Corporate Social Report 2010, JSCo “” _Russian Railways Social Report 2010

Contents

Introduction 03 1. General Information about the Report 6 2. Scope and Limits of the Report 6 3. Regulatory and Methodological Framework Used for the Preparation of the Report 6 4. The Methods Used for the Preparation of the Corporate Social Report 6

List of Acronyms and Terms Used in the Report 9 04 Section 1. General characteristics of JSCo “RZD” 12 1.1. General characteristics of JSCo “RZD” 13 1.2. JSCo “RZD” Ownership Structure 16 01 1.3. JSCo “RZD” Corporate Style 17 1.4. Mission and scale of business 18 1.5. Participation of the Company in International Organizations and International Activities 22 1.6. Structural Reform Program for Railway Sector 25 1.7. Public Evaluation of JSCo “RZD”Performance 30 05

Section 2. Strategic Goals of the Company concerning in Sustainable Development. Key Risks and Opportunities in Social Responsibility 32 02 2.1. Role of JSCo “RZD” for Sustainable Development 33 2.2. Strategic Goals of the Company for Sustainable Development 34 2.3. Key Focus Areas of JSCo “RZD” for Social Responsibility 36 2.4. Social Responsibility Key Risks and Opportunities 40

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Section 3. Stakeholders Interaction 42 3.1. Review of Concerned Parties 43 03 3.2. Forms of Stakeholders Interaction 52

Section 4. Economic Efficiency 54 4.1. Economical Policy of JSCo “RZD” and Its Implementation Mechanisms 55 4.2. JSCo “RZD” Economic Efficiency Management System 56 04 4.2.1. Risks and Opportunities in Economical Context 56 4.3. Implementation of Economic Policy. Presence in Key Markets 58 01 4.4. Investment Activities 64

Section 5. Environmental Performance 68 5.1. Environmental Protection and Rational Nature Management Policy of JSCo “RZD” 69 5.2. Nature Conservation Management System 69 05 5.2.1. Nature Conservation Opportunities and Ecological Risks 69 5.2.2. Atmospheric Air Protection 74 5.2.3. Utilization of Water Resources 80 5.2.4. Protection of Water Resources 82 5.2.5. Production and Consumer Waste Management 86 5.2.6. Environmental Control Costs 91 5.2.7. Implementation of Investment Project “Ecological Safety” 92 5.2.8. Technical Retooling of JSCo “RZD” to Ensure Environment Protection 93 5.2.9. Noise Control Measures 93 5.2.10. Measures within Environmentally Protected Natural Areas 94 5.2.11. Ecological Audit 94 02 5.2.12. Activity of Environmental Divisions of the Railways 96

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Section 6. Staff Interaction 98 6.1. JSCo “RZD” Policy Concerning Staff Interaction 99 6.2. Management System in Terms of Staff Interaction 99 6.2.1. Key Risks and Capacities in Terms of Staff Interaction 99 06 6.2.2. A Strategy and Programs for Staff Interaction 102 08 6.3. Pursuit of a Single Corporate Policy Concerning Staff Interaction and Management in JSCo “RZD” in 2010 104 6.3.1. JSCo “RZD” Personnel Characteristic 104 6.3.2. HR Potential Development 106 6.3.3. JSCo “RZD” Holding’s Competency Models 107 6.3.4. Industrial Competition 108 6.4. Corporate Social Policy 110 6.4.1. Collective Contract Relations and Interaction with Trade Unions 110 6.4.2. Corporate Social Responsibility 111 6.4.3. On Implementation of the JSCo “RZD” Residential Program 112 6.4.4. JSCo “RZD” Youth Policy 113 6.4.5. Culture and Sport 115 6.4.6. Corporate Pension Program 116 6.5. Remuneration of Labor and Motivation of the Staff 117 6.6. Public Health Protection 118 6.7. Labor Protection and Operating Safety 121 6.7.1. Assessment of Risks 124 6.7.2. Industrial Injuries 124 6.7.3. Planning of Labor Protection Measures 127 6.7.4. Financing of Labor protection measures 127 6.7.5. Evaluation of workplaces 128 6.7.6. Personal protection equipment 129 6.7.7. Awareness and competence of employees 09 regarding the Labor Protection 130

Section 7. Observance of Human Rights 132 07

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Section 8. Public Relations 136 8.1. Cooperation Policy of JSCO “RZD” with Society 137 8.2. JSCo “RZD” Management System in PR Field 138 8.2.1. Risks and Opportunities 138 06 08 8.3. Participation of JSCo “RZD” in Building of Governmental Policy in 2010 139 8.3.1. The Company’s Fulfillment of Governmental Tasks 139 8.3.2. Cooperation with Federal Executive Authorities 140 8.3.3. Cooperation with Chambers of Federal Assembly 143 8.3.4. Cooperation with Regional Authorities 144 8.3.5. Interaction with Business Communities 145 8.4. Charitable activities 149 8.5. Information Transparency about the Company 151 8.6. The Compliance of the Company’s Activities with Regulations and Laws in Respect to the Social Interaction 153

Section 9. Product and Service Liability 154 9.1. Policy of JSCo “RZD” in regard to Customer Liability 155 9.2. Customer Liability Management System 155 9.2.1. Customer Liability Opportunities and Risks 155 09 9.2.2. Customer Liability Strategies and Programmes 156 9.2.3. Customer Liability Management Structure 157 9.3. Implementation of Policy in regard to Customer Liability in 2010 162 9.3.1. Quality Control 162 9.3.2. Provision of Information to Customers and Marketing Communications 162 9.4. Innovative Policy of JSCo “RZD” in 2010 165

Appendices 173 07 Appendix 1. The Table Illustrating the Correspondence of Chapters and Sub-Chapters of the Report to GRI Indicators 173 Appendix 2. The Table Illustrating the Correspondence of Chapters and Sub-Chapters of the Report to RUIE Indicators 177 Appendix 3. Table Illustrating the Adherence of Chapters and Sub-Chapters of the Report to UN Global Agreement Principles 180

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Introduction

1. General information about 2. Scope and limits of the Report. the Report The Report covers the information re- The preparation of the Corporate Social garding all aspects of corporate social Report of the Russian Railways for 2010 responsibility implemented by Russian opened the fifth annual reporting phase Railways. Moreover, such aspects as Введение for coverage of the non-financial activities the responsibilities towards person- (reporting social responsibility and sus- nel, consumers and business partners, tainable development) of the Company. including the environment protection, The present Report has been prepared have been reviewed in the Report. The in compliance with Russian Railways Report analyzes management method- Order No. 1313p of June 16, 2011 “The ology, actions and efficiency indica- preparation of the Corporate Social tors that provide for stable economic, Report by Russian Railways for 2010” ecological and social development of taking into account the principal re- the Company. The information given quirements of the Reporting Guidelines in the Report refers to the activities of oriented at the sustainable develop- the Central Office of the Company and ment (GRI, version G3). The previous its affiliates. The activities of subsidiary social reports of the Company for 2006, and affiliated companies as well as its 2007, 2008, 2009 are available at the associates have not been reviewed in official web-site of JSCo “RZD”. the Report. Russian Railways is collaborating on a larger scale with NGOs regard- 3. Regulatory and methodological ing the social responsibilities of the framework used for the business structures, and above all, preparation of the Report with Russian Union of Industrialists The following documents have been and Entrepreneurs. The Company used for the preparation of the strictly follows the directives of UN Corporate Social Report: Global Agreement and joined the • Reporting Guidelines for sustainable Social Charter of Russian Business. The development, i.e. GRI Version G3. Corporate Social Report has been pre- • UN Global Agreement. pared to solve the following problems: • Report verification standards • awareness of all concerned parties АА1000. of the policy, management princi- • Social Charter of Russian Business. ples and substantial aspects of the • Principal efficiency indicators of Company actions in terms of social Russian Union of Industrialists and responsibility; Entrepreneurs. • the development of dialogue with • Recommendations for corporate the concerned parties to meet social non-financial reporting. requirements and demands by the Company; 4. The methods used in preparation • the establishment of the grounds for of the Corporate Social Report and better assessment of the Company its implementation. social activities by Company man- The Corporate Social Report has been agement and experts, including elaborated in compliance with report- the problems, opportunities and ing principles oriented at the sustain- perspective targets in the sphere of able development, covered by GRI. economic development, environment Scope of the GRI principles and their protection, Company human poten- compliance at the stage of preparation tial management and interaction of the Report are given in Table 1.1 with consumers and society. below.

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Table 1.1. Scope of the GRI principles and their compliance at the stage of the preparation of the Russian Railways Social Report 2010.

No. GRI principles Principles description in the Corporate Social Report Введение The essential external and internal factors with respect to the social responsibility of the Company have been considered at the stage of determining the task of the Report. Every Chapter of the Project that refers to the efficiency indicators in each aspect of social responsibility (Chapters 4-9) covers the information of relevant factor, defining the 1 Stability themes of the Report, such as below: • Key risks and opportunities; • Company strategy. The Report illustrates the issues and indicators that attracted specific attention of concerned parties. The inclusion of concerned parties might be realized due to actions that were implemented at the stage of the Report preparation: The identification and assessment of the concerned parties of the Company. Inclusion of 22 The chart of concerned parties was prepared, including the evaluation Concerned Parties of the significance of concerned parties and taking into account the mutual influence of the Company and the concerned parties. The most significant (key) groups of affected parties have been identified during the review. The analysis of the Company contribution into the sustainable develop- ment has been outlined in the Report, as follows: 1. The Report reviews various Company activities associated with its sustainable development, namely: economic (Chapter 4), environment protection (Chapter 5) and social (Chapters 6–9). 2. In addition, the Report illustrates economic, ecological and social Sustainable 3 indicators and covers the information about Company actions aimed at Development the enhancement of each indicator and management methods applied to the sustainable development. 3. Some chapters refer to analysis of the Company activities associated with the stable development of regions and industrial sectors where JSCo “RZD” plays a significant role along with the tribute of the Compa- ny to the sustainable development of the state and society as a whole. 1. The Scope of the Report. The working group has collected data and all the necessary information at the administrative office of JSCo 4 Coverage “RZD” and affiliates of the Company on all substantial issues to be cov- ered by the Corporate Social Report. 2. The reporting limits.

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Table 1.1. Scope of the GRI principles and their compliance at the stage of the preparation of the Russian Railways Social Report 2010.

No. GRI principles Principles description in the Corporate Social Report Введение The Corporate Social Report gives both positive and negative aspects along with the outcome. The negative aspects and outcome are described in the following parts of the Report: 5 Balance • in tables, showing the internal and external risks for each performance area and in comments to these tables; • in chapters, illustrating the values of such negative GRI indicators as an adverse effect on the environment, violation of traffic safety, personnel turnover, penalties and suits, etc. 1. The reported efficiency outputs for 2010, where and if possible, are given in comparison with the indicators of the previous years. 6 Compatibility 2. The reported data is comparable with the indicators, recommended by GRI and other regulations and systematic documents at the stage of preparation of non-financial reporting. The quantative data has not been assessed for the purpose of the Report. 7 Adequacy The allegated qualitative data given in the Report is based on the re- spective quantitative data. In such case all cost parameters of the Report are given in current prices. The Report has been prepared under strict time-constraints. The readiness of the materials of the Report in the second half of the year 8 Timeliness following the reporting period might be explained by the scale of the Company operations and available periods for the preparation of statis- tic and corporate records. To improve clarity of the Report and make it easy to use the following parameters were introduced: 1. The single structure for all Chapters, that contain the data about efficiency outputs of the Company regarding the social responsibilities. 9 Clarity 2. The references are given to sources of the detailed information (including the Company web-site). 3. The list of terms, definitions and abbreviations is given for the purpose of the Report. The materials of the Report are given referring to the state statistics and corporate records and reporting documents of Russian Railways. In ad- 10 Reliability dition, the information posted on the official site and in the corporate information systems of Russian Railways have been used at the stage of preparation of the Corporate Social Report.

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List of Abbreviations and Terms Used in the Report

Guidance for reporting on sustainable development (Global Reporting Initiative), GRI Guidance version 3.0.

AccountAbility Stakeholder Engagement Standard (interaction with stakeholders AA 1000 SES standard) Введение PricewaterhouseCoopers Auditing and consulting company

Moody’s, International rating agency Standard&Poor’s

Fitch International rating agency

JSCo “RZD” “Russian Railways” Joint Stock Company, short name

Company the short name of the company “Russian Railways” Joint Stock Company

Physical and legal bodies which have an impact on the results of activity of the company Interested parties or its impact

Development, ensuring the needs of current generations without compromising the Sustainable Development ability of future generations to meet their own needs [Oxford: Oxford University Press, 1987, р. 43]

Responsibility for the transport development of the country’s economy and Russian society in conjunction with responsibility for the sustainable development of the company. Social responsibility Social responsibility JSCo “RZD”: JSCo “RZD” • based on strict compliance with Russian legislation and legislative acts; • includes proactive activities exceeding regulatory requirements; • oriented on the most complete and well-balanced records of the demands of stakeholders in the economic, environmental and social fields

The result of the risk events, arising from the interaction with stakeholders, as well as stakeholders that may adversely affect the company’s activities in the field of sustaina- ble development and social responsibility, i.e. lead to damage (including financial), loss Non-financial risks of profits. Non-financial risks describe the uncertainty associated with the attitudes, behavior, stakeholders, their expectations and the impact of the activities of the com- pany’s stakeholders

Volunteering on a grant or concessional transfers of property, including money, execu- Charitable activities tion of work, services, other support (iss. 1 Federat Law from 11.08.1995. Number 135-FL “On charity and charitable organizations”) to physical and legal bodies.

JSCo Joint-stock company

GNP Gross domestic product

WHO World Health Organization

HEC Health Expert Commission

S&A subsidiaries and affiliates

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RTI traffic accident

RTSC Road Transport Service centers

SPA Single personal account

STL Single telephone line

UN EEC UN European Economic Commission

RJSICo Railway Joint Stock Insurance Company Введение

RL Railway

ZHELDORTRANS All-Russian Union of Railway Transport Employers

ZAO Closed Joint Stock Company

ZAO “ERL” “EuroAsia Rail Logistics” Closed Joint Stock Company

CI QCS Corporate Integrated Quality Control System

PRC People’s Republic of China

MGIMO State Institute of International Relations (MGIMO-University)

MIIT Moscow State University of Railway Engineering

UIC International Union of Railways

NLMK Novolipetsk Metallurgical Plant

NGPF Non-Government Pension Foundation “WELFARE” “BLAGOSOSTOYANIE”

STW Scientific and technical works

JSCo “SP Vitebskaya SPC” “Saint Peterburg Vitebskaya Suburban Passenger Company” Joint Stock Company

JSCo “Central SPC” “Central Suburban Passenger Company” Joint Stock Company

UN United Nations Organization

LLC Limited Liability Company

RCO Railway Cooperation Organization

FFC First Freight Company

MPE Maximum permissible emissions

MPD Maximum permissible discharge

PNOOLP Draft Standards of waste and limits for its disposal

Rosprofzhel Russian Trade Union of railway transport and civil workers

Rosstat Russian Federal State Statistics Service

Rostechnadzor Federal Service for Ecological, Technological and Nuclear Supervision

Rospotrebnadzor Federal Service for consumer-protection and human well-being

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RUI&E Russian Union of Industrialists and Entrepreneurs

PPE Personal protection equipment

QCS Quality Control System

CIS Commonwealth of Independent States

USSR the Union of Soviet Socialist Republics

CS Company’s Standard Введение

LPMS Labor protection management system

BTSS Brand transport service system

ACIS Alarm, centralization and interlocking system

FPC Federal Passenger Company

CD FAS Central Department of Federal Anti-Monopoly Service

CDFCR Central depot on freight car repair

CDRR Central depot on rail roads’ repairs

CK ROSPROFZHEL Central Committee of Rosprofzhel

BTSC Brand transport service center

ES Emergency situations

EDS Electronic digital signature

IPO Initial Public Offering

ISO International Organization for Standartization

International Organization for Standardization, ISO 14001-2004 “Environmental ISO 14001 management standard. – Requirements for use)

Occupational health and safety information, guidance and resources to support this OHSAS 18001 standard.

_11 General Russian Railways Participation of characteristics Corporate Style the Company of Russian Railways in International Organizations, and International Activities

Russian Railways Mission and Ownership Structure Business Scale 01

Structural Reform Program for Railway Sector

Public Evaluation of Russian Railways Performance General Information about the Company Russian Railways Social Report 2010

1.1. General characteristics of Russian Railways

The full name of the Company: Public customs supervision, including cargo Corporation “Russian Railways”. luggage, luggage and hand bag- The abbreviated name: JSCo “RZD”. gage of the passengers; English name: Joint Stock Company • Forwarding activities; «Russian Railways» • Provision of services associated Address of Russian Railways: 2, Novaya with scheduled and current repairs, Basmannaya Str., Moscow, , including technical maintenance of 107174. ; Internet address of Russian Railways: • Provision of communication, www.rzd.ru. information, marketing and other Russian Railways has been established services; General Information about the Company by the relevant Decree No. 585 issued • Construction, technical mainte- by RF Government on September 18, nance and repair of communication 2003 “The establishment of Public facilities, including linear structures, Corporation “Russian Railways”. systems and radio communication The Company has started its economic facilities; activities on October 1, 2003. • Maintenance and repair of computer In compliance with Decree No. 1009 engineering and other techniques, of RF President of August 4, 2004 including associated peripheral “Approval of the list of strategic en- equipment; terprises and joint-stock companies” • Procurement (sale) of electrical Russian Railways has been included in and thermal energy, provision of the list of Public Corporations, its shares services connected with power, heat belong to the Federal State, and the and water supply, including water Russian Federation exercises control distribution; over shares and provides for the stra- • Metrological works, manufacture tegic interests, defense and security of and repair of measuring devices; the State, protection of morals, health • Prevention and elimination of fires and civil rights of RF citizens. and other emergency situations on The principal activities of Russian the railways, including emergency Railways: and recovery operations; • Provision of services for railways • Scientific and research, develop- infrastructure general use and other ment, design, survey, and repair and public services associated with such construction works; infrastructures (its components); • Information, advertising and • Provision of services for general publishing activities, including public and specific railways, owned printing; by the Company; • Establishment and operation of • Operation, maintenance and repair logistics centers, including the of general public railway transport integrated logistic documentation and specific railways; and its implementation in transport • Transportation of passengers, car- market; goes and cargo luggage by general • Organization of railway for children public railways; and professional orientation of • Provision of services associated with young people; ; • Medical services; • Cargoes handling on general public • Educational services; and specific railways; • Foreign trade activities, includ- • Provision of services on cargoes ing provision of services on gen- storage, including cargoes under eral public international railways,

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cooperation with foreign railway The only shareholder of the Company transport organizations; the con- is the Russian Federation. The struction of railway transport facili- Government of the Russian Federation ties for foreign organizations; exercises the shareholders’ powers on • Other activities. behalf of the Russian Federation. The supreme governing body of The shareholder decisions are executed Russian Railways is the general meet- in a form of directives and regulations ing of shareholders. of RF Government. The decisions of

Organizational and functional managerial structure of Russian Railways

The structure of Russian Railways

General Meeting of Shareholders

Auditing Commission Board of Directors General Information about the Company Advisory council is run by the Chairman of administrative department – President Russian Railways President Advisory council

Administrative department Advisory council is run by members of administrative department – Vice-Presidents of Russian Railways Management personnel

Advisory council is run by members of administrative department – Managers of Russian Railways

Advisory council is run by Managers of Departments and other subdivisions

the annual general meeting of the Russian Railways President exercises shareholders for 2010 have been ap- the rights and bears the responsibili- proved by the decree No. 1129-p of RF ties for the achievement of principal Government on June 30, 2011. targets of the Company, i.e. provision RF Government dominates in taking of the public needs, legal entities and decisions and forming the membership individuals during the transportation of Russian Railways Board of Directors by railways, operations and services both in number and human resources. rendered by the Company, as well as Russian Railways Board of Directors for any proceeds of the Company. consisting of 13 persons has been ap- The Company President is the only proved by the decree No. 1129-p of RF Executive Body of the Company. Government on June 30, 2011. Russian Railways Board of Directors A.D.Zhukov, Deputy Chairman of is the Collective Executive Body of RF Government was selected the the Company. The Board consists Chairman of Russian Railways Board of President as the Chairman of the of Directors. V.I.Yakunin, President is Company, the First Vice-President, a member of the Board of Directors of Senior Vice-Presidents and Vice- Russian Railways. Presidents of the Company, includ- The remunerations for performing ing Company Branch Managers, i.e. the duties as the members of Board of various Railways, heads of Divisions of Directors of Russian Railways have not Company Management and other em- been paid in 2010. ployees in compliance with RF decree

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No. 265-р issued on February 25, 2004. improvement of industrial processes, The members of the Company higher safety and quality of passenger Management Body are selected by the and luggage transportation. Board of Directors, excluding Russian The Audit Commission is formed to re- Railways President, who is appointed view the financial and economic activities by RF Government. of the Company. The Commission con- The fees of Russian Railways senior sists of 7 individuals that are approved executives are directly connected by RF Government in compliance with with the efficiency of the Company Decree No. 1129-р of June 30, 2011. The thus stimulating the development of members of the Audit Commission have the Company at the cost of its profit- no right to hold any other positions, par- ability, expenses optimization, and ticularly for the Company Management.

