FINANCING
Financing is a topic where it is worth taking a closer look.
Hearing
Taxes, levies
- 31.08.2022: Federal Council decides to modernise the collection system for the Distance-related Heavy Vehicle Fee (HVF)
- Information on the Heavy goods vehicle charge (HGVC)
- HVF calculator from ASTAG
- Renewal of the technical infrastructure of the Heavy Vehicle Fee (HVF) as of 2025
- National consumer price index
Financial aid
Joy at SBB, concern at SBB Cargo
SBB is in excellent financial health. This was communicated on 11 March 2024 with the 2023 annual accounts. Only subsidiary SBB Cargo is still considered a problem child and is to receive financial support. We at the VAP think so: This must not be tantamount to permanent subsidisation of single wagonload traffic (EWLV). And the proposed financial injection of CHF 1.25 billion is invalid in view of the 2023 annual accounts.
That’s the point:
- 2023 results: black and record-breaking
- Eternal problem child remains in deficit
- Record results and billions in aid – how does that fit together?
- Corporate responsibility required
2023 results: black and record-breaking
1.3 million travellers, CHF 269 million profit, 9.9 % additional revenue from passenger transport, 92.5 % punctuality despite 20,000 construction sites, debt down to CHF 11.3 billion, all investments financed from cash flow: SBB’s 2023 financial year is bursting with good news and superlatives. For the first time in the post-Covid era, SBB is back in the black. This pleasing performance is primarily due to a record number of passengers and substantial profits from SBB Real Estate. It is therefore not surprising that those responsible are looking to the future with confidence.
Eternal problem child remains loss-making
The financial situation in the freight transport division of the re-nationalised SBB Cargo looks much less rosy. Although the 2023 result of SBB Cargo Switzerland improved by CHF 148 million compared to the previous year to minus CHF 40 million, this is mainly due to impairments from 2022. Transport performance fell by 7.5 % compared to the previous year. According to SBB, the main drivers were price pressure, the structural deficit in the EWLV and the economic slowdown.
The only thing that remains unclear is how high this so-called structural deficit should actually be quantified. In the political debate, SBB speaks of CHF 80 to 100 million, while the 2023 Annual Report states CHF 40 million. Has SBB Cargo generated a profit of CHF 40 to 60 million in block train transport?
Record results and billions in aid – how does that fit together?
Peter Füglistaler, Director of the Federal Office of Transport (FOT), gives a plausible answer to this question in his comment on LinkedIn: «I don’t know». The fact that SBB is doing well financially is indeed commendable. After all, shippers want strong partners in the transport business. Nevertheless, we at the VAP are sticking to our position: SBB Cargo’s financial difficulties should not be confused with the necessary modernisation and restructuring of EWLV. In January 2024, the Federal Council rightly requested measures for the modernisation of the nationwide EWLV in its «Message on the Freight Transport Act» (see blog post «Setting the right track for inland freight transport by rail»). Instead of a reorganisation contribution to the EWLV, we are calling for targeted, degressive and temporary bridging funding for a sustainable transformation of the EWLV towards self-sufficiency. Only in this way can the EWLV modernise and grow.
Entrepreneurial responsibility required
Parliament is currently discussing the «Dispatch on the amendment of the Federal Act on Swiss Federal Railways (sustainable financing of SBB)». According to this, the federal government is to cover SBB’s pandemic-related deficits in long-distance transport. VAP President and Councillor of States Josef Dittli commented: «Why should the federal government, which has just announced linear cuts and plans to make cuts, use taxpayers’ money to support a state-owned company that is achieving record results? This is where I make an urgent appeal to the corporate responsibility of those involved.»
Setting the right track for inland freight transport by rail
The Federal Council released its message on the Goods Transport Act to the Parliament in January. It aims to modernize the comprehensive single-wagon load transport (EWLV) and establish the foundation for its economic viability. Despite various reservations, the Federal Council proposes investment subsidies, temporary operating compensations, and incentives for shippers.
Key Points:
- Federal Council aims for economic viability
- EWLV to undergo fundamental restructuring and modernization
- Support for EWLV operation during the modernization phase
- BAV criticizes industry guidelines
- Overview of the proposal
- What’s next
Federal Council aims for economic viability
On January 10, 2024, the Federal Council adopted the message on the Goods Transport Act (in German) for Parliament. We, from VAP, welcome the continued pursuit of the favored Variant 1. With this proposal, the Federal Council intends to modernize rail freight transport technically and organizationally, strengthen multimodal transport chains, and better integrate shipping. The overarching goals are to enhance supply security nationwide, promote multimodality, and contribute to the federal environmental and energy targets. This involves securing current area coverage, gradually increasing the share of rail freight transport, and laying the groundwork for economically independent operation.
