Armenian regulator criticises South Caucasus Railway for price hike

By bne IntelliNews March 17, 2016

Artak Shaboyan, head of the Armenian State Commission for Economic Competition, has criticised Russian-owned railway company South Caucasus Railway (SCR) for raising prices for freight shipments by 16% in 2015.

Russian public and private companies own most of the largest companies in Armenia, ranging from banks to utility operators, transport companies and manufacturing plants. A hike in electricity tariffs in 2015 by Russian-owned Electric Networks of Armenia (ENA) led to the worst protests in the country in over a decade, with demonstrators complaining about Russian corruption and mismanagement. With difficult economic conditions in Russia on which Armenia heavily depends for trade, investment and remittances, Armenia faces knock-on effects and does not want to exacerbate the socioeconomic situation in the country by allowing socially-important prices and tariffs to go up to avoid a repeat of protests similar to the electricity-related ones.

However, SCR's price hike has little to do with corruption and more to do with the losses incurred by the company in 2014, which amounted to AMD9.3bn (€17mn) and were caused by investments it made in infrastructure to fulfil its contractual obligations to Yerevan. SCR spent some €170mn on investment projects in 2014.

Shaboyan, however, criticised SCR for conducting opaque tenders when choosing its suppliers and subcontractors, and for making up "investments" that have no relation with its infrastructure. The official offered "landscaping services" that SCR paid for as an example.

"The commission has sent a report [about SCR] to the Russian antitrust agency, since SCR is part of the Russian Railways," Shaboyan added.

Russian Railways has operated SCR since 2008, when Yerevan granted it a 30-year concession management of the railway network and operator.

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