Railway dispute continues

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As part of the restructuring of Polish National Railways (PKP), regional rail services are being reorganised and are supposed to come under the jurisdiction of regional governments, thus being divided into 16 separate companies. This plan is strongly opposed by railway trade unions, which organised protests in 2004 and early 2005. An agreement was signed in February 2005 by the government and unions, suspending the establishment of regional rail companies, but the conflict has not been resolved.

Polish National Railways (Polskie Koleje Państwowe, PKP) is undergoing restructuring, although progress has been uneven. Recently, a conflict has broken out between the PKP group and the government on one side, and 28 trade union organisations representing railworkers on the other, centring on the reorganisation of regional services. The unions threatened a sector-wide strike in early 2005 (PL0501101N), although this threat has not yet been carried out.

Restructuring process

The necessity of restructuring the Polish railways system is not questioned by any of the parties involved, especially when it comes to passenger transport, whose volume has been shrinking rapidly over the last few years: between 1995 and 2003 the number of passengers using the services of PKP dropped by nearly 40% (from 466 million to 281 million per year). Railway transport has come under pressure from such factors as the dynamic growth of motor industry and the requirements of EU common competition policy, which has enforced the opening of the railway service market to other carriers. However, the prescription for change proposed by the government has aroused controversy, which has often turned into open conflict.

The governmental programme for PKP restructuring, endorsed in 1999, was based on commercialisation, privatisation, restructuring of employment, legal and management reshuffles, and the restructuring of finances and property. The completion of this programme was the PKP State Company Restructuring and Privatisation Act passed by parliament in 2000, which formally transformed the state company into a joint stock company, in which the State Treasury was the sole shareholder, and established legal grounds for further privatisation. This legislation initiated the process of restructuring.

By the end of 2001, the formerly homogeneous PKP SA enterprise was reorganised into a conglomerate of 42 companies, named PKP Group. This reorganisation demonstrated which areas of railway operations were profitable and which generated losses. The profitable ones (according to data gathered at the end of 2004) were freight transport (PKP Cargo), and the transport of industrial output (carried out by the steelwork wid- tracks line,PKP Linia Hutnicza Szerokotorowa, PKP LHS) from Katowice to the eastern border of Poland. The regional services (PKP Przewozy Regionalne, PKP PR) proved to be the costliest, next to Polish Railway Lines (Polskie Linie Kolejowe, PKP PLK), a company responsible for the tracks infrastructure.

The next phase of privatisation was supposed to be the implementation of restructuring programmes in companies in a bad financial condition (notably PKP PR) and the privatisation of selected companies. In 2001 decisions were taken to privatise some of the companies within the PKP Group: the commuter services in Warsaw (Warszawska Kolej Dojazdowa, WKD) and in Gdańsk-Gdynia-Sopot 'tri-city' (Szybka Kolej Miejska, SKM). In late 2004, all the stock in WKD was acquired by a consortium of six municipalities served by its lines. Of the remaining objectives, none has yet been fully achieved. The plans for 2005 provide that a strategic investor will take over PKP Cargo.

A key aspect of railway restructuring is the reduction of employment. In 2004, the PKP Group reportedly employed around 138,000 people, compared with 170,000 in 2000.

It was decided at the end of 2003 that transformation should be continued according to a 'Programme of further restructuring and privatisation of the PKP Group until 2006'. This programme provides for further regionalisation of management and funding of regional transport, and the transfer of property connected with the regional services to local governments. This regionalisation is the main cause of the current dispute.

Dispute over regionalisation

Local and regional services are the unwanted part of the Polish railway industry, due to the chronic financial losses they generate. As stated by the railway transport regulations (the organisation of regional passenger transport is a responsibility of regional governments) and the local authorities regulations (local authorities are responsible for local transport) - regional services should be under the jurisdiction of regional administrations. However, regional governments cannot actually take over this responsibility until two key issues are settled. The first is to provide regional governments with adequate funding (because they are unable to bear so large a burden by themselves) in the form of central budget subsidies, as it is done in other EU Member States. The second, and equally important, issue is to persuade regional governments that local transport should mostly rely on railways, because local governments can choose the less expensive option of road transport.

The abovementioned restructuring programme for PKP PR stated that the top priority was the reduction of costs through liquidation of the most problematic services. This was the direct cause of an escalation of workers' protests in the summer of 2003 (PL0308105F), which forced the decision-makers to lessen the scale of the planned cuts in regional lines.

