A 100 percent state-owned joint-stock company, Russian Railroads, will be established next year as part of a government plan to reform the country's railroad structure.

A government meeting on April 25, 2002, resolved to begin reforming domestic railroads in 2003. For this purpose, Russian Railroads will be established in the first quarter of next year.

The government has shown its intent to reform one of the basic sectors of the economy. The reform is somewhat overdue; earlier targets called for the Russian Railroads company to be established in 2002. The reforms may yet fall further behind schedule because legislative approval has yet to be received.

Amendments to laws governing the federal railroad transport and natural monopolies and a transportation charter for the Russian Railroads are required for the reforms to be implemented. They have been submitted by the government but must go through the Duma and Federation Council, the lower and upper houses of Russia's parliament.

It is difficult to forecast how long it might take the amendments to pass. A number of factions – led by the Communists – are against the proposal to reform the industry, though their influence in the Duma is not decisive. Still, it will take legislators several months to study the documents and discuss them at meetings. The draft laws required for reform are unlikely to be adopted any sooner than this fall.

Simultaneously, plans call for measures to alleviate the impact on railroad workers. Estimates suggest nearly 500,000 workers will be laid off over the next five years. By the end of this year, the government is to adopt a program for job placement for laid-off railroad workers until 2005.

Serious reforms must also be carried out in the sector's management, structure and legislation, and to promote competition in the sector. Proposed amendments to the federal railroad transport law call for state regulation of the industry. The government will supervise and monitor transportation companies and the Russian Railroads company.

Proposed amendments would also provide a clear-cut definition for the functions of the Ministry of Railroads, when the industry's infrastructure belongs to a joint-stock company.

Amendments provide for a licensing procedure, and in a competitive market, companies involved in freight and passenger transportation will have to comply with rules and technical requirements to guarantee safety of movement and environmental friendliness.

Finally, amendments to be introduced to the federal law governing natural monopolies would divide the sector into two segments, monopolistic and competitive. The monopolistic segment, which will be subject to state regulation, will include only the service of providing infrastructure for railroad transportation.