Updated August 14, 2008

JSC Russian Railways (RZD) approved establishment of a company specializing in transportation of grain. RZD’s subsidiary – the First Freight Company – becomes a controlling stockholder. Its partner, with 49%, becomes a joint venture of such forwarders as LP Trans and TechnoTrans that earlier have been accused of gaining excess profits from exclusive relations with JSC RZD by the grain market participants.

On August, 13 JSC Russian Railways reported that the company directors’ board approved the First Freight Company’s (FFC) participation in establishing CJSC RusAgroTrans that becomes the specialized operator of grain transportation. The FFC declared about such operator establishment a month ago, and specified that the project would be implemented with private partners’ participation. On August, 13 JSC RZD reported that the FFC would own 51% of RusAgroTrans’ stocks, and the rest 49% – the private company JSC RuTrancCom. The FFC will contribute its overall pool of grain cars numbering about 6 000 units to the new company, and private stockholders – a sum of RUR 3,7 billion.

RZD’s report is saying that RusAgroTrans was established by means of two private forwarding companies’ amalgamation – LP Trans and TechnoTrans. The company should start its activity in 2009 under the single brand. TechnoTrans chief executive Victor Chuykin reported that the amalgamation "has taken place from the technical viewpoint, but is de facto yet". Earlier, Mr. Chuykin said that the company was established pari passu, but he also mentioned that "very large foreign banks" had a possibility to enter the founders’ body, as they should finance a rolling stock’s purchase of RUR 27 billion. On August, 13 Mr. Chuykin said that the companies had reached preliminary agreements with one of the banks, but refused to name it. In LP Trans refused to comment.

LP Trans is a well-known and popular company at the grain market, but due to good relations with JSC RZD mainly. At the beginning of the current year, when prohibitive export duties were acting in Russia and the Russian grain traders were engaged mainly in the transportation of the Kazakh grain, the Russian Grain Union (RGU) accused the railroaders of providing LP Trans and TechnoTrans with the preferences. RGU vice-president Alexander Korbut was saying then that the Center for original transport service of JSC RZD had agreed with the plan on transportations for these two companies only, and they, according to the grain market’s participants, asked 60% from the railway tariff’s price for their services, when the regular price of forwarding services is 0,5-1%. Victor Chuykin demurred saying that his tariffs were "objective", and explained that they were calculated judging from the cost of grain cars’ rent. "Freight owners can use their own rolling stocks if they wish, and that can reduce their expenditures", he says.

The FFC’s vice-president on strategy and corporate development Alexander Sapronov explained the choice of the established company’s co-owners saying that they "have approved themselves at the market quite good, and feel comfortable here and know specific features of the export-import transportations". Moreover, private investors have obliged to invest in the rolling stock’s upgrades, Mr. Sapronov adds.

RusAgroTrans’s entry to the market will result in a price rise for grain transportation, experts suppose. "When a company promises some investments, it will inevitably compensate them by means of price rise for transportation", Infranews agency head Aleksey Bezborodov supposes, and considers that as a result the grain freights will move from the railway to the transport. AgroMarket Trade Company chief executive Mark Fedotov considers that growth of transportations’ cost can reduce profitability of both the agricultural producers and the exporters.