EWLV to undergo fundamental restructuring and modernization
The basis for this is a comprehensive restructuring of the EWLV, or network traffic, with associated technological modernization (especially digitization), integration into the Swiss logistics system, and the establishment of non-discriminatory intramodal competition. The latter is expected to significantly improve the quality and efficiency of logistics services and simplify future innovations. The proposal allocates investment funds of CHF 180 million for the introduction of digital automatic coupling (DAK). Additional investment funds are earmarked for digitized process optimizations, data exchange platforms, and similar initiatives.
Support for EWLV operation during the modernization phase
To maintain current area coverage, the operation will be financially supported for eight years during the modernization phase. Allegedly uncovered costs will be covered, and compensations will decrease in line with the progress of the restructuring, determined in multi-year performance agreements with all freight railways involved in network traffic.
BAV criticizes industry guidelines
To ensure the success of this transformation and stable EWLV operation during the restructuring phase, the industry has proposed guidelines for specific measures and support criteria. However, the Federal Office of Transport (BAV) criticizes these as insufficient and demands further revisions. It particularly highlights the lack of perspective for a comprehensive redesign to enhance efficiency and utilization, foreseeing a tendency towards structural maintenance and further service reduction. The VAP understands the BAV’s reservations, as the guidelines represent a compromise between shippers and freight railways, with significant concessions made by VAP in the interest of the cause. Substantial revisions are now necessary, especially from the perspective of freight transport customers as users of logistics services.
We are prepared to significantly support further development. A comprehensive operational control system is seen as a crucial prerequisite for this transformation, serving as an evaluation tool for the effectiveness of measures and incentives, along with the establishment of a digital platform. The transformation should be methodically structured and implemented in a targeted manner as a project.
Overview of the proposal
- Investment subsidies: The Federal Council allocates CHF 180 million for the introduction of DAK, covering approximately one-third of the restructuring costs. The conversion of rolling stock must be coordinated across Europe and is expected to be completed by 2033. DAK is anticipated to substantially improve the productivity and quality of rail freight transport.
DAK Factsheet (PDF, 971 kB) - Operating compensations: To maintain EWLV at the current comprehensive level during the restructuring phase, the Federal Council proposes to financially support it for eight years on a degressive basis. By the end of this period, economic viability should be achieved. For the first four years, it requests CHF 260 million.
Freight Transport Factsheet (PDF, 712 kB) - Incentives for shippers: Permanently planned are handling and loading contributions, along with compensation for the uncovered costs of the ordered freight transport service, totaling CHF 60 million per year.
Read the complete message on the Goods Transport Act.
What’s next
- In the first half of 2024, open points between BAV and the industry will be discussed, and guidelines will be supplemented and clarified accordingly.
- Within this framework and following the approval of the revised law, a tendering process for various service packages within network traffic is expected to start by the end of 2024.
- Negotiations on potential performance agreements are planned for 2025, allowing any support measures to take effect in early 2026.
For further details, refer to this joint press release from VAP, LITRA, ASTAG, IG Kombinierter Verkehr, and VöV.
Ready for the next level of digitalisation
Without digital automatic coupling (DAC) there is no digitalisation and without digitalisation there is no competitiveness. This is how the modernisation of the rail freight sector could be described. However, it’s not quite that simple. Here is an overview of the status quo and the next steps to be taken.
This is what it’s all about:
- Combining hardware and software in a targeted manner
- Financing must provide the initial spark
- «Management Deployment DAK-CH» coordinates the migration
- Test phase: Switzerland at the forefront
Combining hardware and software in a targeted manner
The DAK gets the comprehensive digitalisation of the railway rolling. This is because it offers more than just fully automatic coupling or various tracking functions for individual wagons. It enables a leap forward in Swiss rail freight transport by supplying power and data to the entire train. But that’s not all. Data ecosystems are also required for digitally inspired business models in rail freight transport. The state mobility data infrastructure «MODI» is setting a good example here (see blog post «Data ecosystems: Sharing data to double its added value»). In order to combine hardware and software in such a way that the rail freight sector becomes competitive in multimodal logistics, high initial investments are required. Private companies in the freight transport sector will not be able to bear this alone.
Funding must provide the initial impetus
In Switzerland, the Federal Council adopts its dispatch on freight transport in January 2024 and forwards it to Parliament. A central component of this bill is the funding for migration to the DAK. The Federal Council envisages a funding contribution of CHF 180 million. The calculated investment volume for nationwide DAC migration in Switzerland amounts to CHF 500 million. We at the VAP are taking a leading role in the planning of financial resources. The federal government wants to finance the MODI data ecosystem for the first 10 years and then charge user fees. The European Union (EU) has also yet to fund DAC migration. The EU Commission intends to provide around EUR 200 million for the planned field tests from 2026.
