Russian Railways Reform and the Problem of Non-Discriminatory Access to Infrastructure

Restructuring of the Russian railways system is well under way. Among the policies just now coming into practice are two that are standard in railways restructuring in other countries: the provision of access to the infrastructure by independent train operating companies, and assurances of non-discriminatory access terms for such companies. However, 'discrimination' - in the traditional economic sense - is a standard and often welfare-enhancing pricing strategy for the recovery of fixed costs in a sector, like railways, with declining average costs. If competition regulators are unable to distinguish between discrimination that harms competition and discrimination designed only to recover fixed costs, policy makers in Russia and elsewhere will face a choice between large government subsidies and large welfare losses. In these circumstances, other restructuring models should be considered