New rules: railways clash with Government

Three resolutions of the National Land Transport Agency (Agência Nacional de Transportes Terrestres – ANTT), to be subjected to a public hearing on May 3rd, should set sparks flying between the Government and the railway companies. These resolutions seek to implement a more competitive environment on the railways, but the concessionaires, through the National Association of Rail Transport Companies (Associação Nacional dos Transportadores Ferroviários – ANTF), are casting into doubt the legality thereof. These resolutions deal with users’ rights, setting targets for each stretch for the railway companies and also regulating the way in which one concessionaire can use the network of another paying a kind of toll, in an operation known as passage rights.

There is even the risk that the issue shall reach the Courts. The public hearing that shall debate the three resolutions shall be extended to May 19th but before, on the 10th, there shall be a meeting at the head office of the ANTT, in Brasília, an occasion on which the interested parties may discuss the matter in public.

When the whole discussion process is completed, the technical area of the agency shall prepare a report to be analysed by the Board which shall then approve the resolutions after incorporating the suggestions deemed appropriate. Once this is done, the concessionaires shall then have to adapt to new rules. In a limit situation, if a company fails to comply with the regulations, it could even lose the concession.

The discussion has become sensitive because there is an interpretation by which the principles contained in these regulations shall be valid not only for contracts in effect, but also for the new railways of Valec, a state company associated to the Ministry of Transport that shall be responsible for the construction and exploitation of railway infrastructure in the country. The new railway network of Valec may operate within the new regulatory model for the segment, by which the exploitation of infrastructure (the administration and the maintenance of the network) would be separate from the operation, the provision of rail transport services. This is known as the segregated model, with one company being responsible for the rail network and different operators providing the services to the users.

In the view of the ANTT, this system could increase efficiency and competition, and also reduce the costs of the rail transport services. The resolutions follow this path, according to the Agency. The ANTF disagrees, considering that it is better to keep and enhance an integrated system, as valid for the current contracts of railway concession. In this model, the company manages the network and also operates the trains.

Rodrigo Vilaça, the executive director at the ANTF, feels that the resolutions to be discussed at a public hearing, as from the beginning of May, are an excerpt from the abstract of a decree presenting now rules for railway exploitation that the Government unsuccessfully presented at the end of 2010.

The view of the ANTF, based on judicial opinions, is that the changes as proposed in that decree and which, with minor changes, were repeated in the resolutions as proposed by the ANTT could not be implemented, not even by a Law, as they are a violation of the contracts already signed, which are judicial acts fully backed up by the Brazilian Constitution, says consultant Arlindo Eira Filho, who participated in the work carried out by the ANTF, making a diagnosis of the segment and also presenting proposals to improve the operation of the system.

Bernardo Figueiredo, the President of the ANTT, showed sureness with regard to the legality of the measures as proposed. We have discussed the issue in all judicial spheres of the Federal Government. They [the ANTF] have the right to judicially question the resolutions, but honestly I think this would be a waste of time. Mr Figueiredo said that the three resolutions in discussion shall allow the agency to regulate the contracts currently in force. He accepted that the decree would give greater judicial security, as the resolutions could be cancelled in the future by another Board of the same Agency.

One of the points of disagreement is the issue of passage rights, a kind of toll so that one concessionaire could use its neighbour’s network. Mr Figueiredo says that this is an obligation in the concession contract, even though, ever since the privatisation of the Brazilian Federal Railways (Rede Ferroviária Federal – RFFSA), passage rights had never been applied through lack of rules. In his opinion, the contract of concession established conflicting clauses on defining passage rights as an obligation, while saying at the same time that the concessionaire has exclusivity in operation.  In the resolution, the ANTT wants to set criteria for calculating the value of this toll and how the operation shall work.

The idea is to allow ALL to go to Rio de Janeiro and compete with MRS, and also MRS to enter Mato Grosso and compete with ALL, Mr Figueiredo said, by way of example. The ANTF has a different view of passage rights. This company defends the application of the principle so that a concessionaire may enter the network of another and take the goods to the final destination, as a complement of the rail transport service. Mr Figueiredo asks: Where is it written that passage rights are only for the destination, and not for the origin? The concessionaire has a monopoly over the line but not over the clients, says the President of the ANTT.

He spoke about the other two resolutions that shall be discussed: the target of production for each stretch, which seeks to increase the use of the network, and also the issue of users’ rights, which has the ultimate objective of making sure that the client may create a dedicated railway service should the concessionaire not be able to, or now want to, serve the client. The client that wishes to transport their own product, such as iron ore, shall have rules to do this.

According to the rules, the producers of pig iron in Marabá, in the state of Pará, who wishes to take the product to the port of Itaqui, in Maranhão, using the Carajás Railway (Estrada de Ferro Carajás – EFC) could buy carriages and locomotives, paying Vale a toll so that the mining company could transport the goods. The idea is that the ANTT should monitor the operation, by connecting up with the operational control centres of the railways, using remote technology.

If Vale refused to transport the goods for the iron producers they could even lose the concession, said Mr Figueiredo. The fun with railways is now over.  The concessionaire shall have to look at railways as a way of offering better logistics and the service shall have to remain neutral in relation to the user, he said. He also admitted that the agency shall have to step up its powers of inspection and process analysis.

Approached, Vale said that, this being a discussion in the sector, it is the ANTF who should make a statement. Behind the scenes, it is commented that Vale is one of the main parties interested in working against the ANTT resolutions. For the ANTF, the more operators there are using the network, the harder it shall be to manage the system. The changes, according to Mr Vilaça, could lead to breach of contract, economic and financial imbalance, and the pruning of investments. We are trying to reach a consensus, dialogue with the Government, as we want to continue to invest  and are interested in constructing a proposal to span 30 or 40 years for our railways, said Mr Vilaça.

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