«Management Deployment DAK-CH» coordinates the migration
The cross-industry committee «Management Deployment DAK-CH» will be responsible for coordinating the migration implementation in Switzerland. Among other things, this committee is responsible for the active exchange with Europe’s Rail, the planning of workshop capacities, the material disposition and the verification of the conversions. It must schedule the conversion of the vehicles in advance together with the keepers, as well as with the railway companies and other logistics players. In the meantime, the rail freight companies should determine their requirements for converted wagons according to the volume of traffic.
Test phase: Switzerland at the forefront
The functions and processes of the DAK must be harmonised throughout Europe. One milestone is the definition of the «Starter Package». This defines which functions the DAK migration will start with in Europe. Switzerland is currently actively involved in operational tests of new systems and is contributing pioneering results to the European working groups. Here is an overview of the current tests and projects with Swiss participation:
- The EU is having the rail technology specifications drawn up for the implementation of the «Greening Freight Traffic Package» of the European DAC Delivery Programme (EDDP). Switzerland is actively involved here.
- With «Power-Line-Plus», data is sent via the power supply lines. The Lucerne University of Applied Sciences and Arts is conducting operational tests together with SBB Cargo and providing key insights into data transmission quality. From 2024, proof of operational suitability is to be provided with all the functions of the «Starter Package» and transmission via «Power-Line-Plus», making commercial journeys possible. The FOT is supporting this development financially.
- From 2026, extensive field tests for the operational suitability and reliability of the DAK are planned in Europe with around 100 trains. After that, the aim is to migrate DAK efficiently, including in Switzerland.
- MODI consists of two main elements: The National Data Networking Infrastructure Mobility (NADIM) enables the standardised exchange of mobility data. The national geodata infrastructure «Transport Network CH» can ensure a standardised, digital representation of Switzerland’s entire transport system. MODI is currently only intended for passenger transport. However, freight transport could also benefit from this, for example through the digital networking of public authorities, transport and spatial planning authorities and all stakeholders involved. For this reason, the VAP is in close contact with the responsible offices of the federal administration in order to quickly integrate freight transport into the project.
Partial revision of SBBG: responsibility and market liberalisation further delayed
The Committee for Transport and Telecommunications of the National Council (KVF‑N) unanimously supports the proposal for the financial stabilisation of the Swiss Federal Railways (SBBG). In contrast to the Federal Council, it is of the opinion that there is no need to change the system for granting vault loans to SBB. In doing so, the KVF‑N also disregards all of the VAP’s recommendations.
This is the issue:
- 3 billion financial injection for SBB
- SBBG partial revision referred to the National Council
- The industry’s voice remains unheard
- Still no market liberalisation in sight
3 billion financial injection for SBB
In its report of 16 December 2022 on motion 22.3008 «Supporting the implementation of SBB investments and a long-term vision in Covid-19 times», the federal government proposes to cover SBB’s deficits in long-distance transport with a one-off capital injection of an estimated CHF 1.25 billion. It also wants to ease the track access charges for long-distance transport with a further CHF 1.7 billion. It is also proposing a revision of the financing instruments.
SBBG partial revision referred to the National Council
The KVF‑N has unanimously referred the bill to amend the SBBG to the National Council. The majority of the committee also rejects a change in the system of financing instruments, as budget loans, unlike treasury loans, are subject to the debt brake. It is of the opinion that the resulting competitive situation with other federal expenditure is not desirable with regard to public transport services. The National Council will decide on the KVF‑N proposal in the 2023 winter session.
Voice of the industry remains unheard
As published in our media release of 30 March 2023, we at the VAP reject the proposed extraordinary restructuring of long-distance transport with around 3 billion taxpayers’ money. On the other hand, we welcome the proposed correction of the financing instruments, i.e. the waiver of the granting of vault loans to SBB bypassing the federal debt brake. In the blog posts «SBB should take responsibility instead of a CHF 3 billion financial package» and «No stabilisation of SBB despite CHF 3 billion in additional federal funds», we summarise the industry’s position and our corresponding arguments.
Still no market liberalisation in sight
If the bill is accepted, the National Council would further consolidate the SBB monopoly in long-distance transport. This is problematic in terms of European policy, as the EU is demanding that Switzerland open up the long-distance transport market. This unfulfilled demand overshadows the negotiations with the EU on the extension of the temporary cooperation with the European Railway Agency ERA for one-stop-shop authorisations and more interoperability between Switzerland and the EU. Compared to EU member states, Switzerland does not yet have full market access; the Swiss railway network is currently not an integrated part of the European interop network. For this reason, the freight transport-related associations Astag, CFS and we at the VAP are calling for a national migration strategy to open up the market in line with the EU. If the National Council votes in favour of the KVF‑N motion, it will push this issue even further away.
