Moldovan rail tariffs threaten grain transport shift to roads
The Moldovan Railway's (CFM) decision to raise freight tariffs starting October 1st has raised concerns within the agricultural sector.
An expert analysis states that this measure will reduce the competitiveness of Moldovan exports.
Farmers could lose between 200 and 400 lei for every ton of goods transported. According to the analysis, the state-owned enterprise CFM, which is grappling with major financial difficulties, would also risk losing approximately 5 million lei monthly as exporters and traders switch to road transport, where tariffs, conversely, have dropped during the peak agricultural season.
However, CFM states that measures taken in recent months show a visibly positive development in revenue generation.
An analysis by economist Iurie Rija notes that, under the new schedule of tariffs, CFM fees are increasing by an average of 7%, and the discount previously applied for volumes exceeding 4,000 tonnes (metric tons), especially from railway points in the north of the country, is being cancelled.
This incentive ensured the continued activity of northern railway stations, more efficient transport for exporters, and more attractive prices for farmers. Without it, the balance shifts against all parties: farmers will receive less money, and logistical flows risk migrating massively towards road transport.
On the other hand, road transport is becoming increasingly attractive. Unlike the railway, truck tariffs are not increasing; in some cases, they are even decreasing due to the optimization of two-way trips. Furthermore, road transport is more flexible and faster: goods can be delivered directly to ports, without additional costs for reception, drying, and storage, and without the risk of logistical bottlenecks.
Representatives of grain exporting companies emphasize that road transport remains the primary method for collecting and shipping agricultural produce. Ion Cornea, a representative of one such company, explains that farmers typically do not have access to a railway line or modern grain storage facilities, and their warehouses only allow grain to be loaded onto trucks.
“Generally, farmers only have simple, sometimes older warehouses, which only allow grain to be loaded onto trucks. The same applies to oilseeds, which are transported exclusively this way. Once loaded into trucks, the grain can either be stored and sorted or sent directly for export. For export, we are increasingly utilising the Giurgiulești port,” he told us.
Rail transport represents an alternative, but only 4% of grain is still transported this way, due to the lack of wagons and the deficient technical condition of the existing fleet. Additionally, infrastructure differences between the Republic of Moldova and neighbouring countries make the use of trains for export costly and less efficient.
“This is attributed to the fact that there aren't enough wagons, and the available ones are worn out or involve high costs. Furthermore, the railway infrastructure in Moldova is different from the European one – our lines are of the Soviet type, and changing the bogies to allow onward travel involves time and extra costs, affecting the quality and profitability of the goods. Regarding export markets, our company most frequently delivers to Turkey, Greece, and Romania, but we also have experience with Bulgaria, Iran, or Taiwan. However, road transport remains the main means of collecting and shipping grain from the country.”
The new railway freight tariffs, which were supposed to be applied starting September 12, 2024, were postponed until October 1st after critical market reactions. The main argument of exporters and traders was that transport was already included in the costs of existing contracts. The situation is not new. Since 2010, traders have gradually migrated to road transport, which is more costly but more predictable.
Under these circumstances, the expert from the Agrocereale Association, Iurie Rija, proposes freezing the current situation until the reform is finalised, in order to preserve the client base and avoid estimated losses of over 5 million lei per month.
Currently, CFM is undergoing a comprehensive modernisation programme. According to the institution, the measures taken in recent months show a visibly positive development regarding revenue growth.
One of these is the adaptation of the business model from transit – significantly affected by the regional context – to the internal market, which has generated a considerable increase in the volume of grain transport, from 20% to about 80%. The repair of critical railway segments has allowed the average circulation speed to be raised from 15 kilometres per hour on certain stretches to 40 kilometres per hour, enhancing the attractiveness of rail freight services. Thus, supplementary revenues of about 10 million lei monthly are estimated once transport resumes on the Văleni–Giurgiulești segment, which is set to be reopened soon.
In the period 2021-2024, the total volume of agricultural products transported by rail dropped from 679,000 tonnes to only 139,000 tonnes, a decrease of almost fivefold.
Translation by Iurie Tataru