JSCo «RZD»: Organization structure General Information about the Company

Russian Railways Subsidiaries and branches of the Company

Russian Railways Russian Railways Russian Railways branches Russian Railways Representative offices administration administration Railways (16 rail roads) The Republic of Hungary (Budapest) Departments Shipping operations (3 branches) Federal Republic of Germany (Berlin) Management Technical, economic and financial provision departments (Tehran) (7 branches) People’s Chinese Republic (Beijing) Accounts Department Capital construction (2 branches) Other subdivisions The Democratic People’s Republic of Korea of administrative Rolling stock repair (5 branches) (Pyongyang) department Railway equipment (3 branches) The Republic of Poland (Warsaw)

Information and communication The Slovak Republic (Bratislava) (3 branches) Ukraine (Kiev) Social sphere (1 branch) The Republic of () Design bureaus (11 branches)

Other branches (11 branches) The Republic of Estonia (Tallinn)

_15 Russian Railways Social Report 2010

The organizational structure of “RZD” • 3 branches dealing with informa- Holding consists of Russian Railways tion and communication links; parent company, its subsidiaries and • 1 branch responsible for social dependent companies as of December issues; 31, 2011, including as follows: • 11 branches – designing bureaus; • 16 company affiliates — Railways: • 10 other branches. Oktyabrskaya, Kaliningradskaya, The Company has its Representative Moskovskaya, Gorkovskaya, Offices in 10 countries all over the Severnaya, Severo-Kavkazskaya, world: Jugo-Vostochnaya, Privolzhskaya, The Republic of Hungary (Budapest), General Information about the Company Kuibyshevskaya, Sverdlovskaya, Federal Republic of Germany Juzhno-Uralskaya, Zapadno-Sibirskaya, (Berlin), Iran (Tehran), People’s Krasnoyarskaya, Vostochno-Sibirskaya, Republic of China (Peking), the Zabaikalskaya and Dalnevostochnaya; Democratic People’s Republic of • Functional branches: Korea (Pyongyang), the Republic of • 3 freight branches; Poland (Warsaw), the Republic of • 7 branches responsible for tech- Slovakia (Bratislava), Ukraine (Kiev), nical, economic and financial the Republic of Finland (Helsinki), the procurement; Republic of Estonia (Tallinn). • 2 branches dealing with capital The branches and representative of- development; fices, established by the Company, shall • 5 branches responsible for repairs not be considered the legal entities, of rolling stock; and their assets belong to Russian • 3 branches responsible for railway Railways. equipment;

1.2. Russian Railways Ownership Structure

The authorized funds of the Company company increased its authorized as of January 01, 2010 amounted to funds by 43.6 billion rubles: 40 billion 1,594,516,219 thousand rubles. rubles in accordance with the Federal In the first quarter of 2010, the com- Law “2010 Federal Budget and 2011- pany increased its authorized funds by 2012 Planning Period” in order to 60 billion. rubles in order to build up implement the Company’s investment infrastructure facilities in the course of program, including construction of the preparation for the XXII Olympic and transportation infrastructure facilities XI Paralympic Winter Games in in in the course of preparation for the 2014, in accordance with Clause 11.1.6 XXII Olympic and XI Paralympic Winter of Federal Law #308-FZ “2010 Federal Games in Sochi in 2014 (20 bn. rubles) Budget and 2011-2012 Planning and reconstruction of the public rail Period” dated December 02, 2009. transportation infrastructure (20 bn. In the fourth quarter of 2010, the rubles);

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3.6 bn. rubles – in accordance with the State Registry of Legal Entities on March Federal Law “2010 Federal Budget and 03, 2011 confirming the state registration 2011-2012 Planning Period” in order of amendments made to the constituent to build up a railway infrastructure document of Russian Railways. within the Organization of Intermodal Passenger Transportation on the route The authorized funds of the – Knevichi Airport project. Company as of the end of the An entry under state registration number financial period amounted to 6117746323326 was made in the Uniform 1,698,128,067 thousand rubles. General Information about the Company

1.3. Russian Railways Corporate Style

The new corporate style of Russian measures in the current business envi- Railways is the symbol of the changes ronment. The brand of Russian Railways that are taking place in the Company. also suggests such values as commit- Nowadays, the Russian Railways area ment to traditions, responsiveness to of interest comprises not only the rail customers, guaranteed quality of servic- transportation, but also logistics, tour- es, reliability, swiftness, innovativeness, ism, construction, telecommunication, technological effectiveness, broad area medicine and many other spheres. of interest, dynamic development, thus Therefore the new logo bears a broad creating an attractive image for the in- meaning and does not only focus on ternational audience. In October 2007, railways. Bright red color and advanced the management board of Russian graphics of the new trademark of Railways approved the Company’s Russian Railways demonstrate that corporate trade mark, logotype and the Company is ready to take active corporate typefaces.

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1.4. Mission and Business Scale

The mission of RZD Holding is to personalizing responsibility for the develop effectively the transportation operating results; business making it competitive on both • Taking complex measures aimed Russian and international markets, at increasing cost effectiveness of subject to actualization of the re- target businesses with the respective sponsibility of the national carrier and state support; owner of the railway infrastructure. • Implementing the uniform func- The development priorities of RZD tional policies and developing bal- Holding are defined in the RZD anced strategies with a breakdown Development Strategy for up to 2030, by business type of RZD Holding and General Information about the Company as prepared in Russian Railways and subsidiaries and affiliates of Russian its basic medium-term development Railways. priorities for up to 2015. The key ones The RZD Holding’s basic investment are the following: priorities by 2015 are reconstruction • Scaling up the business on both the and development of infrastructure, domestic and international markets reconstruction of fleet, by 2015; enhancement of cargo and passenger • Increasing the efficiency of the core transportation service. activities, first of all, due to improv- The important objectives of RZD ing the use of capacity and turno- Holding development comprise ver of the infrastructure, as well as improvement of performance of the increasing its technical reliability; staff as well as its involvement in the • Achieving the high-level competitive achievement of corporate tasks. As ability due to creation of a new line this takes place, the care of people is of carrier products and additional the foundation of the Holding’s social services, development of logistics, support system and the Collective service and quality enhancement for Agreement is the key element of ensur- clients, implementation of innova- ing that all the employees are provided tive facilities and work techniques, with social support and the guarantee improvement of ecological safety of their confidence in the future. and transportation security; Achievement of the stated goals will • Increasing the employee welfare and contribute to formation of a sustain- social security based on the prin- able transportation business system, ciples of social partnership subject making the Holding more competitive to the growth of the employees’ and client-focused, enhancement of competencies and improvement of efficiency and quality of the trans- their work performance; portation process and expansion of • Making the corporate executive the range of services rendered to management to comply with the consumers. world’s best practice. The RZD Holding in its target state will be: The Strategy will be implemented by • The largest transportation business taking the following measures: system in Russia; • Elaborating an efficient business • A holding structured by business model of RZD Holding, proceeding type with a consolidated strategy; with management by business types, • An owner of the public rail transpor- improving Russian Railways and the tation infrastructure that will provide Holding’s organizational structure transportation and associated ser- and management system in general; vices on a nondiscriminatory basis; • Formalizing goals and priori- • An infrastructure-integrated ties in business development and network-wide cargo carrier;

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• One of the largest players in the system-level adjustment of its activi- emerging markets of logistics, pas- ties by developing new business types, senger service and other services; expanding its presence and improving • A socially responsible business sys- its competitive ability in the growing tem that will ensure the balance of markets of logistics, passenger service corporate, state and public interests and other services. in its activities. Thus, for the purpose of improve- Actually, the Company started to ment of competitive ability of the long implement the targeted strategic distance passenger transportation plans in 2010. It undertook gradu- complex, the Holding has launched a ally the measures aimed at increasing number of promising projects aimed at General Information about the Company the client-orientedness and techno- attracting new, and retaining “tra- logical sustainability of the operation ditional”, passengers who prefer the of RZD Holding. We enhanced the railway transport over other modes of passenger service quality, introduced transportation: new products and services in the • Development of the practice of passenger complex. We actively took ticket sale via the Internet, including measures aimed at increasing the level on-line registration; of transportation security based on • Expanding the range of quality enhancement of the content services and enhancement of their and repair of infrastructure facilities quality, beginning reconstruction of and rolling stock, improvement of the the largest train stations; risk and threat detection and elimina- • Increase in the flexibility of price reg- tion system to ensure their sustainable ulation in the deregulated segment; operation. • Ensuring the increase in transporta- In 2010, in accordance with the deter- tion speed; mined target parameters, RZD Holding • Outsourcing is actively used within improved gradually its innovation, organization of passenger service. investment and personnel policies. • Development of tourism. It continued to implement the One of the key directions is the devel- Structural Reform Program for Railway opment of the rapid transit and high- Sector; the most important steps were speed service. made to complete the adoption of the In 2010, a regular movement of vertically integrated matrix manage- trains was opened between Moscow ment system. and Saint-Petersburg, in July rapid We completed the formation of trac- transit trains began to move on the tion rolling-stock movement control itinerary Moscow – Nizhniy Novgorod, and repair directorates as branches of and at the end of the year – on the Russian Railways We actively formed itinerary Saint-Petersburg – Helsinki. administration chains in the infra- One of the promising trends of the structure and traction directorates. Holding’s development is the logistics Consecutive work was done to create activities. environment for establishment of As a business type, the logistics is railway-based regional corporate highly synergistic with other basic centers, adoption of a no-department target business types: “cargo transpor- railway management structure. tation” and “operator performance” (especially with the segments of Company’s Business Scale container shipping and special purpose While developing the current busi- cargo transportation). The integrated ness types, the Holding carries out a development of the new segment will

_19 Russian Railways Social Report 2010

provide a basis for both attraction of approaches to Russian ports in all extra clients to the railway transport water basins. In order to achieve the and improvement of the competitive planned volume of carriage at remote ability vs. the motor service. approaches to Baltic ports, Russian The Holding will develop towards its Railways has in recent years done target state not only as the largest groundbreaking work in the area of transportation group of companies, construction of side track, electrifi- but also as a leader of the logistics cation, extension of receiving and market in the “1520 Area”. departure tracks at speed-limiting The strategic development of the areas. There is an intent to continue General Information about the Company Holding in this area consists in taking development of railway stations adja- leadership of the transport and logis- cent to the ports in Ust-Luga, Primorks, tics market based on enhancing the Vysotsk, Murmansk, and Kaliningrad. efficiency of the existing freight yards A great work is being done in the area by way of their reconstruction and of reinforcement and development of modernization on the basis of state- railway infrastructure at the approach- of-the-art technologies and business es to the Far East ports. processes, as well as integrating the There are projects concerning for- activities into a single network and mation of management companies creating a standard service uniform. in the largest ports that are being By 2015, as part of strategic develop- currently implemented. In particu- ment of the logistics business, the lar, the Holding owns equity stakes Holding will: in JSCo “Ust-Luga Company”, JSCo 1. Create terminal and logistics “Murmansk Transportation Junction”. complexes across the entire Russian Participation of the Holding in such railway system. projects will be based on analysis Nowadays, a number of high priority of technical efficiency and payback terminal and logistics infrastructure potential. The volume of the stake in projects are already being implement- the port capital to be acquired by the ed, i.e.: Holding will be determined on a case- • In the Moscow region – a Bely Rast to-case basis; this being said, the prime terminal and logistics center; project for the Holding is participation • In the Leningrad region – a dry in extension of existing terminals and port in the Leningrad Region, near construction of the new ones. Shushary station; Development of railway ferry transpor- • In the region – tation in order to extend the territory Doskino logistics centre. of railway service is also of interest for 2. Enhance the operational effect the Holding. of the existing terminal-warehouse Establishment of joint ventures with complex. sea carriers and forwarding agents is 3. Ensure development of the con- also an important tool by which the tract logistics (3PL). Holding can influence the formation 4. Continue the implementation of a of a competitive and cost effective group of actions aimed at extending “through” tariff rate. the containerization of transporta- Ferries Ltd, a subsidiary of tion and ensuring the door-to-door JSCo “RZD”, is forwarding railway cars cargo delivery with the use of other and cargo between Kavkaz (Russia) modes of transportation. and Poti () ports, thus provid- Russian Railway is also taking ac- ing transport communication with the tive part in construction of railway Republic of .

20_ Russian Railways Social Report 2010

In November 2010, a regular direct enhancement of operational effect railway ferry line has been opened of existing railway systems abroad opened between the ports of Kavkaz on the basis of trust management and Samsun (Turkey), in construction of agreements and/or concessions; which Black Sea Ferries Ltd, a subsidiary • Introduction of new railway routes. of JSCo “RZD”, took an active part. The priority is the railway infrastructure In order to develop multimodal logistic which is a component of international chains for delivery of cargo to custom- transportation corridors and which ers, Russian Railways developers mixed inclines to large regions of cargo traf- railway-ferry service. In 2007, a ferry line fic origins or has a large potential for Ust-Luga – Baltiysk (Russia) – Sassnitz/ development, including the transit General Information about the Company Mukran (Germany) was opened. To potential. resolve promptly issues of ferry service The most promising project in this field in this direction, a special Russian- is participation in the transportation German Ust-Luga – Baltiysk – Sassnitz and logistics business while imple- Combined Railway-Ferry Line Council menting the project of construction was established. Black Sea Ferries Ltd of a broad-gauge line to Vienna and works out projects of engaging addi- development of adjacent logistics tional vessels to increase the volume of infrastructure. transportation in this direction. In addition, the Holding plans to Development of freight transportation develop considerably the international abroad and cooperation with strategic passenger traffic in the following foreign suppliers is the most advanced directions: alternative of diversification of the • Increase in the volume of traffic to/ Holding’s business portfolio. A chal- from European countries; lenging opportunity is an approach • Increase in the volume of passenger by RZD Holding of the transportation/ traffic between Russia and CIS coun- operation market in countries with tries, firstly, the Republic of Belarus, considerable cargo traffic through lines Ukraine, and ; connected with Russia (which include • Development of new train routes; the key international routes). • The high-priority “synergetic” infra- The most important criteria for enter- structure projects for the period up ing the new market will be investment to 2015 include: payback and increase in the cargo base • Reconstruction and development of on the Russian railways. the South Railways; In this area, the Holding is implement- • Reconstruction and development of ing projects of the Ulan-Bator Railways; concession management and recon- • Reconstruction of the Rajin- struction of a railway line together Tumangan railway in DPRK with con- with construction of a terminal in Rajin struction of a terminal in Rajin port; port in DPRK. • Construction of the Rasht-Astara Development of freight traffic business railway in Iran; abroad will take place in different • Reconstruction of Abkhazian directions: railways. • Complex logistics; • Provision of carrier/rolling-stock op- erator services in foreign transporta- tion systems; • Management of railway infra- structure in other countries,

_21 Russian Railways Social Report 2010

1.5. Participation of the Company in International Organizations, and International Activities

In accordance with the Russian In 2010, accession of JSCo “RZD” to the Federation Railway Development International Committee Strategy for up to 2030, reinforcement (CIT) was approved. It was a logical of the global competitive ability of consequence of joining by the Russian RZD Holding and its market standing Federation the Intergovernmental on the Euro-Asian transport market Organization for International Carriage is one of the high priority areas of the by Rail (OTIF). Company’s activities. The paramount In 2010, with an active participation objective is to ensure the most favora- of Russian Railways, the Concept of ble organizational, legal and techno- Strategic Development of Railway General Information about the Company logical environment for achievement Transport for CIS through 2020 of high performance of international was developed and approved and operations in terms of quality. the Concept of Uniform System of Management and Use of Freight International Traffic and Key Car Fleet with Different Patterns of International Projects Ownership were confirmed. In the current year, we have contin- Cooperation with the Spanish Railway ued to create a strategic platform for Infrastructure Administration (ADIF) consolidation of the Russian railways’ and Talgo Company was improved. position in the international markets of A car-building engineering center is transportation services. now being constructed by the Holding Russian Railways has entered into in collaboration with Tatra-Vagonka an active interaction with the new plant in Slovakia. management of the transport block Russian Railways subsidiaries in collabora- of the European Commission. As 2010 tion with their foreign partners are devel- practice showed, the development oping business in Kazakhstan, Ukraine, of economic and cultural relations Belarus, Finland, Slovakia, Germany, China between Russia and Europe was ac- and other countries. TransContainer companied with the growing attention entered into a joint venture –“Rail- towards RZD Holding. Container” – with a Chinese railway Formation of a united transportation container carriage corporation. This area, irrespective of railroad gauge and project reflects a qualitative change in standards, is a powerful tool helping our Chinese colleagues’ attitude towards to overcome the crisis and eliminate TransSib transit possibilities and their will threats of an economic recession. to build logistical cooperation in a three- Due to participation in work of sided format: Russia – China – Europe. international transportation organiza- There is an efficient interaction with tions, such as UIC, OSJD, UNECE and the management of German Railways. UNESCAP, and international business It is for the first time that Russian forums, including Strategic Partnership Railways took part in an extended 1520, Russian Railways was able to meeting of the Board. promote its interests in the course of Due to consistent approaches to the developing transportation corridors, 1520 Area development strategy, harmonizing regulatory framework railway companies may optimize the and technology base. use of resources at their disposal and The Holding representatives started to achieve high results. assume responsibility for solution of The 1520 Area market grows more strategic problems of the entire inter- and more attractive for large inter- national railway community, including national manufacturers of railway the area of innovations. techniques and technologies, this fact