Addendum 20.12.2023, update from the winter session:
In the winter session, a majority of the National Council agreed to grant the Swiss Federal Railways (SBB) a one-off capital subsidy of CHF 1.15 billion to reduce debt. This amount was already included in the 2024 budget. In contrast, the National Council rejected the Federal Council’s proposal to switch from treasury loans to federal budget loans when a certain level of debt is reached. This was based on the argument that applying the debt brake to budget loans could delay the expansion. The chamber also decided to set the appropriate reserve for the railway infrastructure fund (BIF) at a minimum of CHF 300 million, with a maximum of two thirds of the net revenue from the performance-related heavy vehicle charge (LSVA) flowing into the fund. The National Council has thus ignored all of the VAP’s recommendations. The bill now goes to the Council of States, which will hopefully take corrective action.
Strengthen fair competition between federal and private companies
On 15 September 2023, the Federal Council instructed the Federal Department of Economic Affairs, Education and Research (EAER) to submit an amendment to the Corporate Governance Guidelines by the third quarter of 2024. In doing so, it wants to strengthen fair competition between state-owned enterprises and private-sector companies.
This is what it’s all about:
- Owner’s strategy and corporate governance guidelines as a steering instrument
- Parliament has called for fair competition
- Worrying monopolisation of local delivery services
- Further cross-financing tendencies evident
- A fight with unequal stakes
Ownership strategy and corporate governance guidelines as a management tool
Federal companies are created through the independence of administrative units of the Confederation which, according to the Federal Constitution, carry out monopolised activities. For example, the special-law joint-stock company of the Swiss Federal Railways (SBB) was created in the course of the railway reform in 1999. As the wholly-owned owner, the Confederation steers its numerous federal companies by defining and implementing an owner’s strategy and corporate governance guidelines. It also elects the members of the Board of Directors. In addition to its role as owner, the federal government also has other roles: as a regulator, it regulates the market conditions and occasionally even orders public services, for example in regional passenger transport. This inevitably results in certain conflicts of interest. It would be appropriate to examine whether this interweaving of functions is still in keeping with the times and appropriate for single wagonload traffic, and which supervisory body is keeping an eye on how this is handled.
Parliament has demanded fair competition
The private sector’s increasing criticism of the behaviour of federal companies, which, on the basis of a constitutional mandate that is often kept very general, continue to expand their original core business and even buy up private companies, was heard in parliament. Thus, the Councils adopted motion 20.3531 “Fairer competition vis-à-vis state-owned enterprises” by FDP Councillor of States Andrea Caroni and the identically worded motion 20.3532 by Die-Mitte Councillor of States Beat Rieder. With the EAER report, the Federal Council now wants to meet the demand of these two motions. It expects proposals on how the departments can more systematically organise and more comprehensively ensure fair competition between federal and private companies in the management of federal enterprises.
Worrying monopolisation of local delivery services
RailCom’s Activity Report 2022 reports, among other things, on the survey of freight railways on short-distance delivery services in accordance with Art. 6a of the Freight Transport Ordinance (GüTV). These are services provided by SBB Cargo, which covers local delivery in Switzerland on a virtually monopolistic basis. The RailCom activity report lists a lack of resources as the reason for rejecting local delivery services. However, the respondents suspect that they are disadvantaged in the offers and that different tariffs are in circulation.
Private companies are equally concerned about the monopolisation of SBB Cargo’s network offer in the consultation on the draft law “Modernisation of Swiss freight transport” (see blog post “Consultation on rail freight transport in the area: Two variants, many question marks”). They demand a strict demarcation between network services and block train services in terms of remuneration and continued non-discriminatory access to services in local delivery (cf. VAP blog post “Outsourcing the last mile and making it non-discriminatory”). With the help of organisational measures or a legal separation, it must be prevented that certain services provided by the state are cross-financed. This is the case today, for example, with the funding of the SBB pension fund (PK SBB) through the profits of SBB Immobilien.
Further cross-financing tendencies evident
During the consultation on the 2025 train path price revision, Switzerland’s freight railways joined forces and gave the Federal Council a negative response to the partial revision of the Ordinance on Network Access (NZV) on 29 August 2023 (see blog post “Train path price revision 2025–2028: Price increase is unfounded”). Only SBB Cargo, which is fully integrated into the SBB Group and kept on a short leash, was left out. Since the Federal Office of Transport refers, among other things, to falling train path revenues in the train path price revision, the impression is created that this is a case of hidden cross-financing by SBB, which of course SBB Cargo is not allowed to criticise.
