Rail freight voices doubts about EU Commission’s state aid proposal

The European Commission came out with a proposal to modernise rules on state aid for the transport sector on 18 June. Whereas the European Rail Freight Association (ERFA) notes positive changes, it also has reservations about the proposal, fearing that it could lead to unfair advantages for some companies in the sector.

The adoption of the Commission’s proposal would introduce a new set of rules to determine the applicability of state aid for railway undertakings, replacing the currently active guidelines from 2008.

“Whilst public support measures can play a positive role, they must be limited to areas of common interest to avoid competition distortion and maximise limited financial resources”, warns ERFA.

“There is a limited amount of money which rail freight can avail itself of and we need to ensure any money is granted wisely. On top of this, we must also always be aware of the risks arising from introducing state support into a competitive market”, the association’s director Dirk Stahl says.

Operational aid

The organisation says that instead of providing operational aid, the guidelines should focus on reducing the cost of infrastructure use. “Operational aid can often become a tool to support failing or non-effective business models or methods of transport organisation. Care must be taken to ensure operational aid does not create unfair competition between sustainable modes of transport and within these modes”, it explains.

ERFA highlights the example of Single Wagon Traffic, for which the Commission does not want to have a distance limit on operational aid. ERFA warns that aid without distance limitations could not only make it more competitive than road traffic, which is desirable, but also propel it beyond block trains. The latter, together with intermodal traffic, has to deal with a 350-kilometre distance limit on operational aid.

“Operational aid over long distances which is granted per kilometre may bring Single
Wagon Traffic into direct competition with block train traffic, therefore only resulting in a shift
from one way of organising a freight train to another and having no impact on modal shift”, ERFA writes.

Interoperability aid

The association points to the Commission’s proposals on interoperability aid as a positive, but sees room for improvement. “One of the major financial burdens facing railway undertakings today is the requirement to invest in technologies which have little, if any, direct benefits to rail freight undertakings”, ERFA says.

“ERFA therefore welcomes that ERTMS has been signalled out by the European Commission in deserving of a higher threshold for interoperability aid by setting the aid threshold at 80 per cent compared to 50 per cent for other forms of interoperability aid.” Nevertheless, it would also like to see the threshold raised further to 100 per cent outright.

Lastly, ERFA warns that aid for new commercial connections should be approached with caution. “There is a need to ensure situations are avoided when new commercial services are set up which are reliant on State Aid, thereby leading to a situation that after five years, the service needs to be discontinued due to financial unviability as it proves to be financially unsustainable.

Restructuring aid

The Commission’s proposal does not provide any guidelines on restructuring aid for companies in financial trouble. ERFA says that it “welcomes the decision by the European Commission that aid to undertakings in difficulty is excluded from the scope of the Regulation and that such aid should instead be assessed under the Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty.”

“The possibility of restructuring aid therefore has the potential to create competition distortion and reduce incentives for state owned railway undertakings to arrive at a good financial situation”, ERFA explains. “Crucially, introducing a new possibility for restructuring aid would undermine private investment in rail freight.”