, but the penalties for having missed it are not provided. It is set, what form can take liabilities of the subject of Russian Federation. Under financing of budget subsidies addressees from the part of the subject of Russian Federation is not referred to its liabilities It is set, what form can take liabilities of the municipalities. Under financing of budget subsidies addressees from the part of municipalities is not referred to its liabilities.

19 Clause 72. The state or municipal contract and state or municipal mandate It is set, that the charges paid for the obligations of a state authority or body of local self-management city administration should be included in expenses of the appropriate budget. As the Table 1shows, the UPT enterprises according to the current legislation are first of all financed through direct sale of the tickets to the passenger (Civil Code of Russian Federation, Clause. 786.p.2). Besides, in cases when according to the normative legal acts, the exemptions or concessionary travel are established, its costs should be covered by transport enterprise at the expense of the appropriate budget (Civil Code RF.cl.790.p.5.). Thus there are a lot of the federal laws, entitling several categories of the passengers to exempt or concessionary travel, following budgetary compensated costs for exemption carrying to the transport enterprises, including: 1. Federal law «On Great Patriotic War Veterans» from ФЗ (in. The federal laws from г. 40-ФЗ, from ФЗ, from ФЗ). 2. Federal law «On education» from ФЗ. 3. Federal law «On social assistance to disabled in Russian Federation» from ФЗ. 4. Federal law «On care-taking and tuition to orphans and children left without parents» from ФЗ. 5. Federal law «On judicial executive officers» from ФЗ. 6. Federal law «On Federal Legislature Deputy Status» from ФЗ. 7. Federal law «On judge Status» from Federal law «On blood donor function and blood components» from. And other laws. Now there are 64 categories of the citizens (making 60 % of the passengers carried), which are entitled by federal legislation to concessionary travel. Still in most cases these acts don t specify financing sources of exemptions and their granting. At the same time current legislation does not provide effective UPT enterprise cost covering, due to the specified exemptions. Thus it should have mentioned: 1. As it has been found out, the exempt passengers (well over n 94 %) entitled to travel free according to the Federal Law. 2. The obligations to cover costs linked to passenger free or concessionary travel are mostly federal obligations and should be budgeted federally (Federal law «On financial bases of local self-management in Russian Federation «dated cl.4.). 3. Instead of direct subsidizing UPT, Ministry of Finance of Russia according to the current exemption granting procedure legal filled in the federal budget with a individual line, and it are taken into account while establishing Federal fund of financial support to the subjects of Federation. It results in

20 20 practically substituting the federal budgetary obligations towards transport enterprises by the regional and municipal budgetary obligations, whatever the subvention size. This is a major reason UPT under financing. 4. A duly and complete financing of the transport enterprises has no sufficient guarantees. It is due to shortcomings of budget legislation at a federal level. So before a new budget code of Russian Federation the budgetee, including the transport enterprises did not have chance to claim the state on under financing, because legislation did not stipulate the deadlines of the state financial obligations and penalties for breaking them. Put in vigor on , the new budget code stipulate deadlines of state financial obligations, but the penalties for having missed these terms (Budget Code Russian Federation of an item 238) are still not stipulated neither. The new budget code does not consider any more the under financing of budgetee (transport enterprises) as debt obligations of the subjects of Russian Federation and to a municipal debt obligation (BC Russian Federation of an item 99, item 100). Current compensation for transport enterprises under financing has got no legal basis by the time being. 5. While the contracting municipalities with transport enterprises in the form of the municipal mandate, municipalities as a matter of fact should charge themselves with federal financial obligations, which made legislative decisions on exemptions for some citizen categories and cannot guarantee them. According to an item 4 of the Federal law «On financial bases of local self-management in Russian Federation» those who have made specified decisions and have taken on certain financial obligation compensate the increase of the local budgets charges due to decision-making of state authority of Russian Federation or regional authority. However, these obligations, usually, are not practiced. So already in 2001 the Federal Law On blood donor functions has been amended and exemptions number extended to the persons awarded with «Honorable donor of Russia», without any specifying of relevant sizes and sources of financing. It resulted in necessity for regional and local budgets covering UPT losses. UPT enterprises carrying some categories of the exempt passengers are covered for it not only at the expense of the municipal budget, but also substantially the expense of the regional budget. So for Yekaterinburg the appropriate grants of the transport enterprises from the regional budget have amounted in ,2 %, in % from grants totality. The municipalities have not reason enough to charge themselves with obligations to cover to the transport enterprises exemption costs that complicates contracting a lot. 6. As current legislation survey has shown, the obligation of UPT enterprises to carry exemptions is much more legally significant than financial obligations of federal, regional, local levels to cover the exemption costs of the transport enterprises. It testifies ill organization and inefficiency of UPT regulating legislation. Conclusions. 1. At a federal level there is a need of a legislative base determining the standard conceptual framework and standard UPT management principles in market driven economy at regional and municipal levels.