The bill drafted by the Federal Council “Amendment of the Federal Act on Swiss Federal Railways SBBG – sustainable financing of SBB” of 15 September 2023 also corresponds to a blatant interference in free competition. According to this, SBB is to benefit from a capital subsidy of CHF 1.25 billion. The exact use of these funds remains unclear and there is a lack of conditions that could change this in the future. Subsidiary SBB Cargo, which also received extensive financial support in the aftermath of the Covid pandemic, also benefits from this capital injection. It is about to conclude a performance agreement for the compensation of its network traffic, which it obviously cannot handle on its own. The private sector players, on the other hand, did not receive Covid funds, nor do they have substantial non-operational resources and stakes that they could sell off to strengthen their investment capacity.
A fight with unequal stakes
The Federal Council’s self-evidently unequal treatment of state-owned and private-sector companies is conspicuous – and regrettable. Unfortunately, this does not create healthy competition in rail freight transport, which strengthens its innovative power and efficiency. Both are essential if the market players want to retain existing customers and win new ones. This in turn would be necessary to achieve a sustainable modal shift and to integrate rail into multimodal supply chains in the future. And to create new, future-oriented jobs.
Gotthard Base Tunnel (#6): FOT pragmatically supports freight traffic
After the freight train accident in the Gotthard Base Tunnel, the Federal Office of Transport (FOT) is promoting rail freight transport with gripping measures: The tunnel may only be used for goods trains. The compensation per train driven in unaccompanied combined transport (UCT) will soon be increased to up to CHF 1,100. We, as the association of the shipping industry, would like to express our sincere thanks for this. By the way: our vote also applies to foreign shippers.
This is what it’s all about:
- Gotthard base tunnel only open for freight railways
- Higher compensation for transalpine UCT
- The VAP says thank you
Gotthard Base Tunnel open for freight trains only
Since the reopening of the east tunnel of the Gotthard base tunnel, it has been available exclusively for freight traffic. Around 100 train paths are possible every day. A further 30 trains per day run through the mountain section. This means that transalpine rail freight traffic has a total of 130 train paths at its disposal every day. By comparison: in 2022, an average of 120 trains crossed the base tunnel every day.
Thanks to this measure, the freight railways can handle rail freight traffic practically without restrictions. Admittedly, the routing over the mountain route is associated with considerable additional expense. But it mainly affects domestic traffic that is not dependent on the 4‑metre corridor.
Higher compensation for transalpine UCT
The FOT is committed to transalpine rail freight traffic and in particular transit traffic (see “The FOT strengthens rail freight traffic through the Alps”). The compensation per train travelled in UCT will be increased by CHF 200 to up to CHF 1,100 in the coming weeks. The FOT also does not want to reduce the compensation per consignment for 2024, but will introduce a symbolic reduction from CHF 1 to CHF 57 per consignment. In this way, the FOT is supporting transalpine UCT in a very pragmatic way. Against the background of the difficult construction site situation on the access routes and the tense economic situation, the FOT is refraining from continuing the previous reduction path for compensation in UCT.
The VAP expresses its thanks
The FOT deserves a big thank you for this pragmatic support. It strengthens the efforts of the entire industry to make the capacity restrictions on both the Gotthard and Lötschberg axes as bearable as possible in a targeted manner and by joining forces. We see it as a sign of a joint shift policy in transit traffic.
Train path price revision 2025–2028: Price increase is unfounded
The Federal Council plans to increase the train path price in freight transport from 2025. In detail, it wants to raise the basic price for wear and tear by almost 20%; on the grounds of uncovered weight-dependent marginal costs in this area. We reject this unjustified price increase. It accelerates the ongoing modal shift to the roads and contradicts the Federal Council’s modal shift objective.
This is the issue:
- Track access charges not derived transparently
- Traffic losses prohibit price increases
- Respect the legal principle of cost recovery and the polluter pays principle
- Incentive for low-wear freight wagons reversed
- Make infrastructure managers more accountable
Track access charges not derived transparently
The explanatory report of the Federal Office of Transport (FOT) of June 2023 is neither transparently designed nor comprehensibly justified. The reasons for the current determination of the train path price remain completely unclear. Since the FOT refers, among other things, to falling train path revenues, the impression is created that this is a hidden cross-financing of the SBB. Against the background of the “Sustainable Financing of SBB” bill and the reduction of the contribution margin in SBB passenger traffic envisaged therein, this justification is unreasonable for the representatives of freight traffic. Our negative response to the above-mentioned bill can be found in our hearing response of 7 March 2023 and in our blog post “SBB should take responsibility instead of 3 billion financial package”.
Traffic losses prohibit price increases
A price increase is unacceptable in view of the traffic losses in domestic, import, export and transit traffic and the significantly cheaper train path prices in the European environment. Shippers have been exposed to drastic price increases for years, especially in wagonload traffic. These are justified by exogenous factors such as train path prices.
