The paradoxes of Russian railways’ loan policy

Irkutsk State Transport University, 236/B, Baikalskaya str., Irkutsk, Russia

^* Corresponding author: dinets_da@irgups.ru

Abstract

Russian Railways is gradually increasing its loan debt, which reflects the general trend of the economy. But, taking into account the objective economic state of railway transport and its low profitability, the increase in the share of borrowed funds reduces the company efficiency. This contradicts the purpose of using the loan, the purpose of which is to increase the return on equity. While analysing the results of the transport industry, we regarded it as an infrastructure industry, whose goal is primarily to provide macroeconomic indicators, and the problems of making profit recede into the background. An important factor in the development of the Russian economy in consideration of its geographical location is the development of transport networks, in which the predominant (at present and in the future) one is railway transport. However, its technical state requires significant modernization, investments far exceeding its own resources. The state, as a sole shareholder of Russian Railways OAO, does not have the necessary financial resources to handle the modernization, so Russian Railways is turning to the capital market, even reducing profitability. Private capital is willing to invest its capital only in separate modernization projects that can provide an acceptable rate of return for them. This explains the borrowing of capital for modernization at a price far exceeding the return on equity. At present, economic losses are expected to be set off by future revenues and mainly by the multiplicative effect of the economic growth of the national economy and the resolution of geopolitical problems. The purpose of the article is to try to explain the loan policy of Russian Railways.