Economy, Domestic Economy

Railroad Development Needs New Players

Railroad Development Needs New PlayersRailroad Development Needs New Players

Railroad construction in Iran has been traditionally carried out by the public sector, since according to Article 44 of the Constitution, railroads and all large-scale industries are regarded as public properties. The law grants 100% ownership of all railroads, either existing or at different stages of construction, to the government and prohibits their transfer to the private sector.

However, since 2006, with the government’s shift towards privatization, in line with the implementation of the policies outlined in the amendment of Article 44, government authorities have been considering allowing the private sector to participate in developing the rail transportation system.

Thus, the private sector was allowed to engage in the construction and investment of main railroads. It was also allowed to utilize railroads, without having ownership rights.

Persian daily Ta’aadol has investigated the current status of railroad development in Iran, asking the experts’ opinion on whether the private sector and the cooperatives’ role in railway developments could be enhanced.  

  Transfer to Private Sector

The Islamic Republic of Iran Railways (the national state-owned railway system in Iran, abbreviated as IRIR) has reportedly transferred some of its cars and locomotives to the private sector.

“So far, 23,000 cargo wagons and 2,000 passenger trains have been transferred to the private sector,” said head of IRIR Transit Committee, Mohammad Gharavi, at a meeting last Wednesday in the southeastern city of Zahedan.

However, the transfers were criticized by a board member of Iran Chamber of Commerce, Industries, Mines and Agriculture (ICCIMA), Masoud Daneshmand who called them “inefficient,” noting that IRIR does not allow the private sector to participate in railroad affairs.

“Railways accounts for 5 percent of goods transportation and 12 percent of passenger transportation,” he said, adding that according to the objectives set by the 2025 Vision Plan, railway’s contribution to freight and passenger transport must increase to 30 and 60 percent respectively by the plan’s end.

Pointing to the huge gap between the current scenario and the plan’s objectives, the expert lamented that transferring the rails and locomotives to the private sector “hardly led to any improvement in this regard.”

  Not Affected by Sanctions

Vice chairman of ICCIMA’s Transportation, Transit and Customs Committee, Seyedeh Fatemeh Moghimi believes the railway transport is little affected by sanctions imposed by the West against Iran over its nuclear energy program as “railroads are bound within the country’s borders.”

“Unlike road transportation which is influenced by international regulations due to cross-boundary transits, the railroad system is least affected by sanctions as it is managed domestically,” she noted.

Iran’s railways, however, are not intended only for domestic use as with the construction of new railroads, the country is being connected to other parts of the region like Turkmenistan, Kazakhstan, and Afghanistan.

She also noted that connecting the neighboring countries via an integrated railway system provides a good opportunity for developing cargo transportation across the region.

  The Role of Cooperatives

An official at the ministry of cooperatives, labor, and social welfare, Alireza Nateghi believes enhancing the role of cooperatives can help the government in developing the railway transportation system.

“So far, 2,300 cooperatives have been established in the railway transportation sector, creating job opportunities for 56,000 people.”

Nateghi suggested offering low interest loans to the private sector and cooperatives to encourage their participation in railway development projects, in return for collecting the revenues from the newly developed railroads for a period of 10-15 years.

The government is planning to develop railways, especially near the Chabahar Port in southeastern Iran in a bid to facilitate transportation of goods to and from the strategic port.

Experts are worried that once the Chabahar cement factory becomes operational within three years, transportation, which is mainly done via trucks now, will become an issue. This is while trains’ fuel consumption is nearly one sixths of trucks and they have much higher carrying capacity.

Experts believe there are two challenges in utilizing railroad transportation for this purpose, first is  the unusually high tariffs imposed on railway cargo transportation, and the second being the limited number of train routes.

Railway transportation reduces the risk of road collisions, improves passenger safety and reduces traffic congestion. High speed and less environmental pollution are among other advantages of rail compared to road’s transport.

Railway transport is best suited for carrying heavy and bulky goods over long distances. Development of rail transportation can also contribute to the tourism industry as well as the economic growth of remote areas.