Respect the legal principle of cost recovery and the polluter pays principle
The FOT justifies the price increase with the legal principle of cost recovery. This would be upheld even in the event of a price reduction in freight transport. On the contrary, a price reduction is in line with the polluter-pays principle, since freight traffic pays the standard marginal costs of an averagely developed network, which is mainly geared to the needs of passenger traffic. Shippers do not notice the efforts made by the infrastructure managers to build and maintain the infrastructure more cheaply.
Incentive for low-wear freight wagons twisted
The so-called wear factor is supposed to serve as an incentive to use low-wear rolling stock. In the meantime, the opposite is the case: the Federal Council is encouraging the industry not only to pay ever higher track access charges, but also to invest additional financial resources in low-wear rolling stock.
Holding infrastructure managers more accountable
The presented train-path price revision goes easy on the infrastructure operators. As representatives of the siding and terminal operators, who are directly affected by the planning, construction and maintenance costs of SBB Infrastructure in centralised sidings, we observe considerable inefficiencies and an almost shameless handling of financial resources. This is most likely equally true for the public network. The federal government should therefore also oblige infrastructure managers to contain costs.
EU aid: walking a tightrope between protecting the climate and distorting competition
In wagonload traffic (TWCI) within the European Union (EU), we are witnessing a development that is more political than market-oriented. The EU is promoting the transfer of freight transport to climate-friendly modes of transport such as rail and inland waterway with various programmes and funds, and in principle this is to be welcomed.
The public freight companies, supported by the unions, describe the TWCI as a «public service». However, it is not they who bear the consequences, but the States and shippers. In fact, the subsidies redistributed by the EU at taxpayers’ expense mean that the TWCI is heavily subsidised, with no incentive to increase productivity in the interests of sustainable development. This means that the TWCI is using taxpayers’, society’s and the economy’s money to cement a monopoly devoid of any public service obligations such as the obligation to carry or the obligation to publish tariffs.
This lack of market orientation and entrepreneurial spirit on the part of the public railways and the unions will not help to achieve either the traffic transfer objectives or the climate objectives. What’s more, as owners of the state-owned railways, governments are taking a long-term, imponderable financial and transport policy risk with regard to security of supply in their countries.
The consequences for shippers are no less serious. To achieve multimodal transport, shippers have to invest in the rail system, while they are dependent on a monopolistic company that is itself financially dependent and managed by political control. This is hardly security of supply and investment.
Subsidies must be used in a targeted and time-limited way to safeguard jobs in the long term and put TWCI on the road to success.
In this blog post, we take a close look at public subsidies in Germany, France, Austria and Switzerland from the perspective of their purpose and scale, and address the issue of conflicts of interest and the necessities involved.
What is at stake?
- State aid aims to establish sustainable and viable mobility.
- However, it can give rise to distortions of competition and discrimination.
- State financial aid must be used to ensure the transition to financial autonomy.
- Market players specifically need financial support for innovations such as DAC.
- The bodies granting the aid should check its effectiveness and any breaches of the rules on subsidies.
- If necessary, the law should be amended.
The European Commission provides financial support for the transfer of freight from road to more environmentally friendly modes of transport, such as inland waterways and rail. It provides financial aid in line with EU guidelines on State aid. The objective of this EU aid is sustainable and intelligent mobility, which in turn is supposed to help reduce CO2 emissions and relieve road congestion as part of the Green Pact for Europe. As is often the case with public funding, in the freight transport sector it is also necessary to ensure that competition in the internal market is not distorted and that self-financing and transparency are achieved.
Comparison of deficit financing in wagonload traffic
Country |
Subsidy programme and benefits |
Amount of subsidy |
Period |
| Germany |
Temporary, non-discriminatory and growth-oriented subsidy of operating costs (BK-EWV) This grant from the German Federal Ministry of Digital Affairs and Transport is intended as a transitional measure to increase the profitability of the TWCI through the deployment of digital automatic coupling (DAC). The Ministry’s aim is to support Federal and non-Federal railway undertakings in national and cross-border transport within the framework of a TWCI system description to be provided. Details of the BK-EWV programme are expected in July. |
80 million euros 100 million euros 100 million euros |
2023 2024 2025 |
| France |
Support for wagonload traffic transport services The purpose of direct subsidies is to compensate rail companies for the difference in cost between road and rail transport. The beneficiaries are rail companies active in the TWCI sector. |
450 million euros, i.e. 150 million euros per year |
2023–2025 |
| Austria |
«SGV-Plus» (TFM Plus) This subsidy programme helps rail transport companies to carry goods by rail that would otherwise have to be transported largely by road, by lorry. SGV-Plus consists of support for rail freight services and a subsidy for the infrastructure usage charge. Subsidies for connections and terminals The state helps companies to transport their goods sustainably by rail through measures such as these:
|
Approx. 90 million euros
13 million euros per year |
2023–2027
From 2023 onwards |
| Switzerland |
Improving the framework conditions for freight transport in Switzerland The Federal Council is planning subsidy programmes with the following benefits:
|
CHF 600 million, i.e. CHF 150 million per year |
2024–2027 |
Limited relevance of the comparison
The subsidies mentioned in the table above are expressed in absolute figures. This makes them difficult to compare, in the absence of a reference amount. For example, SNCF (France) achieves several times the number of tonne-kilometres travelled by SBB, but receives considerably less money in comparison. Unlike the countries of the European Union, in Switzerland the total amount of subsidies also includes the migration to DAC. It is precisely because most countries have numerous sources of funding at their disposal at the same time that it is extremely difficult to compare subsidies in a meaningful way.
