Economic Policy Review ISSN 1313 - 0544

Enough, enough with the BSR!

Author: Metodi V. Metodiev / 09.10.2008
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It became apparent, during this week that, a new contract between the government and the Bulgarian State Railroads (BSR) is imminent for providing public service of transporting passenger within the country. The current ten years contract expires at the end of 2008. Naturally, according to the rules of the game, the Government announced a procedure for selection of a new railroad carrier. In that procedure there is naturally only one participant - BSR and logically they won. This is due to the fact that in Bulgaria only the state company has a license for passenger railroad transportation[1]. On top of all that, after signing the contract, the state undertakes to to give 1.2 billion levs to BSR for „health measures", which leads the absurdity to qualitative (and quantitative) new levels.  

It is going to be that way as long as there is no competition in the sector, which would replace the socialist-tribal principal of existence. In addition, the hopes that the EU would implement sooner complete liberalization of the passenger transportation proved fruitless.  Unfortunately the deadline for the so called complete liberalization of the railroad transportation (i.e. including the passenger transportation) was extended again and in stead of 2010 became 2017 with a possibility of deregulation of the group of the newly accepted countries.

Otherwise, our railroads are not doing well in the European rankings, which measure the degree of liberalization of the "railroad services"[2].  For 2007 we are at the 18th place out of 27 participating countries, the main reason we are in such "forward position" is that up until now we have matched relatively well the European legislation and have made one and the only significant step - dividing the company into two separate companies.

In addition to that, I am surprised by the effrontery of a group of government employees, who it seems, would not ever like to make sense of the official data about the operation and financial status of BSR.  

From the figure below it is clear that from 1990 the volume of passenger transportation had fallen from approximately 102 million to approximately 33 million for 2007, which is a decrease by approximately 68%, In other words the passengers prefer alternative methods of transportation, which are probably better quality, more reliable, faster and last but not the least the price is more adequate for the service provided. At the same time according to the financial reports, published on the Internet site of BSR, becomes clear that for 2006 the company has lost approximately 30 million levs, while during 2005 the loss is nearly 42 million levs.[3]

Figure: Passenger transportation by BSR

Source: Bulgarian State railroads (BSR)

The answer to the question how could the quality of services provided be improved has been given by us many times. Only de-monopolization of the sector, removal of the barriers to entry and by setting competitive market conditions would give the desired result, by creating stimuli for investments, more innovation and the presence of companies aiming at maximum satisfaction of the consumer demands for price, quality and reliability.

 If this simple concept could not be understood by our rules, unfortunately I would be left with nothing else but to start the next paper about the BSR (again) with ENOUGH, ENOUGH with BSR!  



[1] There are two more companies with a license, but it is only for cargo transportation!

[2] Rail Liberalization Index (prepared by the consultant division of  IBM)

[3] There is no data about  2007