Impact of on-track competition on public finances – The case of the Czech Republic

Abstract

The European Commission presumes that competition in the passenger railway market will motivate railway operators to become more customer-led companies. Competition forces should lead to an improvement in the quality of services provided and thereby increase demand for rail transport and cut budget burdens.This paper aims to assess the budgetary impacts and development of public spending efficiency in the context of on-track competition in the Czech Republic. The paper illustrates what impact the increase of the number of passengers (including passengers entitled to state-imposed discounts on commercial lines) had on public funds, and public spending efficiency as measured by the ratio of public expenditures to rail transport performance.The general results indicate that the situation regarding the budgetary impact is more complex than the original ideas considered. While both the length of subsidised railway lines and the number of subsidised train-kilometres have decreased, the fiscal burden has not dropped but increased as a final consequence. It turns out that an introduction of competition need not result in a reduction in budget entitlements nor an increase in the efficiency of public resources spent. The efficiency of public resources remained unaffected despite the introduction of on-track competition on the main routes.