Conflict of interest between climate protection and competition
Governments mainly use their subsidies to encourage the transfer of traffic to sustainable modes of transport. The ultimate objective entails the risk of distorting the competitiveness of rail freight. If rail freight is to remain viable not only ecologically, but also economically, those responsible must aim for an autonomous, market-oriented rail freight system that integrates all rail freight companies without discrimination on the basis of intramodal competition, and is a reliable partner for shippers. Switzerland has set itself the goal of self-financing, and is well on the way to achieving it.
Guaranteeing non-discrimination
Wherever public and private players in the market come together, the accusation of discrimination quickly arises. A classic example is last-mile subsidies. This is the subject of heated debate both internationally and in Switzerland (see RailBusiness no. 6 and 7/2023). In our blog article entitled «Outsourcing the last mile and making it non-discriminatory», we outline the form that a non-discriminatory last mile could take in Switzerland. We recommend that management of the system should no longer be entrusted to a single major operator – as is currently the case with SBB Cargo – and propose that instead, the first and last kilometre services should be provided by a single service provider. Ideally, this would be the infrastructure operator, which, apart from this, does not provide any transport services. In our blog article entitled «Subsidising wagonload traffic: preventing distortion of competition and discrimination», you will find a more detailed explanation of why non-discrimination is paramount when it comes to State aid.
In Germany, the Verband deutscher Verkehrsunternehmen (VDV) and Die Güterbahnen (The Freight Railways) are calling for non-discriminatory subsidies for service routes between the customer’s loading point and the last functional train consist. Appropriate regulations will ensure that the subsidy reaches particularly underserved and unprofitable regions, as well as new traffic, in order to attract rail transport to these areas as well.
Financial support for innovation
In our view, state funding should be a transitional measure designed to last until the players manage to finance themselves. This approach is particularly important for innovations such as the migration to DAC and the associated digitalisation of rail freight. Wagon owners cannot benefit directly from DAC, but have to make huge investments in re-equipping their rolling stock. To find out why we are in favour of up-front funding for the DAC, which paves the way for a new era of rail, rather than the ongoing subsidisation of an obsolete system, read our blog post entitled «Innovation in rail transport: DAC as a pioneer».
Rethinking the rail system
If the benefits of digitalisation are to be realised in rail freight transport, we need more than the DAC. What is needed is a fundamental transformation and optimisation of cross-system processes. Only in this way will market players be able to increase productivity, reduce costs and systematically adopt a customer focus in order to remain competitive by rail. This requires a new holistic approach to the entire rail system. This goes far beyond the (initial) financing of the TWCI or DAC. It concerns all the processes, incentive instruments, market mechanisms and interfaces of multimodal freight logistics in Switzerland.
Creating transparency through monitoring
If public funds are to be used in a targeted way, the objectives to be achieved with this support must be clearly defined. As is customary in the private sector, this means checking against measurable parameters, such as «how many DACs will be implemented by 2025 for how much money», «how many tracks have been built» or «how many lorry loads have been put on rail». The measurability of a success rate enables the players involved to adapt their strategy accordingly.
Preventing abuses of EU state aid guidelines
In 2020, Deutsche Bahn was accused of massive market distortion, as it was to receive a €5 billion increase in equity from the state as a result of the COVID-19 crisis. At the beginning of 2023, the European Commission launched an investigation into possible illegal state aid of between ten and twenty billion euros paid to the Freight sector of the state-owned railway company SNCF. These recent examples show that public aid always carries a risk of abuse. It is all the more important for governments to create the same conditions of competition for all and, if necessary, to refine the legal framework a posteriori.[1]
Refining the guidelines a posteriori
The European guidelines for the rail sector are an example of such a review. The European Commission has proposed revising them in order to shift traffic to more sustainable and less polluting solutions while maintaining a level playing field within the European Union. The consultation of Member States on the promotion of transparent and non-discriminatory programmes, the limitation of individual aid to exceptional cases and the modification of the aid ceiling ended on 16 March 2022. The majority of respondents favoured the promotion of programmes offering equal opportunities to all companies and the granting of individual aid only in exceptional cases. The European Commission plans to approve the revision of the State aid guidelines applicable to the rail transport sector in the 4th quarter of 2023.