22_ Russian Railways Social Report 2010

opens wide field for international A feasibility study of the investments cooperation. was performed, a conclusion was The Company’s experts together with drawn that the project is realizable in their Mongolian colleagues have im- technical and legal terms and will pro- plemented measures to ensure finan- vide material economical benefits not cial stabilization and development of only to the four Members State. the Ulan-Bator railways. The issues of Russian Railways interacts actively with funding the increase in the authorized its foreign partners both within the funds of JSCo “UBJD” are now being “work” CIS Member States Railway solved with the governmental authori- Council and in the format of the ties. In October 2010, the first train Strategic Partnership 1520 business General Information about the Company with Tavan-Tolgoi coal departed from forum. Ulan-Bator and moved through the In the course of meetings, amend- Russian railway network to Vostochny ments to regulatory documents were port. approved, first of all, to the Rules of By the instructions of the Government Exploitation, Systematic Accounting of the Russian Federation, Russian and Settlements for the Use of Cargo Railways takes efforts to implement a Cars Owned by Other States, Rules of project of Mongolian railway infra- Complex Settlements between Railway structure development in connection Administration of Member Sates, etc. with exploitation of mineral deposits. Being formed by the Council, commis- Implementation of this project is in- sions for rolling stock, informatization, tended to safeguard Russian long-term health care interaction, improvement geostrategic interests in this region. of regulatory framework for organi- Pursuant to the decision of the zation of international traffic settle- Mongolian Parliament, on December ments, passenger facilities, railway 8, 2010, prequalification of bidders reforming and structural transforma- was announced among companies/ tion, operate on an ongoing basis. consortia for implementation of Tavan- In order to coordinate activities and Tolgoi coal mining project, including organization of systematic elaboration construction of railway infrastructure of documents, the Council estab- in . lished an Intergovernmental Technical For participation in the prequalifica- Committee for Safety, Repair and tion, Russian Railways organized an in- Exploitation of Railway Facilities and ternational consortium that comprised Services Standardization (MTK 519). Japanese and Korean companies, as The Council brings into action a con- well as JSCo “SUEK”. sistent railway pricing policy, as well as Based on the necessity to make maxi- an implementation program for High mum use of 1520 Area’s competitive Priority Lines of Cooperation between advantages, in 2010, the Company CIS Member States up to 2020. continued to implement aggressive As defined, the foreground line of measures aimed at enhancing the effi- transport cooperation up to 2020 is the ciency of interaction with CIS and Baltic elaboration of a rail transport strategic railways with a gauge of 1520mm – development concept for CIS member our main cargo traffic and passenger states. service partners. In order to execute this decision, the In 2010, a considerable attention was CIS Member States Railway Council has attracted on the project of con- elaborated a Rail Transport Strategic struction of a “broad gauge” up to Development Concept for CIS Member Bratislava – Vienne. States up to 2020 that was approved

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on the 53rd meeting of the Council trains between Kuchurgan (UZ) and and submitted to the CIS Executive Căuşeni (ChFM) and passenger trains Committee to be considered in the No. 65/66 Moscow – Kishinev, No. prescribed order by the Council of 595/596 Moscow – Kishinev, No. Heads of Government. 51/52 Saratov – Varna, No. 642/641 Bilateral cooperation with CIS coun- Kishinev – Odessa between Kuchurgan tries in 2010 played a particular role in (UZ) and Căuşeni (ChFM) with effec- the Company’s international activ- tive date October 01, 2010 providing ity. Thus, within the Union State of for a temporary organization of freight Russia and Belarus, 2008-2010 Action transit and passenger train traffic General Information about the Company Plan for Formation and Operation of through Transdniestria. United Transportation System of the An agreement was signed between Union State continued to be imple- Russian Railways Joint Stock Company mented. In accordance with the Plan, and the State Administration of the work was performed to develop Ukrainian Railway Sector on joint ac- high-speed passenger service Moscow- tions aimed at organizing high-speed Minsk-Warszawa-Berlin, upgrade and passenger traffic and developing the develop MTK-2 and MTK-9 rail infra- itinerary Moscow – Caucasus through structures that run through the Russian Ukraine. Federation and Belarus. Issues of reconstruction of the full-fea- A Cooperation Agreement for tured railway service between Vesyoloe Development of High-Speed and are now being solved Passenger Service was signed. The with the Republicс of . A deci- agreement defined the area for high sion was taken to elaborate consistent speed passenger transportation in proposals concerning reconstruction Moscow-Minsk-Brest international and modernization of the railways of traffic with the maximum speed of the Republic of Abkhazia between 160-200 km/h. A Memorandum of Vesyoloe and Sukhumi. Mutual Cooperation between Russian In 2010, the following contracts were Railways and AO National Company signed: “” when • Between Russian Railways and RUP Carrying out Customs Operations on Abkhazian Railways No. 1510 dated the Customs Territory of the Customs November 03, 2010 for performance Union. The Memorandum provides for of overhaul of the railway infrastruc- collective elaboration and implemen- ture between the state border of tation of programs and projects aimed the Russian Federation and Sukhumi at developing customs services in the (2104 km. pk8), Ocham-chira and filed of international railway cargo Tkuarchal, of the Abkhazian railways transportation. (the Republic of Abkhazia); Within the framework of the bilat- • Between JSCo RZD Trade House and eral cooperation between Russian RUP Abkhazian Railways for supply Railways and GP Railways of Moldova, of material and technical resources. a provisional agreement was signed between the State Administration of the Ukrainian Railway Sector, Russian Railways Joint Stock Company, Federal Passenger Company Open Joint Stock Company and the Railways of Moldova State Enterprise on or- ganization of traffic of transit freight

24_ Russian Railways Social Report 2010

1.6. Structural Reform Program for Railway Sector

The Russian Railways play a key role in • Separation of social and other facilities satisfying the transportation need of to decrease nonmanufacturing costs; the community and economic require- • Termination of provision of cross- ments of the country. Taking into subsidy assistance to passenger account the huge area of the Russian service on the basis of assignment of Federation, railways are ensure eco- necessary governmental subsidies; nomic and social development of the • Competition development and shift country, conduct of economic restruc- to market pricing in competitive sec- turing, reinforcement of the adminis- tors of the transportation market; trative and political integrity, success- • Identification and conversion of en- ful performance of the sophisticated terprises that are not directly associ- General Information about the Company economic body of Russia. ated with provision of transportation The necessity to reform the railway services into joint-stock companies; sector became evident against the • Attracting investments, through background of the radical economic engagement of private businesses and political changes that took place and Government into the investment at the end of the previous century and process. resulted in facing a number of some Based on those principles, first serious imbalances in the development (2001–2002) and second (2003–2005) of the Russian railways by the booming stages of reformation were implement- economy. ed, and implementation of the third By Decree No. 384 as of May 18, stage was completed in 2010. 2001, the Government of the Russian In 2008, an event that was very im- Federation approved the Structural portant for railway development took Reform Program aimed at: place: By Decree No. 877-r as of June 17, • Improving stability of operation of 2008, the Government of the Russian the railway sector, its accessibility, Federation approved the Russian safety and quality of the services it Federation Railway Development provides in order to create a com- Strategy for up to 2030 aimed at creat- mon economic space of the country ing environment for sustainable social and ensure nationwide economic and economic development of Russia, development. improvement of public mobility and • Forming a unified consistent trans- optimization of merchandise flow, portation system of the country; reinforcement of the economic sover- • Decreasing the aggregate national eignty, national security and defensive economic expenses of railway cargo capacity of the country, decrease in the traffic; aggregate transportation expenses • Satisfying the growing demand for of the economy, improvement of the services provided by the railway competitive ability of the national sector. economy and provision of leadership In order to achieve the objectives of the of Russia on the grounds of faster and reformation, the following basic princi- innovative growth of the railway closely ples were outlined and adopted: harmonized with development of other • Stage-by-stage implementation industries, modes of transportation and of the reconstruction plan and risk regions of the country. minimization of irreversible effects; • Necessity to separate the govern- Key Events of the Third Stage of ment regulation functions from eco- Reformation (2006–2010) nomic activities and create a unified For the purpose of implementation . of the measures provided for the

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third stage by the Structured Reform passengers across all 73 regions where Program, in accordance with Decree suburban railway service is available. No. 1094 as of August 10, 2006 of the There were serious changes taking Government of the Russian Federation, place in the area of reforming railway a Structured Reform Program Action station complex. On March 03, 2006, the Plan for 2006-2010 was approved. Board of Directors of Russian Railways In 2007, in accordance with the plan, a resolved to create a special-purpose Target Model of Railway Service Market branch ensuring operation of railway was approved for the third stage of the stations – Directory of Railway Stations structured reform, embracing: (DZV). On April 01, 2007, DZV began its General Information about the Company • Establishment of Federal Passenger operations by uniting 16 regional di- Company – a long distance passen- rectorates of railway stations. DZV took ger carrier; competence over 323 railway stations, • Transfer of the inventory car fleet i.e. 6% of the total number of railway of Russian Railways to the capital of stations included in the Russian rail and Freight Two; network, that service 82% passengers in • Maintenance of Russian Railways long-distance directions. On August 27, infrastructure and freight traffic at 2008, the Russian Railways Board ap- least until 2010; proved the Concept of Effective Use and • Extension of the range of activities Development of Railway Stations up of rolling stock operators; to 2015. The Concept is based on such • Continuation of competition devel- principles of railway station develop- opment in supplemental and sup- ment as client oriented policy complex- porting activities. ity of development involving adjacent The most important result of the third territory, balanced development, unique stage was reduction of cross-subsidy for development, efficiency principle. long-distance passenger transporta- In accordance with the Structural tion. The Government of the Russian Reform Program for Railway Sector, one Federation made decision about a of the key tasks is development of the stage-by-stage (from 2007) shift to competition sector in the area of freight 100% compensation of losses in carriers’ car operation. income resulting from conveyance of In 2007, following the Target Model of passengers in open-plan and sitting Railway Service Market, Freight One, a carriages in accordance with tariffs Russian Railways subsidiary, was estab- regulated by the Government. In 2010, lished (with transfer of 200 thousand this allowed to form Federal Passenger cars to its authorized capital), this fact Company, a Russian Railways subsidiary became one of system elements of de- in the field of long-distance passenger velopment of the competitive operator transportation. market. The formation of the company The process of formation of joint sub- did not infringe upon the business urban service companies together with of other operators, did not make any Russian Federation constituent enti- problems nor resulted in creation of ties continued, being aimed at solving restrictions for clients. the issue of termination of provision In this connection, Russian Railways ini- of cross-subsidy assistance and crea- tiated the necessity to continue the re- tion of environment for formation of forms in this segment. In May 2009, the a suburban railway service market. In Russian Railways Board approved the total, during the whole period of ref- Concept of Reforming Railway Sector in ormation, 26 suburban service compa- the Area of Freight Car Operation and nies have been established, conveying formation of Freight Two.

26_ Russian Railways Social Report 2010

In order to enhance competitive ability enhanced financial and economic in the area of rolling stock repair, during efficiency, created environment for the period from 2006 to 2008, car- attraction of private investments for repair plants appeared in the market infrastructure and rolling stock renewal through formation of subsidiaries; in through the sale of shares. 2006, Central Directorate for Freight Car When analyzing the results of reforma- Repair was established as a branch of tion, it is necessary to note that, firstly, Russian Railways. From that moment, due to implementation of the Structural separate calculation of freight car repair Reform Program for Railway Sector the expenses was adopted and the process railway industry have fundamentally of prime cost formation and pricing changed and developed in a dynamic General Information about the Company for freight car repair became more way. Secondly, we managed to achieve transparent. the key objectives of the railway Pursuant to Decree No. 348-r as of transport reformation at all stages of March 20, 2008 of the Government transformation, including objectives of the Russian Federation, Russian concerning growth of railway accessibil- Railways undertook measures to sell ity, safety, efficiency and reduction of assets of 22 car-repair depots. Following lack of investment. the results of competitive bidding, the The Government of the Russian assets of 17 car-repair depots were sold Federation examined annually the to the amount of over 3 bn. rubles. results of the reformation and admitted On January 27, 2010, the Board of them to be satisfactory. Russian Railways approved the Concept The positive progress of the railway of Reforming Car-Repair Complex of transport structural reform in Russia Central Directorate for Freight Car is also confirmed by experts from Repair, a Branch of Russian Railways and Organization for Economic Co- Extraterritorial Formation on its Basis of operation and Development, (OECD) Three Russian Railways Subsidiaries. and European Conference of Ministers In order to attract investments to the of Transport (ECMT). industry on the third stage of refor- mation, shares of Russian Railways Reformation of Russian Railways Subsidiaries began to be sold-off. In in 2010 January 2008, sale of 15% block of In 2010, in accordance with the shares of JSCo TransContainer took Structural Reform Program for Railway place, in 2009 – 50%-1 shares of JSCo Sector as approved by the Government were sold. of the Russian Federation, the third In the course of structural reforming, stage of the reform was completed, in formation of Russian Railways, a strong the course of which measures were un- transportation holding, continued. For dertaken to carry out corporate restruc- this purpose, during the period from turing of Russian Railways reduce cross- 2004 to 2010, Russian Railways estab- subsidy between freight and passenger lished 84 subsidiaries and affiliates, services, and develop competition on the including 58 of them on the third stage, market of transportation services. where assets to the amount of over 400 The most important measure in the area bn. rubles were transferred to. of reformation of passenger service is Due to formation of subsidiaries, the beginning of economic activities Russian Railways have enriched the of JSCo Federal Passenger Company competitive sector with different lines that has been providing long-distance of activities, created for each mar- passenger service since April 01, 2010. ket segment its own clear strategy, 94 thousand employees and assets to

_27 Russian Railways Social Report 2010

the amount of 137.2 bn. rubles were In future, there are plans to sell shares transferred to the funds of the Federal of enterprises to be built up; how- Passenger Company. ever, Russian Railways will only retain In 2011, decisions were taken to estab- controlling interest in one of the three lish 6 suburban passenger companies car repair companies. The process of (PPK) operating within the areas of separation of non-core assets into the West-Siberian, Kaliningradskaya, special purpose vehicles continues. Severnaya, Privolzhskaya, Yuzhno- Subsidiaries and affiliates are formed Uralskaya and Yugo-Vostochnaya in the following fields: logistics (JSCo railways. “RZD-Logistics”, TLTs “Bely Rast”), General Information about the Company Since 2011, PPK will provide all subur- manufacture of state-of-the-art ban railway passenger service across lubricants (“INTESMO” Ltd.), scientific the Russian Railways infrastructure field (JSCo “Institute of Economy and throughout the country. Transportation Development”), and In order to complete the process of development of Moscow Little Ring formation of all-featured competitive Railway (JSCo “Moscow Ring Railway”). market in the area of provision of cars In total, 16 subsidiaries and affiliates for freight traffic in 2010, the Board of were established in 2010. Russian Railways resolved to establish a subsidiary – JSCo Freight Two (JSCo “VGK”), to the control of which 180 thousand freight cars were transferred on a stage-by-stage basis. The Freight Two began its economic activities and the process of formation of its author- ized capital is currently in progress. The decision on organization of JSCo “VGK” and liquidation of Russian Railways inventory fleet means liberalization of a part of transportation price policy (its “car component”) and ensures market pricing in this transportation segment while retaining governmental control over infrastructure prices. In order to increase the share of private rolling stock in the market and decrease lack of rolling stock, Russian Railways sold 23 thousand grain carriers and 50 thousand low-sided cars with expired service time subject to their follow up overhaul. Environment is created for attraction of investments and development of competition in the area of repair of freight cars. The process of dividing the complex of 118 freight car repair depots into three extraterritorially allocated subsidiaries is coming to an end, the economic operations of which subsidi- aries are planned for July 01, 2011.

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Resolutions of the “Russian Railways Board as to setting up subsidiaries and affiliates in 2010

No. Name of Subsidiary Date of Resolution Share of Russian Railways

1. “INTESMO” Ltd. January 27, 2010 25%

2. JSCo “Baikal Suburban Company” March 19, 2010 51%

3. JSCo “Institute of Economy and Transportation Development” April 27, 2010 99,9%

4. JSCo “Kaliningradskaya Passenger Suburban Company” July 30, 2010 99,9% General Information about the Company

5. JSCo “Severnaya Passenger Suburban Company” July 30, 2010 99,9%

6. JSCo “Saratovskaya Passenger Suburban Company” July 30, 2010 51%

7. JSCo Freight Two August 26, 2010 99,9%

8. JSCo “RZD-Logistics” August 26, 2010 99,9%

9. JSCo “Yuzhno-Uralskaya Passenger Suburban Company” November 26, 2010 99,9%

10 JSCo “PPK Chernozemye” November 26, 2010 50%+1 share

11. “Bely Rast Terminal and Logistics Center” Ltd. November 29, 2010 99,9%

12. JSCo “Car-Repair Company – 1” December 20, 2010 99,9%

13. JSCo “Car-Repair Company – 2” December 20, 2010 99,9%

14. JSCo “Car-Repair Company – 3” December 20, 2010 99,9%

15. JSCo “Lublinskiy Casting and Mechanical Plant” December 27, 2010 99,9%

16. JSCo “Moscow Ring Railway” December 27, 2010 50%

In order to attract investments to de- In December 2010, a deal was closed to velop the railway sector in 2010, Russian sell a 50% block of shares – 2 shares of Railways proceeded with implemen- JSCo “Elteza” (manufacture of teleme- tation of the 2010-2012 Subsidiary chanics and automation equipment) to Equity Sale Plan approved by the Board Bombardier, a Canadian engineering of Directors of Russian Railways in company. The total cost of the block of December 2009. The Company’s Board shares made 1.99 bn. rubles. Involvement of Directors made provisional decisions of Bombardier as a strategic partner is in on sale of 54 subsidiaries. compliance with the strategic develop- In November 2010, a public offer- ment objectives of JSCo “Elteza” and ing of 35% block of shares of JSCo will enable Russian Railways to enhance “TransContainer” was made, this fact efficiency and safety of railway transpor- played a significant role not only for tation due to the use of state-of-the-art Russian, but also for international capi- telemechanics and automation systems tal markets. made in Russia.

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In order to ensure environment for • Formation of fully competitive mar- sustainable development of the railway ket of freight car operations; sector and development of the road • Preparation of a new model of gov- transport services market, the Company, ernmental regulation of tariffs; together with federal authorities, has • Development and application of a developed a Target Model of Freight regulatory contract model for devel- Railway Traffic Market for up to 2015, opment and maintenance of infra- providing for: structure as a legally-backed system • Integration into Russian Railways of contracts between an infrastruc- of the functions of owner of public ture owner and the Government. General Information about the Company infrastructure and network-wide • Implementation of the Target Model cargo carrier subject to conservation will enable meeting economic of freight locomotive fleet on the demands and needs of particular company’s balance; users of railway transport in the filed • Providing environment for develop- of freight traffic, and improving ment of competition in the trans- services provided, as well as elimi- portation business and formation nating infrastructural restrictions of carriers that will be independent of economic development of the of Russian Railways and will operate Russian Federation. within limited dedicated itineraries of the public network;

1.7. Public Evaluation of Russian Railways Performance

During the reporting year, the Russian Union of Industrialists and Company’s activities were several times Entrepreneurs. Russian Railways awarded recognition from governmen- was declared the winner of award tal authorities, professional societies for Accomplishments in Personnel and public organizations: Potential Development. • A number of Russian Railways • Russian Railways won the energy ef- employees were awarded a com- ficiency award ‘Save Energy!’ in the mendation from the Government of Energy Efficient Enterprise category the Russian Federation for complete in October 2010. The ‘Save Energy!’ professionalism, courageous and award is supported by the Ministry decisive actions undertaken in the of Energy of the Russian Federation, course of recovery of Moscow Government, OPORA 166 accident; ROSSIA All-Russian Organization for • Russian Railways won the na- Small and Medium Entrepreneurship, tional competition Russia’s Best NP AVOK, MOO Moscow Association Enterprises: Dynamics, Efficiency, of Entrepreneurs, Russian Energy Responsibility 2009 held by the Agency of the Ministry of Energy

30_ Russian Railways Social Report 2010

of Russia, Moscow International Business Association, Moscow Chamber of Industry and Commerce, and Consumer Market Participants Union. • The Russian Railways’ Annual Report 2009 won the 13th competition of corporate annual reports conducted by RTS Stock Exchange jointly with Standard & Poor’s. The Annual Report of Russian Railways won the General Information about the Company award for Best Annual Report Design and Printing. Among other strengths of Russian Railways Annual Report, the judges of the contest mentioned integrity of the concept of its design. • The Press Service of Russian Railways won the Company’s Press Service Award in the Business Journalism 2009 contest held by the Russian Union of Industrialists and Entrepreneurs. • Readers of UK’s Lonely Planet, one of the world’s most popular travel guides, chose the Trans-Siberian Railway as the winner in Lonely Planet’s Best in Travel 2010. The voting took place on the company’s web-site among Lonely Planet’s subscribers and purchasers of travel guides published by this publishing house. • The Edge, a film produced with the support of Russian Railways, was nominated for an Oscar follow- ing the results of a secret ballot by Russian experts. Besides, The Edge was nominated for a Golden Globe Award among other foreign nomi- nee films.

