Financing the NSR: Regional Aspects

(By V. Kryukov, V. Shmat, A. Moe ; INSROP Working Paper No. 146 – 1999, IV.2.5)

The purpose of the present study is to discuss key economic issues in the development of the NSR, with special emphasis on the role of the regional level, and put forward ideas which can help solve the current economic problems facing the NSR, focusing on the crucial role played by the tariff system A sub-goal of the project has been to identify policies on the regional level with regard to the NSR, and the perception of the sea route as well as plans for its use and ideas for its role within the regional economies.

For the present level of use of the NSR transport system there are no real possibilities for introducing a competitive tariff rate. This will become possible only if the total cargo flow volume is multiplied approximately with a factor of 4.

If the cargo flow is increased further, it is possible to lower the limit of the profitable rate significantly. The profitable rate will stabilise as cargo flows approach 100% of the capacity of the NSR.

The possibility of leading a flexible tariff policy, in particular by differentiating tariffs in relation to distance of transportation, will appear when one reaches total cargo volumes corresponding to the capacity of the NSR transport system (e.g. an approximate increase by a factor of 7).

The level of differentiation of zone tariff rates will vary substantially according to the intensity of transit transportation. For the latter higher tariff rates are applied - close to the maximum acceptable competitive rate, in order to compensate for reduction of tariffs in separate sections of the NSR.

The present results may be used mainly for analytical purposes. In order to make more accurate calculations which could be used for setting up parameters for a real tariff system, it would be necessary to take into account the entire set of factors, influencing the competitive power of transportation along the NSR, in particular:

• real estimates of the costs for exploiting and increasing the capacity of the NSR transport system;
• production costs and market situation for the transported commodities;
• tax conditions for all subjects taking part in the production and transportation processes;
• additional transport costs, connected with mixed transportation scheme of most commodities (railway - NSR ports, river - NSR ports, etc.);
• considerations of possible competitors’ actions

V. Kryukov, V. Shmat, A. Moe, 1999, Financing the NSR: Regional Aspects, INSROP.©