Transport policy decisions of the summer session 2023
In the summer session from 30 May to 16 June 2023, various sector-relevant business was discussed. The results are largely in line with our expectations. However, we regret the missed opportunity to link the proposal for the agglomeration programme with the expansion of the national road network in order to further develop projects and transport modes as an overall system.
That’s what it’s all about:
- More financial means for the rolling road (Rola), we demand quality control.
- Yes to simplified approval of rolling stock for international rail traffic
- Yes to modernisation and expansion of the Swiss national road network
- Yes to the Agglomeration Transport Programme – regrettably without a link to the expansion of the national road network
- Interpellation on the renationalisation of SBB Cargo
Accompanied combined transport (Rolling Road, Rola):
On 1.6.2023, the Council of States dealt with the Federal Council’s dispatch of 30 September 2022 on the amendment of the Freight Traffic Transfer Act and on a federal resolution on a payment framework for the promotion of accompanied combined transport (Federal Council business 22.064). Following the National Council, the Council of States has now also decided to support the “Rolling Highway” (Rola) until the end of 2028 instead of only until 2026 as proposed by the Federal Council. The Confederation can provide a total of CHF 106 million for this support between 2024 and 2028.
With regard to the 2023 modal shift report, the VAP recalls its still outstanding demands:
- Technology-neutral promotion of transports, especially in selected regions with volume potential.
- Quality control also for conventional transports
We consider the one-sided promotion and quality control only in UCT as a missed opportunity. The potential of conventional transport should also be fully exploited – with appropriate application of the modal shift measures, i.e. financial support and quality control.
Amendment of the Railway Act within the framework of the 4th EU Railway Package:
On 13.6.23, the Council of States approved bill 23.024, according to which the European Railway Agency (ERA) is to be responsible for the approval of rolling stock in international rail traffic. Railway companies should no longer have to go through separate approval procedures when introducing new trains in several countries. The Federal Council is now seeking the permanent adoption of this EU solution, which will require an amendment to the overland transport agreement with the EU. The business will now be submitted to the National Council. The VAP supported this draft amendment (see blog article: Revision of the railways act guarantees access to the EU railway network), as it allows for further steps towards harmonisation of regulations in railway operations and facilitates the adoption of this package in the land transport agreement.
Payment framework for national roads 2024–2027 and expansion step 2023:
The Federal Council is planning to modernise and expand the Swiss national roads network with a budget of around CHF 12 billion. Of this, around CHF 8 billion is earmarked for operation and maintenance, while CHF 4 billion is to be allocated to special expansion projects. We at the VAP support this bill and emphasise the importance of a sustainable transport infrastructure for multimodality and modal shift. On 30.5.2023, the National Council decided to allocate as much as CHF 5.3 billion to expansion projects instead of the CHF 4.4 billion requested by the Federal Council. In addition to the five projects included in the federal decree, the National Council considers the extension of the A1 on Lake Geneva to be equally urgent. The Council of States will vote on the bill next.
Commitment credits for agglomeration transport from 2024:
The National Council approved contributions of over CHF 1.6 billion for the new agglomeration transport programmes. A slight increase was made for the Moscia-Acapulco road tunnel in Ticino. We support this federal decision, which is intended to promote transport infrastructure projects in Switzerland’s conurbations in order to create a more efficient and sustainable transport system.
Regrettably, however, NR Wasserfallen’s minority motion was rejected. This called for the bill on the proposal for the agglomeration programme with the expansion of the national road network in order to consider projects and transport modes as an overall system. This should prevent projects and modes of transport from being played off against each other. We consider this a missed opportunity. In the event of a referendum, we will oppose it, in the interest of the country’s security of supply.
See also our commentary on LinkedIn: Billions approved for agglomeration transport programmes: National Council misses chance for holistic transport system
SBB Cargo back in the lap of the state: What’s the point?
With his interpellation «SBB Cargo zurück im Schoss des Staates. Was soll das?» (SBB Cargo back in the lap of the state. What’s the point?), NR Christian Wasserfallen FDP/BE is asking the Federal Council for an assessment of the SBB Group’s decision to take over 100% of the share capital of SBB Cargo and to place SBB Cargo directly under the management of the Group. This unilateral change in the market and power structure is detrimental to the portents of the pending reform of the framework conditions for Swiss freight transport. The VAP welcomes the questions put to the Federal Council.