_31 Role of Russian Key Focus Areas Railways of Russian Railways in Sustainable in Social Development Responsibility

Strategic Goals Key Risks and of the Company Opportunities in Sustainable in Social Development Responsibility 02

Strategic Goals of the Company in Sustainable Development. Key Risks and Opportunities in Social Responsibility Russian Railways Social Report 2010

2.1. Role of Russian Railways in Sustainable Development

The scale and nature of the Company’s of the railway sector and related activities have a considerable impact industries; on the sustainable development of the • Creation of circumstances for social country. and economic development of The railway sector is an infrastructural regions; ground for social and economic pro- • Provision of socially important pas- gress in Russia. Not only prospects of senger service based on the aggre- further growth of the domestic econ- gate financial results. omy depend on the condition and op- The railway sector is one of the most erative quality of the Russian railways, environment-friendly modes of but also the State’s ability to perform transportation; this, however, does

efficiently such topmost functions as not preclude the responsibility of the Key Risks and Opportunities in Social Responsibility protection of the national sovereignty company for environmental protection and safety of the country, preservation and rational management of natural Strategic Goals of the Companyin Sustainable Development. of the integrated social and economic resources. For this purpose, state-of- space, provision of equal opportunities the-art systems of ecological manage- for realization of constitutional rights ment and energy and resource saving and liberties of citizens (including the technologies are being implemented in right of freedom of movement) all over branches of the Company, environmen- Russia. tal monitoring and control take place. Operating activities of the Company Due to the length of railway tracks, affect socially, economically and eco- availability of a considerable locomo- logically the interests of regions and tive and car fleet, production infra- millions of people. structure facilities allocated through- Effective performance of railway trans- out the country, the Company needs port is one of essential elements of to take significant measures and bear interaction between domestic export- respective expenses to maintain due ers and importers of products and their operating condition of the railroad foreign partners, which element has bed, ensure the security of passenger influence on the competitive ability and freight transportation, occupa- of domestic manufacturers in global tional safety of the Company’s staff, markets. compliance with the rules of ecological Besides, the railway transport is a and industrial safety. The significance topmost instrument of public policy in and profundity of the impact on the socially important freight traffic (coal, domestic economy, Russian society and mineral fertilizers, and cargo deliver- environment evoke considerable - ies to the Far East), long-distance and ligations in the area of social respon- suburban passenger service, as well as sibility and sustainable development; performance of defense and mobiliza- well-being of a considerable part of tion functions. the Russian community depends heav- Social functions performed by the ily on their fulfillment. railway transport: The Company understands that: • Realization of constitutional rights • Development of successful business of population to free movement requires mutually beneficial relations throughout the country; to be built with the regions where • Provision of legal entities and the Company carries out its activi- individuals with equal transport ties, such regions are represented by opportunities; regional administrations, popula- • Rise in employment of the domestic tion, public organizations, as well population due to development as industry’s trade unions, for that

_33 Russian Railways Social Report 2010

purpose their interests and require- education and culture issues, under- ments must be taken into account; developed state of the social infra- • In order to improve investment at- structure, etc.) requires involvement tractiveness, it is necessary to enhance of large business (together with the the Company’s reputation and image Government) in solving vital social as a socially responsible company; problems. • Presence of unsettled social prob- These commitments are being met lems in the country and its regions both in the current and strategic activi- (employment, manpower training, ties of the Company. Key Risks and Opportunities in Social Responsibility Strategic Goals of the Companyin Sustainable Development. 2.2. Strategic Goals of the Company in Sustainable Development

The Russian Federation Railway implementation of the Strategy 2030 Development Strategy (approved by in the area of sustainable development Decree No. 877-r dated June 17, 2008 are described in Table 2-1. These tasks of the Government of the Russian are being achieved by the Company Federation) defines strategic objectives based on the principles of sustainable and tasks of its development for up to development of territories, popula- 2030. tion, efficient and safe use of national The expected results of resources (see Fig. 2-1).

Table 2-1 Anticipated results of the Strategy – 2030

The implementation of the Strategy would provide for transport links to 24 perspective mineral deposits and 11 industrial zones. For that purpose it is planned to construct about 21 thousand km of new rail roads and electrify about 7.5 thousand km of railways. Four RF Subjects (Altai Republic, the Republic, Magadan region and Nenets Autonomous Okrug) will be provided with the reliable transport links. The total length of the railways providing for the movement of high-speed passenger trains at Economic speed up to 350 km/hr will reach 1.5 thousand km by 2030. efficiency The scope of investments in the development of railways in the Russian Federation will amount to 13 billion rubles by 2030 (in prices of 2007). Transport capacities of GDP (railway transport) will drop by 1.8 as compared to 2007. The turnover of cargoes will increase by 58%, and the passenger turnover – by 33% as com- pared to 2007. Over 23 thousand locomotives will be procured to cover the growing shipping operations, in- cluding almost million freight cars, 23 thousand passenger cars, 24 thousand local trains.

34_ Russian Railways Social Report 2010

The reduction of harmful emissions and poorly cleaned sewerage water more than in 3 times. Environment Untreated sewerage water will not be discharged. efficiency The power intensity will be reduced: power consumption by 14.4% and fuel consumption by 9.1%.

The development of human potential along with the personnel motivation. The increase of labor productivity of railway transport workers of general use and, consequent- ly, the adequate salaries of the Company employees. By 2030 the wages of railway workers shall reach 170% of Russian wages general level. The higher safety and efficiency of the railway transport. Social efficiency The safety of railway infrastructure facilities, reduction of illicit intrusion to the territory of such facilities (such risks will decrease by 16–17%; critical and potentially dangerous railway infra- structure facilities will be 100% monitored). The provision of accident-free movement of the railway transport at the cost of modern tech- nologies, scientific and technical development and innovative solutions. Key Risks and Opportunities in Social Responsibility Strategic Goals of the Companyin Sustainable Development.

Fig. 2-1. The targets of Strategy – 2030 to be realized in the social life and for the environment protection

Social sphere

Human potential development and Environment protection personnel motivation

Increase of labor productivity of workers Reduction of harmful emissions more than 3 times Provision of adequate salaries for Strategy – 2030 employees Reduction of power consumption by railway transport Improvement of safety, environmental conditions and decrease of energy consumption by railway transport

Provision of safety of railway infrastructure facilities and decrease of risks of illicit intrusion in the operation of such facilities

Provision of accident-free movement of trains

_35 Russian Railways Social Report 2010

2.3. Key Focus Areas of Russian Railways in Social Responsibility

The Company makes every effort to ecology and the social sphere. comply in a strict and steadfast man- The corporate social responsibility, ner with the Russian and international being the fundamental principle of (where applicable) laws and regulations Russian Railways corporate govern- in all areas of its activities. The Company ance, plays a crucial role at every stage endeavors to achieve an effective bal- of the decision-making process and is ance between the three components of an important factor of dynamic devel- sustainable development: economics, opment of the Company (see Tab. 2-2). Key Risks and Opportunities in Social Responsibility

Strategic Goals of the Companyin Sustainable Development. Table 2-2 Principal trends in corporate social activities of the Company

Sustainable Effectiveness parameters Current trends in RZD corporate social responsibility development constituent

Business development in compliance with strategic trends ori- ented at the development of Railway transport.

Interaction with international organizations in terms of interna- tional transport operations and technological equipment Economic effectiveness The implementation of investment projects of construction and renovation of railway mains, development of passenger and Economics freight transport operations, modernization of locomotive and car depots

Engagement of regional suppliers and contractors, including local Market Presence managers in Company’s activities

Investments in the development of social infrastructures in re- Investments gions and environment protection actions

Development and implementation of environment protection measures

Ecological management on Russian Railways facilities Environment protection Ecology Training courses for personnel on the matters of environment measures’ effectiveness protection and appropriate usage of natural resources

Ecological monitoring

Compliance with the requirements

36_ Russian Railways Social Report 2010

Sustainable Effectiveness parameters Current trends in RZD corporate social responsibility development constituent

Development of resource saving technologies

Implementation of resource saving actions

Waste use as raw materials

Implementation of actions oriented at the reduction of power Resource economy consumption and increase of power efficiency Key Risks and Opportunities in Social Responsibility Development of power efficient technologies Strategic Goals of the Companyin Sustainable Development. Development of actions oriented at the reduction of water con- sumption (circulating water system and prevention of emergency water losses)

Development of actions oriented at the mitigation of adverse ef- fect upon the protected areas

Biodiversity Reclamation works

Development of measures oriented at the mitigation of adverse effect on flora and fauna

Measures oriented at the reduction of pollutant emission (gas cleaning units, new technologies reducing the emissions)

Monitoring of pollutants

Measures oriented at the reduction of sewerage water discharge

Measures oriented at the reduction of contaminants in sewerage Emissions, discharges and water (cleaning and treatment units) disposals Monitoring of discharged sewerage water

Wastes handling

Construction of landfills (waste disposal grounds) Use of less hazardous materials to reduce the hazard class of wastes

Products and services -

_37 Russian Railways Social Report 2010

Sustainable Effectiveness parameters Current trends in RZD corporate social responsibility development constituent

Fulfillment of Collective agreements

Implementation of corporate system of labor payments, social support

Development of human potential and motivation of personnel

Non-governmental pensions and care of veterans Key Risks and Opportunities in Social Responsibility Health protection of the employees and members of their families

Strategic Goals of the Companyin Sustainable Development. Relations with personnel Labor protection

Provision of housing

Promotion of physical education and sports

Youth Policy

Equal opportunities in positions and wages of men and women

Interaction with trade unions Social sphere Adherence to UN Global Agreement principles and Russian Busi- (social Human rights observation effectiveness) ness Charter Development of interaction programs (plans)

Participation in the preparation of staff in the regions of the Company presence

Stakeholder complaints and requests redress policy

Charitable activities

Relations with society Socially significant passenger conveyance using the state regu- lated tariffs

Interaction with NGOs

Interaction with mass media and communication policy

Publication of reporting documents

Consideration of stakeholders’ opinions

Anti-corrupt practice Anti-corrupt measures while purchasing

38_ Russian Railways Social Report 2010

Составляющая Effectiveness parameters Current trends in RZD corporate social responsibility устойчивого развития

Participation in the Participation in the development of the State Policy regarding the development of the State development of transport system of the country Policy Participation in the work of NGOs and international organizations Implementation of Russian legislation as well as adherence Adherence to requirements to international requirements and standards, adopted by the Company

Protection of health and safety of passengers at the railway Key Risks and Opportunities in Social Responsibility stations and in trains Strategic Goals of the Companyin Sustainable Development. Safety of cargoes and safety of shipments Awareness of consumers of products and services regarding the Responsibilities for products current rules in using railway transport and services Advertising activities to promote products and services Advance sales of railway tickets Observation of requirements regarding the responsibilities for the passengers conveyance and cargo transportation

The Company has developed an • Free railway travel; advanced corporate base in the area • Special mortgage conditions. of social responsibility. Its elements As of today, the Russian railways sup- include social support to personnel, port over 1.4 thousand facilities of development of staff potential and the social infrastructure all over the employee motivation, health care and country. occupational safety, non-governmen- Since the inception, the Company tal retirement insurance and care of focuses on social responsibility to veterans, housing policy, development personnel, society, consumers and of physical education and sport, char- other stakeholders. Accession to the ity and sponsorship activities, youth UN Global Compact, membership policy, interaction with trade union in the RUIE and joining the “Social organizations. Charter of Russian Business” adopted The existing corporate regulatory by the Russian Union of Industrialists framework and social responsibility and Entrepreneurs (RUIE) gave Russian practice comprise: Railways an additional impetus for • Free medical service; the work in this field. The said docu- • System of continuous staff training ments serve the basis for planning and and retraining; implementing the Company’s social • Non-governmental retirement responsibility concept (for more details insurance; see Sections 6–9). • Payments to retiring persons;

_39 Russian Railways Social Report 2010

2.4. Key Risks and Opportunities in Social Responsibility

The sustainable development of the i.e. might result in damage (including Company and the success of corporate financial damage) and loss of profits. social responsibility efforts depend on Non-financial risks characterize the un- the capacity of the Company to man- certainty related to attitudes and con- age non-financial risks. duct of the stakeholders, their expec- Non-financial risks of the Company tations and influence of the Company’s are the result of a risk event arising performance on the stakeholders. from Company’s engagement with Among non-financial risks, Russian stakeholders and actions of stakehold- Railways reckons political, legal, climatic ers that might have a negative impact and technogenic risks, economic, social on the operation of the Company in and ecological risks, consumer-related

Key Risks and Opportunities in Social Responsibility the field of sustainable development and reputation risks (see Fig. 2-2). and corporate social responsibility Strategic Goals of the Companyin Sustainable Development.

Fig. 2-2. Non-financial risks of JSCo «RZD»

Non-financial risks of JSCo «RZD»

Social risks Reputational risks

Environmental risks Risks of deterioration of Company’s HR risks (risks of employee turnover and loss of reputation due to low quality skilled and promising personnel) of published information Risks of non-compliance with requirements of environmental Risks of injury and occupational disease legislation and prescribed norms Risks of reputation deterioration because of Company’s failure to observe some legal requirements or fulfill its Risks of excessive expectations for Risks of non-efficient use of natural commitments accomplishment of plans and projects energy resources implemented by the Company in regions

Economical risks Risks of incidents and emergencies associated Risks of lowered environmental safety of railway transport (because with non-observance by the Company’s Political risks personnel of prescribed regulations and lack of physical depreciation and of necessary technical means obsolescence of key assets and technogenic accidents on railway Legal risks facilities affecting the environment) Risks of failure to ensure quality of services for Natural, climatic and customers technogenic risks

Risks of labor deficiency

Risks of delayed accomplishment of plans and projects implemented by the Company Operational (internal) risks in regions Strategic (external) risks

40_ Russian Railways Social Report 2010

Risk management tasks of Russian • Active labor policy aimed at increas- Railways include timely identification, ing attractiveness of railway careers prevention, control and minimization by improving salary competitive- of negative risk impacts in different ness compared to other branches spheres of the Company’s activi- of economy and imbedding moti- ties, arising (or that may arise) dur- vational mechanisms to promote ing interaction with stakeholders. To continued employability of qualifies manage risks, the Company addresses personnel; both possible unfavorable events • Powerful physical infrastructure; (threats) and positive developments • State support of the Company’s (prospects). With risk management, development;

the Company opens new perspectives • Efficient equipment and technolo- Key Risks and Opportunities in Social Responsibility of development in the sphere of social gies, including in the environmental responsibility. area; Strategic Goals of the Companyin Sustainable Development. In order to manage risks, the Company • R&D support, aimed at alleviating developed a range of regulating docu- impacts on the environment; ments aimed at ensuring compliance • Company and its employees’ experi- with the law and its commitments ence in sustainable development and (Russian Railways Collective Bargaining corporate social responsibility; Agreement, Russian Railways Code • Company’s engagement with of Business Ethics, the Functional governmental authorities in policy Strategy of Risk Management in building activities related to railways Russian Railways the Functional and the development of legal and Strategy of Russian Railways Finance regulatory documents Management, the Basic Principles The basic mechanism of risk manage- of Corporate Governance followed ment is allocation of risks among by Russian Railways in its Operations groups of stakeholders, analysis of and Plans Aimed at Improving the their interests and development of Corporate Governance Practice, measures aimed at reconciling their Standard Business Plan Structure interests and the interests of the of Russian Railways Subsidiary and Company, and, first of all, establish- Affiliate Investment Project, Russian ment of mutually beneficial coopera- Railways Ecological Policy, Russian tion with stakeholders significantly Railways Ecological Strategy, etc.) influencing risk magnitude for the Capability and potential of the Company. Company to ensure sustainable devel- opment and manage non-financial risks is characterized by the availability of: • Skilled personnel and advanced management system in the Company (in economy, ecology and the social sphere);

_41 Review of concerned Forms of interaction parties with stakeholders 03

Stakeholder Interaction Russian Railways Social Report 2010

As dictates the business practice of due consideration of all interests of the developed countries, the effective concerned parties and quick response interaction with all concerned parties is to such interests. considered the main grounds. The com- The Company strives to balance all panies which activities affect consider- interests as it is very important under ably the society and environment play the State regulation of the tariffs. The the leading roles in such process. As the latter restricts the possible expendi- activities performed by Russian Railways tures of the Company. are highly valuable for the public, In 2006 the Company adopted the The interaction with stakeholders with interaction The Russian Railways implements a number Business Ethics Code, describing of measures oriented at the increase of the Company Policy regarding the effectiveness at the stage of the inter- interaction with the stakeholders. The action with the main stakeholders thus Code contains the principles that gov- minimizing the non-financial risks. ern the corporate ethics of Russian The interaction of the Company with Railways and corporate values of the the interested parties is realized in Company. compliance with the corporate ethics, In 2008 as a continuation of developed including transparency, reliability, traditions in terms of stakeholder inter- submission of complete information action, the Company has adopted the about the Company activities, the Social Responsibility Code.

3.1. Review of concerned parties

Russian Railways activities concern interested party. The review of princi- the interests of many parties. The list pal concerned parties is given below to includes different categories of com- illustrate the parties that are somehow mercial and non-profit organizations, related to Russian Railways and those the government officials, individu- parties that interact with the Company als, that are affected by the Company to ensure the sustainable development. activities or, on the contrary, whose ac- tivities affect the Company. Management. The most important groups of The Board of Directors of the Company stakeholders in the sphere of cor- implements a number of key functions porate social responsibilities are that delegate the Board the high- the Shareholder, employees of the est powers in the system of corporate Company, consumers of the Company’s management and create the necessary services, population, contractors and conditions for its efficient work as the suppliers, public authorities, NGOs and body, representing the interests of the international associations, partners, Shareholder. competitors, etc. The various committees and com- The activities of the Company while missions are formed at the Board of interacting with stakeholders are ori- Directors of Russian Railways. Such ented both at outsiders and the staff of committees and commissions can the Company which is the incorporated substantially assist the Board in the

_43 Russian Railways Social Report 2010

Fig. 3-1. Map of Concerned Parties

Shareholder Employees

Non- Customers Public Authorities governmental organizations

Trade union International

The interaction with stakeholders with interaction The organizations organizations

Contractors and Partners Business Investors vendors rivals

Affiliated and Mass media dependent companies

decision making on the most vital is- the Board of Directors shall disclose sues associated with the activities of the information about possession and the Company. deals with Russian Railways securities In particular, the committees on the thus diminishing the risk of the inter- audit, risks, remunerations and strate- est conflicts. gic planning committees have already The Company formed the Collective proceeded to business. The meetings Executive Body, i.e. Management of the Board of Directors are held ac- Board that helps to make proper deci- cording to the approved calendar plan. sions on a number of key issues related The Executive Bodies of Russian to the Company activities. Collegiality Railways shall regularly, duly and timely in making decisions enhances the submit the complete information con- chance of proper and effective ap- cerning the activities of Russian Railways proach to the problems. to the Board of Directors. A circle of per- The system of remuneration and fees sons responsible for such materials and is provided for members of Executive the submission of the same are clearly Boards of Russian Railways but the fees stated in the Plan for the preparation of depend on the results of the Company. the information as above, including the It helps to stimulate the executive deadlines of the document submission. members if the Company achieved the According to the internal documents indicators planned and met the expec- of Russian Railways the members of tations of the Shareholder.

