Finland explores competition in passenger rail after 2030

Published on 19-04-2023 at 11:54

VR train waiting in Seinäjoki to leave for Helsinki Ninara / Flickr

With the current passenger rail service contracts expiring in 2030, publicly funded passenger rail traffic in Finland will need to be reorganised in 2031 to meet the European Union’s agreed-upon goals. The Finnish ministry of Transport is inviting public comments on the matter, wanting to achieve level playing field in the market for the next decade.

The Finnish Ministry of Transport and Communications has opened a request for opinions on the assessment memorandum concerning passenger rail services after 2030. This memorandum provides a knowledge base for making decisions on the organisation of passenger rail traffic in the future.

Currently, a passenger rail contract is directly awarded to Finnish State railway company VR, for 39.4 million euros annually. This contract expires in 2030. The Finnish government says a renewal of the same contract is not possible, saying “as an EU Member State, Finland is committed to the tendering of passenger rail services”. Indeed, after 1 January 2025, direct awards will no longer be possible according to EU regulations.

Open Access

The Finnish Transport Ministry underlines that Finland is one of the first Member States to put into place the legislative amendments required to guarantee that railway companies have open access to the market. The open access approach requires the company to have its own locomotives and railway carriages. Since Finland has a track gauge different from other European countries, rolling stock suitable for use in Finland is, for all intents and purposes, only available in Finland.

To date, the open access approach has not resulted in any company joining VR on the Finnish market with operations, but there are plans. New operator Suomen Lähijunat Oy wants to bring back regional trains, because many regional train operators ceased over the last decades, leaving only VR. “We chipped away at the existing monopoly in Finland on the bus side, and we could very well be at a turning point for rail now”, founder Pekka Möttö said earlier in an interview with RailTech.

A level playing field is an obligation under EU regulation, Finland sees. The assessment memorandum states that a rolling stock company must be established in Finland and other structural arrangements put into place to enable tendering. It is up to the next government to lay down guidelines on the future passenger rail markets and services, no later than in 2024. The assessment memorandum now circulated for comments seeks to provide a knowledge base in support of this decision-making.

The memorandum seeks to provide a comprehensive understanding of the current state and future of passenger rail service procurement. It outlines the decisions that must be made during the government’s term starting in 2023 and the process for an orderly transition to procurement arrangements consistent with EU regulation by 2030.

Finland ready for level playing field, some countries want to keep direct awards

A major goal of the EU is to encourage the modal shift towards rail transport. The European Commission sees market opening as the way forward, and recent new entrants in for example on the Spanish high-speed market has led to cheaper train tickets and an increase in passengers. In France, change is coming also to the regional train market, which are now tendered in the first regions.

EU regulation requires a level playing field in the passenger rail services market. This means that passenger rail services must be put out to tender in line with EU regulations. The assessment memorandum recommends that the tendering be organised centrally under the leadership of the Ministry of Transport and Communications.

This is another approach than some other European countries who are dealing with a direct award contract that already expires earlier, for example Belgium where the NMBS/SNCB contract expires by 2023 and the Netherlands, where the contract with NS expires in December 2024. Wanting to keep the current situation of giving a direct award to the incumbent operator, the Netherlands and Belgium plan to go through with this, regardless of the EU rules which will change the situation from 2024. According to ALLRAIL, which advocates market opening for rail in Europe, this could be in violation with the rules, saying it will file a complaint with the European Commission. It will remain to be seen whether these direct awards will be accepted because they are – in the nick of time – awarded before 2025.

The Finnish government says it is ready for open competition however. “Finland should make every effort to bring about the conditions required for open competition so as to give companies a level playing field in the passenger rail services market. This way, competition and the benefits to society arising from competitive tendering can be achieved”, the Transport Ministry states.