Russia to Freeze Road Tariff Hike

After massive protests by long-haul truckers and transport companies, the Russian government has decided to freeze  a planned increase of a controversial highway tariff for several months, according to the Journal of Commerce. Opponents say this increase could shrink Russia’s domestic transportation market by 30 percent.

The current rate of the tariff, which was introduced in November and applied to trucks weighing more than 12 tonnes (13.2 tons), is set at 1.53 rubles ($0.02) per kilometer (0.62 miles). The government had planned to nearly double the tariff to 3.06 rubles per kilometer beginning March 1.

The government will revisit the tariff issue by October 1, according to Arkady Dvorkovich, Russia’s first deputy prime-minister, who said the freeze would cost the government 25 billion rubles. The government has said the fee would be used to build road infrastructure throughout Russia.

In contrast to maritime container transportation, the Russian market for overland container shipping remains highly competitive because of its low entry barriers. The market is highly fragmented, with thousands of players, a significant portion of which consists of individual entrepreneurs, competing for relatively small revenue. That means that pricing in the industry remains very sensitive to additional costs and the introduction of additional fees will force carriers to raise prices for their services for at least the amount of the additional costs.

Thus, the majority of these costs will be shifted to local consumers. Russian retail chains have already begun raising their prices.

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