44_ Russian Railways Social Report 2010

The grounds for stable development of acquisition, disposition or potential dis- Russian Railways are the personnel re- position of Russian Railways properties serves to replace the heads of divisions (directly or indirectly), the price exceeds and other structural subdivisions thus 3 bn rubles, but does not exceed 25% ensuring the continuity of the man- of the book balance value of Russian agement. The activities of the Board of Railways assets, defined at the last re- Directors and Management Board of porting date. Such measure enhances the Company are governed by the re- the security against assets withdrawal spective provisions, approved by the and lets the Shareholder represent- The interaction with stakeholders with interaction The Shareholder. The activities of the Board atives in the Board of Directors to of Directors and Management Board of evaluate the economic reasonabili- the Company are governed by the re- ty of such deal with major assets. The spective provisions, approved by the Company practices the open com- Shareholder. petitive bids for the procurement of goods and services for Russian Railways Shareholder. that enhances the security of the The only Shareholder of Russian Shareholder interests and assets. The Railways is the Russian Federation. internal document of Russian Railways The Government of the Russian provides for the involvement of the in- Federation exercises all sharehold- dependent appraiser during the deals er powers on behalf of the Russian with properties that promotes fair as- Federation. The mechanism of inter- sessment of the Shareholder assets. action between the Company and The recognized audit firms are invit- the Shareholder has been stipulat- ed to carry out the audit of financial ed in Russian Railways in the Articles statements of the Company in compli- of Association, the Federal Law “Joint- ance with IFRS and Russian Accounting Stock Companies”, Civil Code of the Standards. Russian Railways selects the Russian Federation and other legisla- audit firm through open bidding, pro- tive and regulatory documents. The viding the public access to the bidding issues delegated to the powers of the information that guarantees the ob- Shareholder are discussed at the an- jective and independent selection of nual and special general meetings of the firm. shareholders. The information regard- The internal documents of the ing the Company activities is delivered Company contain the provisions stat- to the Shareholder via an established ing the declaration procedure in case reporting procedure. of the conflict of interests by the mem- The whole management system of bers of the Executive Boards. In such the Company is based on the efficient case the members of Russian Railways approach to the realization of op- Executive Boards shall immediate- portunities and minimization of risks ly inform the Board of Directors. This stated in Chapter 2 of this Report, that practice will secure the Shareholder are common for the Company and the interests. Russian Federation. The Company ef- fects the regular payments of dividends Employees. to the Shareholder since the day of its The Company undertakes a number of foundation. measures oriented at the enhancement The Board of Directors of Russian of the social security and well-being of Railways as a body protecting the its employees, creating opportunities Shareholder interests, is empowered to for professional development, reduc- approve the deals, associated with the tion of staff turnover, life and health

_45 Russian Railways Social Report 2010

safety of employees and members of services, for instance, the single payer’s the families. account, legally significant electronic Owing to these measures the Company document turnover using the electron- provides opportunities for profession- ic digital signature when registering the al promotion and development of each shipping documents for the cargoes. employee, including the social support For the minimization of the consumer during the implementation of social risks that directly depend on the freight programs like Housing and Youth pro- quality and security, sanitary and epi- grams. For its employees the Company demiological and ecological safety, the The interaction with stakeholders with interaction The uses the health public system and non- Company developed the Functional governmental pension funds. Among strategy of Quality Control and the the risks connected with the activities Strategy of Safeguard and Reliability of the Company are traumatism and of the freight that are used along with occupational diseases. The Company other functional strategies in the sys- actions are aimed at the minimization tem of strategic management of of such risks through labor protection Russian Railways. and industrial safety measures. A great The awareness of the consumers of part of personnel risks of the Company the services offered by the Company (such risks are given in Chapter 6) is as- and the rules of railway transport use sociated with low competitiveness of as well as the activities in the sphere of wages and rates of its growth. In or- marketing communications is the prin- der to increase the prestige of the work cipal approach of the Company to the in the railway transport system, en- interaction process. Russian Railways hance the competitiveness in the labor makes all decisions connected with the market and reduce Russian Railways management on the grounds of in- personnel turnover the Company terests of all parties: the state and the developed new wage regulating in- public, Russian Railways. Consumers struments. Such instruments have been and suppliers, including its employees introduced to the directives of the (Russian Railways Functional Strategy). compensation corporate system that was based on the differentiated wages Population. taking into account the profession- Russian Railways helps to improve the alism, output and labor input of the social and economic status of the popu- workers as well as the existing process- lation living in the regions covered by the es in the market. The development of Company and its enterprises activities. collective and contractual system plays The creation of new jobs by the a significant role in the establishment Company and involvement of local la- of partnership relations between the bor promotes the employment and Company and its employees. The col- enhances the living standards of the lective agreement of Russian Railways population. The higher social welfare for 2008-2010 defined the general of the population, in its turn, stimulates principles of the interaction between different social programs and charita- the Company and its workers and ble activities of Russian Railways. considered the mutual interests and The Company activities promote the expectations. development of interregional econom- ic and cultural links. Consumers. Russian Railways activities might cause In order to improve the quality of ren- the following risks for the population: dered services the Company optimizes • possible risks to the population the processing of freight and associated health caused by certain activities of

46_ Russian Railways Social Report 2010

the Company local enterprises due to participation of the State in the de- adverse affect on the environment, velopment of the railway transport the violation of sanitary and epidemi- presumes the establishment of tariffs, ological norms, for instance, noise and specific tax policy for investors, partici- vibration); pating in the mentioned development, • Risks for the population health and the creation of favorable grounds properties that might arise due to po- for the commercial use of Russian tential accidents on the railways; Railways assets owned by the Russian • In the connection with the above Federation. The interaction with stakeholders with interaction The the Company undertakes the nec- Russian Railways representatives par- essary measures to mitigate the ticipate in the meetings held by the adverse effect upon the environment Government, ministries and depart- in compliance with the Environment ments, parliament hearings, plenary Protection Laws. The representatives meetings of the Federal Assembly, sci- of the local population may appeal entific and practical conferences, against Russian Railways in an estab- symposiums and other events carried lished order and complain that the out by the State Authorities to guar- Company infringes the public safety antee the effective cooperation in the and health norms. preparation of regulations and legal acts, including the information and The State Authorities methodological interaction in the im- The rank and position taken by Russian plementation of the public policy in Railways in the industry assumes the the development of the railway trans- mutual beneficial cooperation of the port industry. The Company cooperates Company with the State Authorities. with the authorities supervising the The main tribute of the Company to the operation of the railway transport, solution of the state problems and im- traffic safety, including the exchange of plementation of the public policy in the information and consultancy services. railway transport development is the ef- ficient transport service of the Russian NGOs. economy, the increase of employment, Russian Railways cooperates with NGOs social and economic development (non-governmental organizations) of the country and the realization of dealing with the social responsibilities, the investment programs. In order to environment protection, human legal expand the positive effects of the col- rights and public control in this sphere. laboration with the governments of Such cooperation with NGOs defines the Russian Federation Subjects the the basis for the development of busi- Company conducts the active regional ness social responsibilities instruments, policy mainly based on the implemen- accounting for public opinion on the tation of the programs implied in the matters of the improvement of social General Agreement with regions and and economic situation in the regions Agreements on the cooperation and in- covered by the Company activities, in- teraction with regional governments. cluding the local population status, Russian Railways pays a special environment protection and rational attention to the development of mech- natural resources use. anisms stimulating the partnerships The Company is the member of the between the State and the Private sec- Russian Union of Industrialists and tor. Firstly, it is the implementation of Entrepreneurs RUI&E), and in the be- the projects aimed at the develop- ginning of 2008 the Company joined ment of railways infrastructure. The the Social Charter of Russian Business.

_47 Russian Railways Social Report 2010

The Company associates with RF specific for international agree- Chamber of Commerce on many issues, ments and referred to activities of the including the realization of reforms, organizations participating in the inter- and participates in the work of the All- national agreements and conventions Russian Railway Employers Union and like UN Global Agreement, including Transport Worker Union of Russia. the voluntary international standards and Guidelines. Trade Union Organizations. The Company and trade union organ- Contractors and suppliers. The interaction with stakeholders with interaction The izations cooperate on social and labor Russian Railways and organizations matters and mutual implementation of providing for industrial and other ser- various social projects and social poli- vices or supplies under the contracts cy of Russian Railways. The Company concluded with the Company build strives to achieve the understanding their relations on mutually beneficial and trust in relations with trade un- grounds. The Company is interested ions, maintaining the image of socially in high quality of procured goods and responsible company. services thus promoting the best eco- nomic outputs due to the established International organizations. cooperation with the contractors and Russian Railways associates with a suppliers. number of international organiza- In compliance with RF Legislation and tions both functional and railway order, established by Russian Railways organizations, such as: Organization the placement of orders for the pro- for Cooperation of Railways (OSJD), curement of goods, works and services International Union of Railroads is done on the open bidding basis. The (IUR), Eurasian Transport Union, UN notices about the bids are published European Economic Commission on the Company web-site as well as (EEC UN), World Health Organization in mass media, and the information (WHO), International Congress of is open and accessible to everybody. Industrialists and Entrepreneurs, the In order to avoid the risks associat- Council for Rail Transport of CIS States ed with non-compliance of regulations and others. and legal norms, including the agreed The participation of the Company provisions, Russian Railways is guid- in the international organizations ed by the policy of transparency, equal promotes the mutually beneficial co- rights, effectiveness and responsibility operation under the international in its relations with the contractors and agreements, conventions, codes, etc. suppliers. The principal benefits of such coopera- tion are listed below: Freight partners • implementation of mutual projects; Nowadays when the broad per- • informative and methodological spectives open for international and interaction; multi-mode freight transportation • Consideration of the documents (cargo carriage using multi transporta- issued and adopted on the inter- tion means) the partnership in this field national level, including the recom- has a great importance. The estab- mendations on railway transport lished partnership relations promotes activities. the integration of the railway transport Russian Railways undertakes to fulfill into the global traffic logistic system on obligations, approved on the interna- the basis of achieved high qualitative tional level and stated in the provisions standards of transportation services

48_ Russian Railways Social Report 2010

and transformation of Russian Railways carriage is the essential aspect in the into an exporter of traffic products, reform of the railway transport and technologies and technical solutions. considered one of the strategic lines of The mutual cooperation of Russian the Company activities. Railways with other carriers creates the new opportunities for achieving the Investors. better economic results, expanding its The Company considers the attrac- presence in the market. tion of necessary investments that can Among the carriers-partners of Russian guarantee the further build-up of the The interaction with stakeholders with interaction The Railways are transport organizations of industrial capacities of the Company Russia and other states, collaborating one of its principal targets. Russian with the Company. Railways is interested in the strategic investors who might become reliable Competitors. partners of the Company in future. The Among the competitors of the investors of the Company are banks, Company are the other traffic and pri- lending syndicated loans; commercial vate railways companies. The private counterparty banks; leasing provid- railways companies coordinate the ers and bondholders. The risks of the transportation modes and time ta- Company might lead to the unpaid bles. In compliance with the Rules debts to investors becoming the gener- of Non-discriminatory Access of al risks of the Company and investors. carriers to the public railway infrastruc- The Company strives to minimize the tures, approved by Decree No. 710 of risks of the investors purchasing the se- November 25, 2003 of RF Government, curities of the Company or investing the Company shall provide for the free to the Company in either form, for in- non-discriminatory access to such rail- stance, through the development of way infrastructures for all carriers. In qualitative corporate management sys- such case Russian Railways is interested tem. The Company has developed the in the participation of the competitors Regulation regarding the information in maintaining the said infrastructures policy of the Company thus confirming in a proper state. Both the Company the basic principles of the information and its competitors transporting the policy. Such Regulation is essential for passengers and cargoes by railways the gradual development and build- shall provide for the favorable environ- ing up the relations with investors. mental and epidemiological conditions, Russian Railways keeps and discloses including the emergency safety. the financial statements in compli- The potential interaction risks when ance with Russian and International working together with competitors – Accounting standards. Strictly fol- railway carriers – might occur due to lowing the transparency norms the the infringement of regulations, legal Company discloses additional informa- norms and agreed provisions, defining tion about its activities which might be the limits of the cooperation between of interest or substantial for investors. the parties. In order to minimize the For such disclosure of the information risks the Company organizes the access the Company uses the most convenient to the railway infrastructures, regu- means and ways. The optimal volume lations and other legal norms which of the information about the Company regulate such services, for the employ- can be seen on the corporate web-site. ees who are involved in servicing. The In addition, Russian Railways discloses interaction of Russian Railways with the information via information agen- competitors in the sphere of railway cies and other mass media sources. The

_49 Russian Railways Social Report 2010

part of the important information is media has a long life-story and earned presented on the website in English. the credibility and trust of the readers, for instance, the newspaper “Gudok” Subsidiaries and affiliates of the (Horn) that publishes the materials on Company. the basic activities of the Company. Russian Railways governs the opera- tion of its subsidiaries and affiliates Subsidiaries and affiliates. using the corporate methods, but Russian Railways has subsidiaries and avoids the administrative influence on affiliates (S&A). The foundation and The interaction with stakeholders with interaction The the business of such companies. The activities of S&A are governed by the subsidiaries and affiliates business laws and Articles of Associations of is controlled letting the representa- such companies. The activities of said tives of Russian Railways to participate companies are aimed at the fulfill- in general meetings of shareholders, ment of targets and tasks stated in the Boards of Directors and audit commis- Charters. The Company is interested in sions of subsidiaries and affiliates. The the efficient work of S&A and governs Politics of Corporate Governance is ex- the activities in order to enhance the ercised in key functional directions quality of produced goods, works and such as: services. Accordingly, Russian Railways • Planning and control over the cooperates with concerned parties in realization of the development strat- every sphere of social responsibilities, egy carried out by subsidiaries and indicated in Chapter 2 of the pre- affiliates; sent Report. The cooperation trends • Financial and economic activities; of the Company with concerned par- • Deals with assets; ties in terms of main groups are given • Staffing policy of subsidiaries and in Table 3-1. The Company has special- affiliates. ized structures to govern the methods of interaction. The main responsibil- Mass media ities are distributed between certain The relations of Russian Railways with departments in compliance with the mass media are based on the princi- competence of such departments. The ples of transparency, efficiency and key departments responsible for the re- reliability of the submitted informa- lations with internal concerned parties tion. Such principles are presented are Social Development Department in the “Regulation about the infor- and Personnel Management mation politics of Russian Railways Department. The Department for co- developed by the Department of operation with Federal and Regional Corporate Communication with partici- authorities, Department for Corporate pation of the Department of Corporate Communications, Justice Department, Construction and Modernization. etc. bears the responsibilities for the re- Russian Railways actively cooper- lation with external concerned parties. ates with all main federal and regional mass media of Russia. The Company’s

50_ Russian Railways Social Report 2010

Table 3-1. Interaction areas with breakdown by main groups of stakeholders Interaction areas including for the following groups of stakeholders The interaction with stakeholders with interaction The Employees Customers Public Authorities Non-governmental organizations International organizations and Contractors vendors Business rivals Mass media Investors Shareholder Partners Affiliated and dependent companies Administration

Economical component

Increase of economical effectiveness

Expansion of market representation

Investment activities

Environmental component

Nature-conservative measures

Implementation of environmental management systems

Social component

Social support for employees

Respect for human rights

Interaction with society

Compliance with regulatory requirements

Participation in build-up of governmental policy

Responsibility for products and services

Prevention of corrupt practices

_51 Russian Railways Social Report 2010

3.2. Forms of interaction with stakeholders

When interacting with stakeholders, of individual groups of stakeholders the Company uses various interrelated are being prepared in this case. The forms of dialogue, starting from the Company places the information in basic form like the identification of Internet on its web-site (www.rzd.ru) stakeholders up to the developed form that is accessible and free-of-charge. like the partnership. The Company In addition the information and docu- strives to develop and enhance the ef- ments as requested by the concerned fectiveness of dialogue for each group. parties might be presented as well in the original. Displaying the informa- The interaction with stakeholders with interaction The Identification of stakeholders or tion to all parties the Company follows concerned parties the international norms and rules The Company identifies the stakehold- in the sphere of the business social ers by the interests and expectations. responsibilities. Thereby the Company The results are taken into consideration practices the regular social reporting at the stage of the preparation of non- and presentation of the results to the financial reports of the Company and public. The reports of the Company planning of activities associated with (financial reports, prepared in compli- the interaction. Besides, the identifica- ance with international standards, tion of stakeholders is done during the annual reports, accounts and records preparation of non-financial docu- prepared in compliance with Russian mentation as well as at the stage of standards) are posted on the Company the implementation of the Company’s web-site. The open publication of the activities that concern the stakeholders stature, internal regulations and clearly (competitive procurement, application defined targets and mission of the and complaints redressing, public hear- Company contribute to the adherence ings and other procedures, performed to the high standards of transpar- by the Company and providing for the ency. The Articles of Association of the participation of concerned parties). Company can be seen on the Company web-site (http://doc.rzd.ru/wps/ Information exchange. portal/doc). The Company prepares press-releases, Russian Railways informs the con- information programs; organizes sumer about offered services as well press-conferences; organizes the in- as results of the Company activities in terviews to spread the information in mass media, Internet, and text notices. mass media. Russian Railways prac- The Company provides the accessibility tices the reporting system in compli- to the rules and regulations, govern- ance with international and Russian ing the use of the railway transport, standards. Both the open reports including the behavior of service and reports covering the activities consumers. The Company carries out

52_ Russian Railways Social Report 2010

the work in the sphere of marketing parties) under concluded agreements communications, delivers the infor- and other documents. At present the mation to the potential consumers Company implements the agreements about the services, accounting for the with regions where the Company and requirements of the regulations and regional executive authorities interact laws in the sphere of marketing com- in different directions of economic, munications. The information for the environmental and social spheres. Such internal stakeholders of the Company agreements, inter alia, assume the is posted on the stands; the decisions budgetary financing of the Company The interaction with stakeholders with interaction The of the Management are communicated and investment of the Company to the to the employees within the internal infrastructures. document flow. The Company has the Collective In order to meet the demands of the Agreement, defining the rights and public and mass media in the informa- responsibilities of the Company and tion the Company posts on its web-site its employees in terms of social and the thematic press-files, containing labor relations. The implementation of the information about the Company the Collective Agreement is subject to activities. constant supervision and control. The Company holds meetings with The mutually beneficial agreement focus-groups (representatives of local under international agreements, population), meets the people and conventions, codes, etc. as well as in organizes the operation of hot line, the framework of interaction with including the feedback via Internet NGOs plays an important role for the (http://www.rzd.ru) for taking into realization of the Company social account the interests of consumers and responsibilities. communities. Moreover, the Company The Company makes suggestions on conducts a public hearings on the the improvement of the operation of environment protection matters. The the railway transport and on regula- Company participates in joint confer- tions in the sphere of such transport, ences, symposiums, and meetings, participating in the work of gov- organized by the international organi- ernment authorities. The Company zations and other NGOs, including the conducts the public hearings with meetings with trade union organiza- the participation of representatives tions on social and labor issues. of regional governments and local authorities. The Company organizes Partnership relations between the the consulting and methodological in- Company and stakeholders. teraction with supervising bodies and Russian Railways cooperates with a assists in investigations. number of stakeholders (concerned

_53 Economical Policy of Risks and JSCo "RZD"and its Opportunities in Implementation Economical Context Mechanisms

Russian Railways Implementation of Economic Efficiency Economical Policy. Management System Presence in Key markets 04

Investment Activities

Economic Efficiency Russian Railways Social Report 2010

4.1. Economical Policy of JSCo “RZD” and its implementation mechanisms

The most important issues of Russian Ministry of Transport No. 45 of May 12, Railways’ economical policy were 2005”) and Strategy of development defined by Decree of the Russian of railway transport in the Russian Federation Government No. 384 “On Federation” (approved by Order of the the Program of Structural Reform at Russian Federation Government No. railway lines” of May 18, 2001, “The 877-р of June 17, 2008).