The present restructuring programme provides that the regional services will be entirely taken over by companies established jointly by the governments of the 16 regions (voivodships) and the PKP (both the parent company, PKP, and the PKP PR), and regional governments will be responsible for their financing from their own income. The central government would also support regional railway transport by granting it statutory tax relief. Furthermore, local railways could count on financing from EU structural funds.

The range of operations of these companies should include transport and the choice of forms of train stock procurement (purchase, lease, contracting service etc). The companies will also obtain the property needed to perform the tasks they are required to do. Regional governments will have a say about the volume and the structure of railway connections. Regional companies will employ people who worked on regional lines (train staff and administration staff). The programme assumed that reorganisation could be done without major redundancies. In addition, regional governments were offered a possibility to establish joint ventures in neighbouring provinces.

Both regional governments and trade unions are sceptical about the presented reform scheme. Regional governments claim that the solutions provided by the programme do not guarantee enough funding to maintain passenger railway transport. Trade unions, on the other hand, are afraid that regional governments would seek to shut down many lines, due to their high maintenance costs - and replace them with less expensive road transport, or select an independent operator by way of a public bid - which would lead to job losses.

As a result, at the beginning of 2005 only one regional railway transport company has been established so far, Mazovian Railways (Koleje Mazowieckie). The other 15 regions still have not founded their companies. Further, some regional governments have not even undertaken talks with PKP. Two of them have openly declared they would organise a public bid to select an operator for regional connections.

Looming conflict

Social dialogue over railway transport has been going on since June 2003 in the forum of a tripartite team (PL0308101F) (involving trade unions, PKP management and the government). Negotiations within the team have helped to avert the threat of a sector-wide strike on several occasions. The usual subject of disputes between government and rail unions has been whether the government would be able to provide enough means in the central budget to restrain the scale of liquidation of local railway connections. In autumn 2003, trade unions renewed their protests, saying that the government breached agreements reached in July 2003 with regard to reducing the number of local lines to be closed down, subsidising regional connections and safeguarding a sufficient budget for the railways in 2004.

The government confirmed its earlier pledge, and declared that it would withhold all decisions until the Tripartite Commission for Social and Economic Affairs (Komisja Trójstronna do Spraw Społeczno-Gospodarczych) (PL0210106F) reached agreement on regionalisation. Therefore, strike action was postponed. In December 2003 the railways issues new timetables, with 518 local connections closed down. This led trade unions to initiate a new wave of protests and criticise the provisions of the 'Programme of further restructuring and privatisation of the PKP Group until 2006'. The government managed to ease the conflict by promising to reopen some of the local connections that had been closed down. When, during the state budget debate in parliament at the beginning of 2004 a motion was filed to cut subsidies for infrastructure investments, the trade unions expressed concerns once again. The proposal was then rejected, which eased the tension. Later on, when it was obvious that the plans for establishing regional passenger transport companies would fail, the unions became preoccupied with the future of the local lines, and most of all with the ensuing threat of job losses. In December 2004, protests against regional companies were organised all over the country.

The year-end financial statement brought some optimism for the railways: PKP PLK spent PLN 1 billion on modernising its infrastructure in 2004. Moreover, the state budget compensated the sale of reduced-fare tickets to the railways (for the first time in two years). Regional governments’ subsidies to regional connections amounted to PLN 436 million (which was PLN 100 million less than expected). However, in January railworkers blocked two railway stations in Warsaw as a protest. The sector's tripartite team managed to reach a compromise on 3 February 2005: the establishment of regional companies was suspended, and negotiations over the reorganisation of local connections are to be continued. Mazovian Railways will go on operating. Its operations will be monitored, and the results of this monitoring published every quarter.

Commentary

The agreements achieved in early February mean only that the rail dispute is suspended. The parties involved are not getting any closer to a constructive solution of this stalemate. The 2004 concept of the regional transport reform has failed. It has been contested by trade unions and regional governments have distanced themselves from it, saying they could not accept the financial obligations imposed on them. As for the central government, it must admit that regional governments cannot be forced to abide by the provisions of the restructuring programme. Some arduous negotiations are ahead of the social dialogue bodies in the months to come. Meanwhile railway operators from other EU Member States are starting to get interested in Polish passenger transport services. (Jan Czarzasty, Institute of Public Affairs [Instytut Spraw Publicznych, ISP] and Warsaw School of Economics [Szkoła Główna Handlowa, SGH])

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