Russian Federation’s Transport Policy The Company’s leadership in traffic Efficiency Economic for the period till 2020” (approved volume does not automatically ensure by Order of the Russian Federation high results of financial and economical

Fig. 4-1. Lines of Economical Policy

Development of national integrated efficient transportation system

Improvement of stability and safety of railway transportation

Areas of JSCo «RZD» economical policy Geographical expansion of representation on transport services market

Improvement of investment attractiveness of railway transport

activities of Russian Railways with view formation of non-price competitive ad- that overwhelming majority of services vantages and risk mitigation (Fig. 4-1). provided by Russian Railways are strictly Moreover, Russian Railways assumed a regulated by the State; meanwhile strategic line to conduct high-efficiency, the Company is required to conduct client-oriented, and socially respon- socially important traffic which is not sible business using best practices of commercially effective. Besides, Russian Russian and foreign companies. In each Railways operates already today in of the said lines of economical policy of conditions of growing competition. The Russian Railways there are certain risks very circumstances require development and chances. Speaking about them, and implementation of active strategy one must note that risk and capabilities in the field of improvement of ser- management is based on what goals vices provided and traffic efficiency for the Company sets for itself.

_55 Russian Railways Social Report 2010

4.2. Russian Railways Economic Efficiency Management System

The Company’s Economic Efficiency • Improvement investment climate Management System is focused on the and development of market rela- following factors: tions in transport complex; • Effective combination of govern- • priority development and moderni- ment regulation and market self- zation of railway system; regulation mechanisms on railway • Higher safety of railway transport

Economic Efficiency Economic transport; operation.

4.2.1. Risks and opportunities in economical context

Exterior risks and opportunities of activities. Those are mainly heritage the Company in economical context of the former years of the Company’s are determined by the level of social business: it is enough to say that the and economical development of most part of the Company’s rolling the country as a whole, household stock was built before disintegration income, and political factors which of the USSR. Minimization of these may be both positive and negative as risks is related to reforming of the related to the Company’s activities. whole railway transport and structure The table below (Fig. 4-2) provides of interactions within the Company risks of Russian Railways related to and collaboration with the parties various issues of Russian Railways concerned.

56_ Russian Railways Social Report 2010

Fig. 4-2. Main non-financial risks of JSCo «RZD» in terms of economics

Indicators of economical Risks Areas of Company’s activity efficiency Economic Efficiency Economic

Changing share of passenger and freight Investments into facilities projects and Profits of JSCo «RZD» operations market due to increasing volume re-equipment with new rolling stock, and affiliated companies of transportation in Russia and abroad establishment of some affiliated companies

Improvement of conditions Share of railways in total Competition with other modes of transport for passenger and freight operations amount of transportation

Technological difficulties in railway Integrated reconstruction of access Passenger/freight turnover communications with foreign countries railways to the ports of Gulf of Finland with foreign countries, length of railways

Attraction of foreign investments from Increasing cost of new rolling stock Volume of rolling stock acquisitions, private companies to the sector. (extended payback period for the cars) profitability of transport operations Acquisition of the rolling stock

Lack of required funds for the railway Volume of repair works Investments into passenger/freight system transport and acquisitions of the rolling stock

Volume of government subsidies Activity aimed to provide state support. Stiff control of fares by government for compensation of unprofitable Improvement of fare system passenger operations

The Company’s opportunities are de- example, improvement of passenger termined by growing transcontinental transportation conditions is accompa- traffic, which may lead to freight turn- nied by differentiation of transporta- over growth (mostly container traffic) tion rates on the basis of comfort level. of Russian Railways with foreign states. The Company also gradually introduces This opportunity may be implemented self-service system with long-distance via expansion of the infrastructure train ticket sales: ticket printing along the international traffic cor- machines will be installed in all avail- ridors – East-West and North-South. able places. It is supposed that these No doubt that development factors innovations will increase passenger include adaptation and use of high traffic in Russian Railways and railway technologies on railway transport. For transport on the whole.

_57 Russian Railways Social Report 2010

4.3. Implementation of Economical Policy. Presence in Key markets

Presence in the freight and In 2010 turnover of railway transport passenger transportation markets (without empty mileage of mile- Historically, railways play a key role in age private and leased rolling stock) Russian transport system, ensuring over increased by +7.8% as compared to 42% of turnover of the whole transport 2009. Here, specific weight of railway system of the country (and, without transport of the country increased by

Economic Efficiency Economic pipeline transport, about 85% ) and +0.3 % (from 42% in 2009 to 42.3% in almost 33% of passenger traffic. 2010 ).

Freight turnover by modes of transport, billions of ton per km

Mode of transport 2009 2010 % Share of transport mode in total freight turnover

2009, % 2010, %

Freight transportation 4 444,8 4 752,5 +6,9 100,0 100,0 turnover

including:

1 1 Freight turnover Railway 1 865,3 2 011,3 +7,8 42,0 42,3 figures without Motor road 180,1 199,2 +10,6 4,0 4,2 empty run of private and leased rolling Sea 98,4 101,0 +2,6 2,2 2,1 stock, according to data reported by Inland water 52,7 54,3 +3,1 1,2 1,2 JSCo «RZD» Air (transport aviation) 3,6 4,7 +32,0 0,1 0,1

Pipelines 2 245,8 2 382,0 +6,0 50,5 50,1

58_ Russian Railways Social Report 2010

Freight Turnover Structure by Transport Type in 2003-2010, %

39,0 39,5 39,7 40,6 42,5 42,8 42,0 42,3

53,1 53,0 52,9 52,1 50,1 49,8 50,5 50,1 Economic Efficiency Economic

4,0 4,0 4,2 4,2 4,3 4,4 4,0 4,2 3,9 3,5 3,2 3,1 3,1 3,0 3,5 3,4

2003 2004 2005 2006 2007 2008 2009 2010

Railway Automobile Pipeline Other

In 2010, in the process of implemen- except others. The share of open box tation of the Program of Structural cars belonging to Russian Railways de- Reform on Railway Transport, com- creased extremely rapidly (more than petition in freight transportations still by 50%) because of transfer of a part developed. In 2010 the Russian fleet of open box car fleet to OJSC Vtoraya of freight cars had grown by 3.4% Gruzovaya Kompania and their sales to making over 1,025 million freight cars independent private owners. (against 0.991 million cars in 2009 )2. As In 2010 (as compared to 2009) 2 Without of December 31, 2010, inventory fleet the share of Russian Railways(less «transporter» type of Russian Railways was over 0.212 mil- subsidiary companies and affiliates) railway cars lion cars or 20.7% of the total Russian in the market of freight car opera- car fleet, against 0.3379 million cars tions (as by volume of freight railway and 34.1 respectively as compared with transportations ) fell from 33.8% the previous year. Here, the share of to 25.5%. The share of subsidiary rolling stock fleet belonging to subsidi- companies and affiliates of Russian ary companies and affiliates of Russian Railways in terms of traffic volume Railways was 29.7%, with independ- became 23.9%. The volume of traffic ent private owners made for 49.5% in by cars belonging to Russian Railways total rolling-stock fleet (as compared Holding (Russian Railways with its to 23.9% and 41.9% as of December subsidiary companies and affiliates ) 31, 2009). Increased was the number of in 2010 lowered by 1.9% (–11.9 mil- open box cars (+22.3%), other (special- lion tons ). However, the total gain ized) cars (+36%), box cars (+7.9%), in transportation volumes reached and tank cars (+8.9%) all belonging +8.9%. At the same time the volume to independent private companies. of transportation provided by cars of The share of Russian Railways Holding other owners increased by +18.5% lowered in all types of railway cars, (+104.6 million tons).

_59 Russian Railways Social Report 2010

Structure of the Russian Market of Freight Car Operations by Volume in 2003-2010, %

28,7 31,5 34,0 35,0 38,5 41,0 46,1 50,6 Economic Efficiency Economic 1,0 1,2 9,3

20,1 23,9

71,3 68,5 66,0 64,0 60,3 49,7 33,8 25,5

2003 2004 2005 2006 2007 2008 2009 2010

Russian Railways Other owners Subsidiary companies and (less subsidiary companies) affiliates of Russian Railways

The share of Russian Railways in freight turnover by cars of private owners was car operations by freight turnover 21.8%, while in 2010, the same figure changed from 78.2% in 2003 to 18.6% reached 81.4% (+10.6 % gain against in 2010. In 2003, the share of freight 2009 ).

Structure of the Russian Market of Freight Car Operations by Turnover Volume in 2003-2010, %

21,8 26,1 30,2 30,5 34,0 37,1 41,0 47,4

3,2 3,6 14,0

29,8 34,0

78,2 73,9 69,8 66,3 62,4 48,9 29,2 18,6

2003 2004 2005 2006 2007 2008 2009 2010

Russian Railways Other owners Subsidiary companies and (less subsidiary companies) affiliates of Russian Railways

60_ Russian Railways Social Report 2010

During 2003-2008 the Holding signifi- (open box cars etc.) where the Holding cantly lost its competitive positions in controls over 75% of the market, while freight car operations. The share of in the tank car segment the Holding’s the Holding in 2010 was about 53% share is significantly less (about 25%). both in the number of cars and total Thus, the structure of the Holding’s proceeds (as compared to 75-78% in rolling-stock fleet makes it less com-

2002-2003) which was due to market petitive in terms of transportation of Efficiency Economic deregulation and tariff freedom of high-yielding cargo. activities of private operators, and to The passenger segment operations active market penetration of private in 2010 was focused on full demand leasing companies. satisfaction and increase of the quality The Holding’s market share are the of services provided to the popula- maximum in universal rolling stock tion, steady and dynamic development

Amount of the Russian Fleet of Freight Cars, Thousand Pcs. (as of 31.12.2010)

176 182

136 122

98

67 54 41 40 32 18 15 19 16 0,5

Open box cars Cistern cars Flat cars Box cars Other

Russian Railways Independent private owners Subsidiary companies and affiliates of Russian Railways of transportations, improvement of The reasons to the decrease in passen- efficiency of passenger traffic. Railway ger traffic in 2010: passenger traffic was 139 billion pas- • increased competition in trans- senger kilometers in 2010 (-8.2% as portation service market from compared to 2009 ), including: the side of bus operators, local, • long distance traffic – 111.0 billion regional and inter-regional airlines, passenger kilometers (-2%); including low-budget carriers and • suburban traffic – 28 billion passen- personal car transport; ger kilometers (-26.6%).

_61 Russian Railways Social Report 2010

• low rates of recovery of demand Notwithstanding the growth of house- for passenger transportation in the holds’ income in 2010 (104.1% against post-crisis period; 2009 ), railway passenger traffic (both • reduced demand for passenger trans- long-distance and suburban) has a portation because of demographic tendency to reduction. recession and population aging; According to data provided by Rosstat

Economic Efficiency Economic • changes in travel counting system in (the RF Statistics Committee) in 2009- Russian Railways; 2010 the share of railway transport in • increased number of ticketless trav- passenger traffic of main public use els by train. transport types fell from 37.2% to In suburban traffic, the objective 32.7%. These changes in passenger reason of passenger turnover decrease traffic structure are related to signifi- was the change in the procedure cant reduction of the bus transport of registration of travel documents share and increase of air transport for recipients of federal benefits. share.

Passenger Turnover Structure by Transport Type in 2003-2010, %

34,0 32,2 36,8 38,1 37,4 39,1 37,2 32,7

50,5 47,1 44,2 41,6 38,5 33,5 34,5 32,7

34,5 27,6 17,7 23,8 27,2 15,3 18,5 20,1 0,2 3,0 0,5 0,2 0,3 0,2 0,7 0,1

2003 2004 2005 2006 2007 2008 2009 2010

Railway Air (transport aircraft) Automobile (bus) Other

3 JSCo «FPK» is In 2010 the share of Russian Railways growth in passenger traffic by OJSC exercising an in long-distance passenger traf- Federalnaya Passazhirskaya Kompania3 independent fic was 16.6%, while the share of its which conducted the major part of business activity subsidiary companies and affiliates transportations. from April 1, 2010. increased to 72.2% at the cost of the

62_ Russian Railways Social Report 2010

Passenger Turnover Structure by Transport Operator in Long-Distance Traffic, %

11,0% 10,8% 0,2% 0,4% 0,5% Economic Efficiency Economic

88,3% 72,2%

16,6%

2009 2010

Russian Railways Subsidiary companies and affiliates of Russian Railways Private transportation CIS, Baltic countries and non-CIS countries

In suburban traffic, the share of subsidiary in 2010 as compared to 2009 increased by companies and affiliates of JSCo «RZD» 19.7 p.p. (up to 57.6%).

Passenger Turnover Structure by Transport Operator in Suburban Traffic, %

14,8% 37,9%

57,6%

85,2% 62,1%

42,4%

2008 2009 2010

Russian Railways Subsidiary companies and affiliates of Russian Railways

_63 Russian Railways Social Report 2010

4.4. Investment Activities

The total funds as stipulated by the Implementation of health facilities investment budget of Russian Railways renewal program has been per- for 2010 and approved at the Meeting formed aiming to ensure integrity of of the Company’s Board of Directors the Company’s health care institutions, are 315.0 billion Rubles, while actual related to medical support of railway utilization of Russian Railways invest- operation safety and determination

Economic Efficiency Economic ment budget for 2010 was 317.4 billion of professional aptitude, provision of Rubles or 100.8% against the plan, high quality medical services to railway including 0.6 billion Rubles attracted personnel, and local residents. from outside financing sources. In 2010, under this Program high In 2010, in the whole federal railway technology medical equipment was system fixed assets amounting to purchased and equipment for instal- 214.6 billion Rubles were commis- lation of fire alarm systems, together sioned. Within the said period the with renovation of a number of health following was commissioned: 2.49 km care institutions. of new lines; about 116 km of side One of the Company’s lines of ac- tracks and about 96.5 km of station tivities is a further development of tracks; 1657.1 km of track superstruc- existing system of training, conver- ture were modernized. In 2010, 46.0 sion training and advanced training billion Rubles were committed to of Russian Railways personnel. Under renewal of rolling stock, with 393 mo- the Company’s investment budget, tive power units, 172 freight cars and measures were implemented aiming 677 cars of rolling to renew and develop educational stock purchased, while rebuilt were 88 institutions. In the current period, a freight cars, 812 motive power units number of Russian Railways technical and 9 cars of electric multiple unit roll- schools, training centers and educa- ing stock. Here one should note that, tional institutions (hostel schools and besides solving production issues, our kindergartens) in the Federal railway Company pays special attention to system were built, upgraded and social issues. In the said period, invest- provided and installed with training ment measures amounting to 0.6 equipment. In 2010, the following fa- billion Rubles were performed under cilities were rebuilt and commissioned: investment budget of Russian Railways • Technical School Hostel at Kaluga in section “Social Development Railroad Station (Moskovskaya Projects”, which is by 0.6 billion Railroad); Rubles more than the same figure in • the building of Personnel Training 2009. These projects were aimed at Center (with Hostel annex) at renewal of health care and educa- Klubnaya Street in tional facilities, expansion of special- (Dalnevostochnaya Railroad); ized housing stock of the Company • Educational Building of Road and development of material and Technical School at Elets Railroad technical structure of juvenile railways. Station (South-Eastern Railroad);

64_ Russian Railways Social Report 2010

• Technical School at Astrakhan innovations, intellectual and cultural Railroad Station (Privolzhskaya development, education in healthy Railroad); life-style. In the current period, new • Hostel, administration and amenities TUYU series Diesel-powered loco- building, workshop, welding station, motives were purchased, designed parking garage and simulator equip- specifically for juvenile railroads and

ment building of Technical School meeting current requirements. In 2010 Efficiency Economic at Tikhoretskaya Railroad Station the construction of a hotel to accom- (North-Caucasian Railroad); modate students of Children’s • Kindergarten No. 47 at Aleksandrov Railroad was launched, with continued Railroad Station (Moskovskaya renovation and new construction of Railroad); facilities of Novomoskovskaya Railroad • Kindergarten No. 262 at and Malaya Oktyabrskaya Railroad. Khabarovsk-1 (Dalnevostochnaya Implementation of this program al- Railroad). lowed renovating and building existing According to the Company’s Hosing infrastructure, and setting up an edu- Policy Concept approved by Order cational support basis with conversion 780р of Russian Railways of May 25, of educational activities of children’s 2005, the Company develops Russian railroads to a uniform educational Railways specialized housing stock program. Russian Railways pays special (technological houses). The top priority attention to population safety issues. of the Concept was defined as neces- Transport Safety Program stipulates sary creation of the Company’s housing equipping railway facilities with securi- stock to meet operational and process ty hardware. Implementation of these needs, maintain the existing and at- measures helps to improve population tract potential personnel. According safety at railway transport and trans- to results of Technological Housing port infrastructure facilities, ensure Project, in 2010 the Company’s spe- life and health of population, prevent cialized housing stock was increased crimes and other law offences made to by 69,900 meters, or 941 residential passengers and railway personnel, and premises. In order to improve quality lower level of threats at the Company’s of vocational oriented education of socially-significant facilities. One of the children and status value of railway most important tasks of the Company professions, and to ensure safety of is maximum satisfaction of needs of children and minors during their stay passengers and consigners in terms at juvenile railroad facilities, in 2010 of transportation services. Presently, measures were implemented aimed improvement of population mobil- to develop physical infrastructure of ity necessitates integration of various juvenile railroads. Juvenile railroads are transport types into an integrated the facilities intended for additional logistic system. The solution of this task comprehensive juvenile education, is building of railway lines which would technical creativity, apperception of link city railway stations and the largest

_65 Russian Railways Social Report 2010

transportation junctions, thus help- In the current period, in order to ex- ing to significantly save travel times pand potential use of railway transport and (in some cases) to solve transport services by low mobility groups and problem for mega cities (unload motor handicapped persons, implementation roads). In order to provide quality level of Project “Reconstruction of Sochi of suburban passenger traffic on the railway terminals and their adjustment

Economic Efficiency Economic most intensive areas, improve level of for use by handicapped persons” con- comfort and safety of transportation tinued. The said measures are planned services and manage with ever grow- to be implemented at the following ing passenger traffic, Russian Railways railway stations: Dagomys, Sochi, implements the following socially- Matsesta, and Khosta. Besides, during significant projects: construction and renovation of build- • “Organization of intermodal pas- ings and facilities a set of measures is senger traffic along Vladivostok – performed to ensure barrier-free access Knevichi Airport route”. After the to railway facilities for low-mobility Project’s implementation, travel time groups and handicapped persons. of electric suburban trains along Works are under way to install elevators Vladivostok – Knevichi Airport route and lift platforms, parking places are (with three stopovers) will be 48 stipulated at parking areas near railway minutes; terminals, curbstones are removed to • “Organization of intermodal passen- ensure exit from parking areas, ramps ger traffic between Kazan Railroad with two-level handrails are being Station and Kazan International equipped, tactile lanes re implemented Airport”. After the Project’s imple- inside railroad passenger terminals. mentation, travel time will be 20-25 Under high-speed and ultra-high minutes; speed railway traffic development • “Organization of intermodal passen- program, high-speed train ser- ger traffic along Sochi-Adler-Sochi vice is launched at Moscow – Nizhniy Airport route”. After the Project’s Novgorod route: implementation, travel time will be • on July 30, 2010 Sapsan trains started 44 minutes; to run between Moscow and Nizhniy

66_ Russian Railways Social Report 2010

Novgorod (with travel time being 3 hr 55 min). Under the program of renovation of railway infrastruc- ture facilities on Moscow – Nizhniy Novgorod route, 54 passenger plat- forms were build and upgraded, area

fencing structures were installed on Efficiency Economic 331 km of track etc. • On December 12, 2010 high-speed railway service was launched be- tween Russia (St. Petersburg) and Finland (Helsinki). From this day railway transit time between St. Petersburg and Helsinki reduced from 6 hr 18 min to 3.5 hours. Every train in this service provides seats for handicapped passengers, and special playgrounds for children’s leisure. Results of implementation of Russian Railways investment budget verify high social focus of investment projects, and balanced approach to planning of funds allocated for development of industrial and non-industrial facilities.

_67 Environmental Nature Conservation Utilization of Water Production and Protection and Opportunities and Resources Consumer Waste Rational Nature Ecological Risks Management Management Policy of Russian Railways

Nature Conservation Atmospheric Air Water Resources Environmental Management System Protection Conservation Control Costs 05

Implementation of Noise Control Investment Project Measures "Ecological Safety"

Technical Retooling of Russian Railways to Ensure Environment Protection

Measures within Activity of Environmentally Environmental Protected Natural Divisions of the Areas Railways Environmental Performance

Ecological Audit Russian Railways Social Report 2010

5.1. Environmental Protection and Rational Nature Management Policy of Russian Railways

Russian Railways carries out envi- Company’s nature conservation man- ronmental activity pursuant to the agement system and its improvement. environmental protection legislation As a part of the structural reforms of the Russian Federation as well as to implemented by the Company, there documents of Russian Railways: were created Environmental Protection • Ecological strategy of Russian Centers comprising environmental Railways for the period till 2015 and laboratories on all railways in 2010. The in consideration of the perspec- Centers are entrusted to be ecologi- tive till 2030 as approved by Order cal safety providers in the Company Performance Environmental No. 293 of Russian Railways dated branches located within the bounda- February 13 of 2009; ries of the railway. • Railway transport development strat- The central nature conservation com- egy of the Russian Federation as ap- mission of Russian Railways is estab- proved by Order No. 877-r of the RF lished to improve nature conserva- Government dated June 17 of 2008; tion management system of Russian • Innovation development strategy of Railways and to reduce negative Russian Railways for the period till impact on the environment. Regional 2015 (White Book of Russian Railways). nature conservation commissions of In its operation Russian Railways Russian Railways are created on all the attaches great importance to the railways.

5.2. Nature Conservation Management System 5.2.1. Nature Conservation Opportunities and Ecological Risks

Railway transport is recognized as the the environment, minimizing con- most environmentally friendly trans- sumable resources and power; port in the world first of all for its low • the advanced nature conservation power consumption. management system which incor- Railway also offers porates long-range and short-range environmental benefits through exten- planning, development and updating sive use of electric traction which pre- of the corporate normative-meth- vents emissions of harmful substances odological basis on nature conser- into the atmospheric air and decreases vation, Company staff training and contamination of soil with heavy metals. education in nature conservation, Nature conservation opportunities of rational nature management and the Company are provided with: ecological safety, ecological monitor- • ambitious investment programs ing of Company facilities, ecological aimed at ensuring environment audit of Russian Railways divisions, protection and ecological safety introduction of progressive nature of the Company facilities and conservation management systems infrastructure; up to international standards. • innovative technologies aimed at Major ecological risks of the Company preventing or reducing impact on are associated with negative impact of

_69 Russian Railways Social Report 2010

the Company facilities on the environ- oxide and hydrocarbons) from sta- ment, utilization of natural resources tionary emission sources; including non-renewable ones. Sources • air pollutant emissions (carbon of the Company’s ecological risks are: oxide, soot, sulfur dioxide, nitrogen • fuel consumption for haulage of oxide and hydrocarbons) from diesel trains and in boiler houses; locomotives; • consumption of water resources for • effluents discharge into water bodies. service and domestic needs; Ecological risks of Russian Railways are Environmental Performance Environmental • hazard class V waste generation; managed at all stages of the nature • power production and consumption conservation management system for haulage of trains; beginning with identification and • soil disturbance during construction planning and ending with monitoring of new facilities and extraction of and control. industrial minerals such as sand and Table 5-1 lists main areas of ecologi- detritus; cal risk management activity of the • air pollutant emissions (carbon Company and pertinent environmental oxide, solids, sulfur dioxide, nitrogen performance indicators.

Table 5-1 Main Areas of Ecological Risk Management Activity of the Company and Pertinent Environmental Performance Indicators Pos. Risk sources Activity lines Measure of efficiency

• Development and implementation of measures aimed to reduce fuel consumption in stationary and mobile • Diesel fuel consumption Fuel consumption in hauling sources in hauling operations 1 operations and boiler stations • Investments to development of new • Consumption of gas, oil technologies aimed to lower fuel fuel, coal and other fuel consumption in boiler stations • Introduce new technologies aimed to lower fuel consumption

Introduction of water saving technologies, • Consumption of water Consumption of water resources circulation water supply systems, water ra- resources for industrial 2 for industrial and consumer needs tioning and instrumental water consump- and consumer needs tion metering • Volume of circulating water

70_ Russian Railways Social Report 2010

Generation of great volumes of • Utilization of waste in technical industrial and consumer waste • Waste generation by processes as sources of raw and recycled (wasted ties, boiler ash, refuse hazard class 3 materials burnout, construction waste, • Percentage waste • Introduction of waste recycling domestic garbage, metal scrap, utilization technologies crushed stone)

Power generation and • Implementation of energy saving 4 consumption for hauling technologies Power consumption Performance Environmental operations • Training in energy saving technologies

Soil spoilage during new construction and production of 5 Spoiled land recultivation operations Land recultivation costs nonmetallic mineral resources such as sand and crushed stone

• Switch boiler stations to more • Volume of air emissions environmentally safe fuel of pollutants from Air emissions of pollutants (carbon • Improve fuel combustion efficiency stationary pollution oxide, solid substances, sulfur • Introduce electric heating sources 6 dioxide, nitrogen oxide, and • Liquidate low production coal-fired • Air emissions of hydrocarbons) from stationary boiler stations main pollutants from pollution sources • Renovate and build effective and stationary pollution introduce new dust separating sources equipment

• Volume of air emissions • Replace engines with more fuel- Air emissions of pollutants (carbon of pollutants from efficient engines which have improved oxide, soot, sulfur dioxide, nitrogen Diesel locomotives 7 environmental safety properties oxide, and hydrocarbons) from • Volume of air emissions • Develop new Diesel locomotives with Diesel locomotives of main pollutants from gas diesel engines Diesel locomotives

• Volumes of sewage • Replace engines with more fuel- water efficient engines which have improved Effluent discharge into water • Volume of pollutants 8 environmental safety properties bodies discharged together • Upgrade and build water treatment with sewage water to facilities water bodies

Development of project documents by Delays in obtaining of required • Penalties 9 qualified employees Russian Railways or by environmental permits • Charges for above- independent specialized contractors standard exposure

_71 Russian Railways Social Report 2010

Figure 5-2. Organization of environmental activity management in Russian Railways

Russian Railways

Administrative office

Occupational Safety & Health

Environmental Performance Environmental & Environmental Control Administration

Functional branches of Railroad management bodies Russian Railways

Environment Protection Sector / Environment Protection Department EPS Engineers

Management bodies Structural railroad subdivisions Structural subdivisions of Railroad divisions

Environment Protection Sector / Environment Protection Sector / EPS Engineers EPS Engineers EPS Engineers

Core environmental performance • reduced pollutant effluents dis- indicators of Russian Railways charge into water bodies by 4%; Ecological factors play an increasingly • increased waste neutralization and prominent part in production opera- process waste utilization by 9%. tion of Russian Railways, promotion of Such reduced impact on the environ- its ecological safety and competitive ment is achieved with 4 chief guide- strength. lines of Russian Railways: As a part of the ecological strategy of • the current nature conservation Russian Railways over a period from management system; 2008 to 2010 as compared to 2007 • technical retooling with an ecologi- (reference year), hazardous air emis- cal component; sions from stationary sources declined • implementation of investment by 31%, greenhouse gas emissions projects; by 19%, water utilization for service • ecological monitoring the impact on needs by 34%, pollutant effluents the environment. discharge by 16%, waste generation Figures 1-5 show dynamics of hazard- by 29%. ous and greenhouse gas emissions into In 2010 as compared to 2009, the the atmosphere, water utilization, pol- Company: lutant effluents discharge into surface- • reduced hazardous air emissions water bodies, waste generation over a from stationary sources by 10%; period from 2007 to 2010.

72_ Russian Railways Social Report 2010

Dynamics of air emissions from stationary Greenhouse gas emissions by of Russian Railways pollution sources of Russian Railways branches, branches, million thousands tons of CO2 eq. thousands tons

Figure 1 Figure 2

148,1 38,03 35,63 133,4

113,4 31,15 30,08 101,9 Environmental Performance Environmental

2007 2008 2009 2010 2007 2008 2009 2010

Dynamics of water consumption by Russian Dynamics of pollutant effluents into surface Railways branches, millions m3 water bodies by Russian Railways branches, in million m3

Figure 3 Figure 4

162,7 16,9 147,9 16,0 127,5 13,9 116,2 13,4

80,8

71,6 62,2 53

2007 2008 2009 2010 2007 2008 2009 2010

water consumption, million m3 incl. industrial water, million m3

_73 Russian Railways Social Report 2010

Dynamics of waste generation by Russian Railways branches, millions tons

Figure 5

2,77

2,33 2,2

Environmental Performance Environmental 1,96

2007 2008 2009 2010

5.2.2. Atmospheric Air Protection

In 2010 hazardous air emissions construction of new and moderni- amounted to 403.1 thousand tons zation of operating boiler houses, including 101.9 thousand tons from conversion of boiler houses to more stationary facilities and 301.2 thousand ecologically clean types of fuel (gas, tons from mobile sources of which oil-fuel), enhanced fuel combustion 200.2 thousand tons were released by efficiency, introduction of electric mainline and shunting diesel locomo- heating, closing-down of low-active tives, 89.96 thousand tons by motor coal boiler houses, retrofitting of vehicles, 11.0 thousand tons by special operating and introduction of new driverless rolling-stock. As compared dust and gas collecting equipment to 2009, emissions from stationary fa- (cyclones). cilities declined by 11.5 thousand tons Figure 6 shows share of air pollutant in year 2010. emissions from stationary sources of Hazardous air emissions from sta- the railways and administrations of tionary sources decreased due to Russian Railways.

74_ Russian Railways Social Report 2010

Percentage of air emissions from stationary pollution sources In 2010 Russian Railways numbered of Railroads and Directorates of Russian Railways in 2010, % 49026 stationary sources of air pollut- ant emissions totally. Stationary sourc- es accounted for 25.3% of hazardous Figure 6 air emissions and mobile sources (mainline and shunting diesel locomo- tives, motor vehicles, special driverless rolling-stock) accounted for 74.7%. Environmental Performance Environmental

In 2010 the railways released 81.5 thousand tons, the administrations of Russian Railways released 20.26 thousand tons and other branches (plants) released 0.16 thousand tons of air pollutant emissions from stationary sources. The largest part of hazardous air emissions from sta- tionary sources is produced by the railways: (Zabaikalskaya) (13.7 thousand tons), West Siberian 79.96% – Railroads 0,16% – other branches (Zapadno Sibirskaya) (11.0 thousand tons), Far Eastern (Dalnevostochnaya) 19,88% – directorates (9.1 thousand tons), East Siberian (Vostochno Sibirskaya) (5.6 thousand tons), Kuibyshev (5.6 thousand tons), Northern (Severnaya) (5.0 thou- sand tons), Sverdlovsk (4.8 thousand Structure of air emissions from mobile pollution sources tons), Gorki (4.5 thousand tons), of Russian Railways branches in 2010, % (4.3 thousand tons), and on the administrations: TsTR (9.8 thousand tons), TsDRP (5.2 thousand Figure 7 tons), TsDRV (5.1 thousand tons). In 2010 all the railways and administra- 49,7% – by shunters and tions of Russian Railways reduced air line Diesel locomotives pollutant emissions from stationary sources except for TsDRV (+52.81 tons) 25,3% – by stationary sources and TsTR (+9784.35 tons). Hazardous air emissions decreased mostly on 22,3% – motor vehicles the railways: Moscow (2.2 thousand tons), South-East (Yugovostochnaya) 2,7% – self-propelled (1.6 thousand tons), East Siberian special cars (Vostochno Sibirskaya) (1.4 thousand tons), Krasnoyarsk (1.3 thousand tons), Sverdlovsk (0.9 thousand tons) and in the administrations of Russian Railways: FPD (7.1 thousand tons), TsDRP (0.4 thousand tons).

_75 Russian Railways Social Report 2010

Share of air emissions from stationary sources by railroads in 2010, %

Figure 8

Environmental Performance Environmental Zabaikalskaya 16,9

Zapadno-Sibirskaya 13,5

Dalnevostochnaya 11,2

Kuybyshevskaya 6,9

Vostochno-Sibirskaya 6,8

Severnaya 6,2

Sverdlovskaya 5,9

Gorkovskaya 5,5

Moskovskaya 5,5

Krasnoyarskaya 5,2

Severo-Kavkazskaya 4,3

Yuzhno-Uralskaya 4,1

Oktyabrskaya 4,0

Yugo-Vostochnaya 2,7

Privolzhskaya 2,2

Kaliningradskaya 0,5

76_ Russian Railways Social Report 2010

Percentage of air emissions from stationary pollution sources by Directorates in 2010, %

Figure 9 Environmental Performance Environmental

47,9% – Central Directorate 25,0% – Central Directorate 0,5% – Directorate of of Locomotive Repairs of Freight Car Repairs Railroad Stations 25,7% – Central Directorate 0,8% – other branches of Track Repairs

Percentage of air emissions from stationary pollution sources by Railroad functioning in 2010, %

As compared to 2009, emissions Рис. 10 41,67% – Public works and from mobile sources (diesel locomo- waterworks tives, motor vehicles, special driver- less rolling-stock) increased by 45.6 33,42% –Heat and Water Supply thousand tons in 2010. In 2010 haz- Directorate ardous air emissions from diesel lo- 6,18% –track enterprises comotives amounted to 200.2 thou- sand tons which is 5.8 thousand tons 5,24% – others greater than in 2009. The largest part 5,08% – locomotive enterprises of hazardous air emissions from mo- bile sources is produced by the rail- 3,69% – railway car enterprise ways: Northern (45.9 thousand tons), 2,06% – passenger enterprises Sverdlovsk (25.4 thousand tons), Volga (21.1 thousand tons), Transbaikal (19.7 1,02% – freight car enterprises thousand tons), Far Eastern (19.3 thou- 0,95% – Technical Development sand tons), West Siberian (17.9 thou- Directorate (DTR) sand tons), Gorki (17.9 thousand tons), North-Caucasian (14.9 thousand tons), 0,69% – electrization enterpises Moscow (14.7 thousand tons).

_77 Russian Railways Social Report 2010

Percentage of air emissions from mobile sources by Railroads of Russian Railways in 2010, %

Figure 11

Environmental Performance Environmental Severnaya 18,61

Sverdlovskaya 10,30

Privolzhskaya 8,56

Zabaikalskaya 7,98

Dalnevostochnaya 7,83

Zapadno-Sibirskaya 7,25

Gorkovskaya 7,03

Severo-Kavkazskaya 6,05

Moskovskaya 5,97

Yuzhno-Uralskaya 5,77

Yugo-Vostochnaya 4,35

Kuybyshevskaya 3,75

Vostochno-Sibirskaya 2,35

Krasnoyarskaya 2,26

Oktyabrskaya 1,29 The largest part of hazardous air emis- sions from mobile sources is produced by the administrations: TsTR (46.4 thou- Kaliningradskaya 0,64 sand tons), TsDRP (6.3 thousand tons).

78_ Russian Railways Social Report 2010

Percentage of air emissions from mobile sources by Directorates of Russian Railways in 2010, %

Figure 12 Environmental Performance Environmental

85,43% – Central Directorate 1,44% – other 0,42% – Directorate of Locomotive Repairs branches of Railroad Stations 11,61% – Central Directorate 1,10% – Central Directorate of Track Repairs of Freight Car Repairs

Percentage of air emissions from mobile sources of Russian Railways in 2010, %

Figure 13

210,6 211,9 203,8 200,2 193,6 194,4

90,0 90

58,7 57,2 50,0 50

11,9 13,4 14,7 11,8 11,1 11

2005 2006 2007 2008 2009 2010

by shunting and mainline diesel by motor vehicles, thousands tonnes self-propelled and special cars, locomotives, thousands tons thousands tonnes

_79 Russian Railways Social Report 2010

Dynamics of decrease in air emissions as related to freight turnover to passenger turnover in Russian Railways

Figure 14

190,3 181,3 169,9 1950,8 2090,3 2116,2

Environmental Performance Environmental 157,5 2011,3 1801,6 1858,1 1865,3 148 1668,9 133,4 113,3 101,9

157,6 164,3 172,2 177,6 174,1 175,9 153,6 139,0

2003 2004 2005 2006 2007 2008 2009 2010

freight turnover, billions of pricing tonne-km passenger turnover, billions passenger-km air emissions, thousands tonnes

5.2.3. Utilization of Water Resources

In 2010 Russian Railways reduced wa- consumption decreased by 1.9 million ter consumption by introducing water cubic meters and made 59.52 mil- saving technologies, circulation water lion cubic meters. Industrial water supply systems, water rationing and consumption decreased by 9.2 million metering systems. cubic meters and made 53.02 million During the in question Russian cubic meters. The railways used 100.5 Railways used 116.2 million cubic million cubic meters, the administra- meters of water in total which is 11.4 tions used 15.7 million cubic meters of million cubic meters or 8.9% less than water. Figure 15 shows water utiliza- in 2009. Utility and drinking water tion structure in percentage terms.

80_ Russian Railways Social Report 2010

Structure of water consumption in Russian Railways in 2010 % In 2010 railway undertakings used 100 477.17 thousand cubic meters of Figure 15 water: 44882.72 thousand cubic meters for industrial needs, 51917.29 thou- sand cubic meters for domestic needs, 3677.16 thousand cubic meters for other needs. The highest industrial water consump- tion is noticed in the railway services: Performance Environmental public works, heat and water supply, locomotive, carriage and track, which have 83.1% of the whole consumption. Figure 16 shows the percentage of industrial water consumption by the the railway services.

51,2% – household water use 45,6% – industrial water use 3,2% – others

Percentage of water consumption for industrial needs in 2010 In 2010 the administrations of Russian by railroad enterprises, % Railways used 8.1 million cubic meters of industrial water. The highest water

Figure 16 consumption is noticed in TsTR and 32,2% – Public Works TsDRV. Figure 17 shows the percentage 29,2% – Heat and Water Supply of industrial water consumption by Directorate administrations.

11,3% – others

9,2% – Locomotive Enterprises

7,7% – Railway Car Enterprises

4,8% – Track Enterprises

4,0% – Passenger Enterprises

1,0% – Electrical Enterprises

0,6% – Freight Car Enterprises

_81 Russian Railways Social Report 2010

Percentage of industrial water use by Directorates of Russian Altogether, overall water circulation Railways in 2010, % of Russian Railways was 54.72% and water circulation of the railways was Figure 17 44.0%. Water circulation remains the lowest in Krasnoyarsk (1.9%), Kaliningrad (2.8%), Oktyabrsk (10.1%) and East Siberian (13.4%) railways. High rates Environmental Performance Environmental of water circulation are found in West Siberian (77.4%), South-Eastern (61.8%), South Ural (43.3%) railways and in other branches of Russian Railways: Lyublino Mechanical Foundry (97,9%), Voitovich Plant (67.4%), TsDRV (62.4%), TsTR (56.2%).

41,9% – Central Directorate 8,7% – Directorate 6,6% – other branches of Locomotive Repairs of Railroad Stations

35,8 – Central Directorate 7,0 – Central Directorate of Freight Car Repairs of Track Repairs

5.2.4. Water Resources Conservation

In 2010 the railways and other to surface water (18.4 million cubic braches of Russian Railways dis- meters) and to land (3.0 million cubic charged 89.4 million cubic meters of meters). Figure 18 shows the structure wastewater into the environment of wastewater discharge by Russian including into public sewer collection Railways braches in percentage terms. systems (68.0 million cubic meters),

82_ Russian Railways Social Report 2010

Structure of wastewater discharge into environment by branches of Russian Railways in 2010, %

Figure 18 Environmental Performance Environmental

76,0% – into municipal sewerage systems

20,6% – to surface water 3,4% – to land

Structure of effluent discharges by Russian Railways into Wastewater discharge to surface surface water bodies in 2010, millions m3 water

Figure 19 Overall, in 2010 Russian Railways dis- charged 18.38 million cubic meters of wastewater to surface water. Among them: • 4.31 million cubic meters of waste- water is treated according quality regulations; • 0.70 million cubic meters of waste- water is partially clean according to the quality regulations (untreated); • 12.90 million cubic meters of waste- water is undertreated; • 0.47 million cubic meters of waste- water is pollutant (untreated).

12,9 – insufficiently 0,7 – clean according to the treated wastewater quality regulations

4,31 – wastewater treated 0,47 – without treatment according to the quality regulations

_83 Russian Railways Social Report 2010

In 2010 the railways discharged 17.0 Oktyabrsk, Sverdlovsk, Far Eastern and million cubic meters of of wastewater by the administrations: TsTR, TsDRV to surface water. Including: and DZhV. • 4.12 million cubic meters of waste- Untreated wastewater is not dis- water is treated according to the charged to surface water by quality regulations; Kaliningrad, Moscow, Gorki, Northern, • 0.70 million cubic meters of waste- North-Caucasian, South-Eastern, water is clean according to the qual- Volga, Kuibyshev, South Ural, West ity regulations (untreated); Siberian, Krasnoyarsk, East Siberian, Environmental Performance Environmental • 11.77 million cubic meters of waste- Transbaikal railways and TsDRP. water is undertreated; Two branches of Russian Railways in- • 0.41 million cubic meters of waste- creased wastewater discharge to surface water is undertreated. water by 328.6 thousand cubic meters Wastewater discharge by the admin- total. These are (317.5 istrations to surface water increased thousand cubic meters) and DZhV (11.1 in comparison with 2009 and totaled thousand cubic meters). The larger part 7.5% of all all wastewater discharged of wastewater is accounted for by the by Russian Railways. In 2010 1.38 mil- following railways: falls on the railways: lion cubic meters of wastewater was South Ural (24.99%), Sverdlovsk (10.68%), discharged to surface water. Including: Far Eastern (9.75%), East Siberian • 192.4 thousand cubic meters of (9.47%), Transbaikal (8.09%), Moscow wastewater is treated according to (8.05%), Northern (6.63%) and the ad- the quality regulations; ministrations: TsTR (7.49%), TsDRV (1.2%). • 1135.0 thousand cubic meters of On the railway the majority of waste- wastewater is undertreated; water is discharges to surface water by • 56.03 thousand cubic meters of 4 railway enterprises: Heat and Water wastewater is untreated. Supply Directorate, Public Works, oth- Untreated wastewater is discharged ers and Track Enterprises, which dis- to surface water by three railways: charges 98.0% of the total wastewater.

Percentage of wastewater discharged to surface water in 2010 by railroad enterprises, %

Figure 20 70,6% – Heat and Water Supply Directorate

15,3% – Public works

9,2% – others

2,9% – Track Enterprises

0,8% – Freight Car Enterprises

0,6% – Locomotive Enterprises

0,4% – Railway Car Enterprises

0,1% – Electrical Enterprises

0,1% – Passenger Enterprises

84_ Russian Railways Social Report 2010

Structure of waste water discharge to surface water by branches of Russian Railways in 2010, thousands m3

Figure 21 Environmental Performance Environmental

12 901,38 – insufficiently 701,18 – clean according to the treated wastewater quality regulations

4 309,23 – wastewater 467,13 – without treated according to the treatment quality regulations

Evolution of wastewater discharge in the ratio of freight turnover to passenger turnover in Russian Railways

Figure 22

37,9

33,2 2 090,30 2 116,20 1 950,80 2 011,31 1 865,30 1 801,60 1 858,10 1 668,90

23,6

18,7 16,9 16,0 13,9 13,4

157,6 164,3 172,2 177,6 174,1 175,9 153,6 139,0

2003 2004 2005 2006 2007 2008 2009 2010

freight turnover, billions of pricing ton-km passenger turnover, billions passenger-km air emissions, thousands m3

_85 Russian Railways Social Report 2010

5.2.5. Production and Consumer Waste Management

Percentage of industrial and consumer waste generation by In 2010 Russian Railways braches gen- railroad enterprises, % erated 1.96 million tons of production

Environmental Performance Environmental and consumer waste, which is 237.0 Figure 23 46,70% – Track Enterprises thousand tons or 10.5% less in com- parison with the same period in 2009. 18,62% – Public Works The railway divisions generated total 9,19% – Railway Car Enterprises 809,97 thousand tons of production and consumer waste in 2010. 7,72% – others In 2010 the largest volume of waste 7,44% – Passenger Enterprises was generated by the following ser- vices: track, public works and carriage, 4,63% –Locomotive Enterprises which generated 74.5% of total waste 3,08% – Heat and Water Supply volume. of the total volume. Figure 23 Directorate the share of production and consumer waste generated by Railway Services. 1,39% – Electrical Enterprises

1,23% – Freight Car Enterprises

The largest volume of generated waste generation according to haz- waste belongs to 5th class (virtually ard classes. non-hazardous). Table 1 presents

Table 1

Parameters Total 1st class 2nd class 3rd class 4th class 5th class

Volume of generated 1964,4 0,13 1,52 291,99 309,22 1361,53 waste, thousand tons

Volume of generated 100 0,01 0,08 14,86 15,74 69,31 waste, %

86_ Russian Railways Social Report 2010

In 2010 Russian Railways salvaged and consumer waste according to the 559.98 thousand tons of production hazard classes:

Table 2

Parameters Total 1st class 2nd class 3rd class 4th class 5th class Environmental Performance Environmental Volume of salvaged waste, 559,98 0 0,175 107,42 65,25 387,14 thousand tons

Volume of salvaged 100 0 0,031 19,18 11,65 69,13 waste, %

In 2010 Russian Railways neutralized and consumer waste according to the 17.41 thousand tons of production hazard classes:

Table 3

Parameters Total 1st class 2nd class 3rd class 4th class 5th class

Volume of neutralized 17,41 0 0,54 6,24 8,55 2,08 waste, thousand tons

Volume of neutralized 100 0 3,1 35,9 49,1 11,9 waste, %

In 2010 the railway divisions salvaged railway services: track, public works, and neutralized 267.03 thousand tons carriage, locomotive and the heat and of production and consumer waste. water supply administrations, which The largest waste volume was sal- salvaged and neutralized 86.39% of vaged and neutralized by the following waste. 89.39%.

_87 Russian Railways Social Report 2010

Percentage of waste utilization and neutralization by railroad enterprises, %

Figure 24 53,7% – Track Enterprises

18,5% – Public Works

8,7% – Heat and Water Supply Directorate Environmental Performance Environmental 4,3% – Railway Car Enterprises

4,2% – Locomotive Enterprises

3,9% – others

3,4% – Passenger Enterprises

2,3% – Freight Car Enterprises

1,0% – Electrical Enterprises

The larger volume of waste (total subject to a special waste treatment. 1361.55k tons) was salvaged and neu- The waste within 3rd class of hazard tralized within 5th category of hazard. is the main concern, and a subject to This waste includes 733.77 thousand special waste disposal and treatment tons (53.89%) of scrap metal, 310.288 technologies. thousand tons (22.79%) of building Soils were neutralized with biological detritus that lost its useful qualities, drugs, biosorbents and biodestructors. 45.19 thousand tons (3.3%) of wood Wastes within class 3rd and 4th classes waste, 55.134 thousand tons (4.0%) of of hazard oil products are subjects to burnt coal ashes and 25.543 thousand thermal treatment units, i.e. “Fakel”, tons (1.9%) of reinforced concrete “Forsazh”, “Ecochuto”, oil and bio- waste. logical waste neutralization unit at All waste within 1st and 2nd classes of Scientific-Production Environmental hazard (acutely hazardous and highly Center – Russian Railways branch, gas hazardous) is disposed by appropriate generator for disposal of used wooden off-site waste treatment plants. sleepers on South-Eastern railway, unit The waste within 3rd and 5th classes for environmentally sound disposal of of hazard (marginally hazardous used wooden sleepers and oil wastes and virtually non-hazardous) is not a on .

88_ Russian Railways Social Report 2010

Percentage structure of Hazard Class 3 waste in 2010

Figure 25 Environmental Performance Environmental

81,0% – wasted timber sleepers 1,5% – others 17,0% – oil contaminated waste 0,5% – oil contaminated soil

In 2010, 1360.01 thousand tons of salvage, neutralization, storage and production and consumer waste disposal including according to the were transferred to off-site plants for classes of hazard:

Table 4

Parameters Total 1st class 2nd class 3rd class 4th class 5th class

Volume of transferred 1360,01 0,14 0,83 184,06 234,22 940,77 waste, thousand tons

Volume of transferred 100 0,01 0,06 13,53 17,23 69,17 waste, %

_89 Russian Railways Social Report 2010

After neutralization, salvage and tons of hazardous waste remaining at transfer of production waste to the the facilities of Russian Railways as of off-site plants, there are still 94.84k the end of 2010:

Table 5

Parameters Total 1st class 2nd class 3rd class 4th class 5th class Environmental Performance Environmental Remaining waste as of the 94,84 0,032 0,039 59,88 4,75 30,14 end of year, thousand tons

Remaining waste as of the 100 0,03 0,04 63,14 5,01 31,78 end of year, %

Evolution of waste generation in the ratio of freight turnover and passenger turnover in Russian Railways

Figure 26

3,04 2090,3 2116,2 2,89 1950,8 2011,3 2,77 1865,3 1801,6 1858,1 2,7 1668,9 2,33 2,2 1,96 2,07

157,6 164,3 172,2 177,6 174,1 175,9 153,6 139,0

2003 2004 2005 2006 2007 2008 2009 2010

Freight turnover, billion tariff ton-km Passenger turnover, billion tariff ton-km Formation of wastes, million tons

Pollution abatement from previous from washing and steaming station in years the 50’s of previous century. By now In 2010 the most prominent pollution the volume of reclamated oily soil abatement from previous years were: totaled 44.7 thousand cubic, including 1. Land reclamation in Koptevski pit 6.0 thousand tons in 2010. In 2011 it in Novospassky region, Ulyanovskaya is planned to remediate 6.0 thousand Oblast (Kuibyshev railway). The former cubic meters of contaminated soil. The sand pit was polluted with oil waste reclamation works will be completed in

90_ Russian Railways Social Report 2010

2012. The soil is being decontaminated The land had been used as a platform is being biologically decontaminated for experimental research in deactiva- on the temporary stations around the tion technologies of the rolling-stock, pit. The pit reclamation project was which was polluted after Chernobyl awarded a diploma for Best Ecological nuclear accident. The project was Project by Ministry of Natural completed under the government Resources and Ecology in 2008, Russia. authorities. 2. Gorki railway reclamated and The project’s results included the fol- removed radioactive waste from the lowing: 750 square meters of the terri- Performance Environmental territory of the former experimen- tory and 35 cubic meters of radioactive tal training facility of All-Russian waste were deactivated, 25 cubic me- Railway Research Institute located in ters of radioactive waste were recov- Gorokhovetski region, Vladimirskaya ered and 270 cubic meters of soil were Oblast. reclamated. The project’s cost was 25.4 Since 1986 to 1989 the land had been million rubles. The project was ap- contaminating with radioactive waste. proved by environmental authorities.

5.2.6. Environmental Control Costs

Environmental payments branches) for environment contamina- Environmental payments charged from tion made 63.26 million rubles includ- Russian Railways for environment con- ing 46.14 million rubles for tolerable tamination in 2010 made 228.9 million contamination and 17.12 million rubles rubles which are 32.15 million rubles for excess contamination. less than in 2009. In 2010 share of excess payments of Current environmental control Russian Railways in whole was 50.06 costs million rubles or 21.9% of the sum of In 2010 current environmental control payments (228.9 million rubles). Excess costs of Russian Railways made 2 payments declined by 3.91 million ru- 338.14 million rubles including 1488.7 bles in 2010 as compared to 2009. million rubles for protection of water Wastes incur the largest payment both resources, 1041.3 million rubles of for tolerable and excess environment which were paid to other organizations contamination. for effluents collection and treatment; In 2010 environmental payments of 145.1 million rubles for air protection; the railways for environment con- 665.5 million rubles for production tamination made 165.7 million rubles waste protection, 551.3 million rubles including 32.9 million rubles for excess of which were paid to other organiza- environment contamination. tions for waste reception, storage and In 2010 environmental payments of destruction; 38.8 million rubles for the administrations (Russian Railways reclamation of lands.

_91 Russian Railways Social Report 2010

Distribution of current expenses in 2010, %

Figure 27

63,7% – for water resources conservation

28,5% – for disposal of production and consumer waste Environmental Performance Environmental 6,2% – for air conservation

1,7% – for land reclamation

5.2.7. Implementation of Investment Project “Ecological Safety”

In 2010 the Company executed • 11 nature conservation facili- Ecological Strategy Implementation ties were built, reconstructed and Program of Russian Railways based commissioned; on investment projects: “Ecological • 15 sets of environmental protection Safety”, “Introduction of Resource equipment were bought to purify Saving Technologies into Railway hazardous air emissions, polish ef- Transport” as well as investment fluents and neutralize production projects of the departments, railways, waste. administrations and subsidiaries of According to the project data, commis- Russian Railways. Investments in con- sioning of the specified facilities will struction and reconstruction of nature allow to refine 3.6 million cubic meters conservation facilities made 1.4 billion of wastewater discharged to surface rubles, current expenses for ecological water and public sewerage systems measures made over 500 million rubles. and to decrease waste production vol- In 2010 within the framework of in- ume by 0.8 million tons in 2010. vestment project “Ecological Safety”:

92_ Russian Railways Social Report 2010

5.2.8. Technical Retooling of Russian Railways to Ensure Environment Protection

Technical retooling of Russian Railways with eco-friendly reinforced concrete related to infrastructure upgrade, sleepers. In 2010 a 3.05 th. km long traction and rolling stock replacement track having wooden sleepers was reduces technological environmental replaced with that having reinforced impact. concrete sleepers. During overhaul outdated engines of In the Federal Passenger diesel locomotives are replaced with Administration passenger rolling- modern, more eco-friendly engines of stock was equipped with eco-friendly home manufacture which increase fuel enclosed-type toilets with holding Performance Environmental efficiency of the overhauled locomo- tanks (EFT) which prevent bacterial tives by 15%, enhance ecological pollution of the roadway and adjacent indices by 30%. territories with faecal microflora. 516 124 old diesel engines were replaced carriages with EFT were commissioned with new ones in 2010. During track in 2010. overhaul wooden sleepers are replaced

5.2.9. Noise Control Measures

In 2010 noise control measures were stations and other facilities found carried out: themselves in a dwellings zone being • rail grinding work was performed not enough spaced from them. Local along 14586 km; authorities allocated such dwellings ar- • anchoring rail fastenings were used eas without securing approval of USSR along 954 km; Ministry of Railway Communication. • a 3153 km long continuous welded As a result, acoustic climate within the rail track was made. settlements began worsening. Measures were taken to install noise In 2010 there was elaborated and barriers probably would make more approved Russian Railways industry sense. If necessary, this installation is standard 1.07.007-2010 “Acoustic carried out during new construction Barriers for Railway Transport. or reconstruction of railway infrastruc- Acceptance, Commissioning and ture facilities. A 4.22 m tall and 453 m Life-Cycle Service Rules”. Work was long noise screen was installed during performed to elaborate 3 national reconstruction of Solonchak-Verkhni standards of the Russian Federation: Baskunchak section of Volga railway. • GOST R “Noise. Calculation Methods At the present moment there are noise for Ambient, Railway Radiated Noise barriers on Oktyabrsk and Kuibyshev Levels”; railways. • GOST R “Acoustic Barriers for Railway Issues of railway noise impact on hous- Transport. Specifications”; ing estates came out in conjunction • GOST R “Acoustic Barriers for Railway with intensive housing construction in Transport. Specifications Monitoring the 60-80’s. At that time many railway Procedures”.

_93 Russian Railways Social Report 2010

5.2.10. Measures within Environmentally Protected Natural Areas

In 2010 the following nature-conserv- the amount of 24.8 million rubles; ative measures were taken nearby • bank protection structures of mined railway tracks: rock in the volume of 7.6 thousand 1. Within 3 facilities of East Siberian cubic meters and to the amount of railway along the coastline of Lake 8.6 million rubles. Baikal: 2. A high-side revetment wall 1477 • bank protection overhaul within running meters in length, enclosing Pereemnaya-Mishikha span in the grilles 1470 square meters in area, Environmental Performance Environmental volume of 8.8 thousand cubic meters concrete flumes 305 running meters and to the amount of 11.1 million in length were erected along the rubles; coastline of Black Sea nearby the • bank protection overhaul within railway tracks of -Adler section Baikalsk-Murino span in the volume of North-Caucasian railway. The costs of 22.0 thousand cubic meters and to were equal to 170 million rubles.

5.2.11. Ecological Audit

In 2010 Russian Railways underwent an most part of them related to obtaining ecological audit to evaluate conform- permits for air pollutant emissions (34). ance of its environmental activity to Protection and utilization of water requirements of the environmental resources drew 27 rebukes. Generally, protection legislation of the Russian these are issues of adherence to en- Federation and environmental vironmental requirements associated management system of international with discharge of surface effluents standard GOST R ISO 14001 and to be from a catchment basin and elabora- subsequently certified. tion of regulatory documents. The ecological audit was conducted Production and consumer waste in 169 divisions (facilities) of Russian management and land protec- Railways braches including within tion drew 312 rebukes. Most recom- 37 facilities of , 10 mendations relate to the issues of: facilities of Gorki railway, 36 facilities of waste management staff training South-Eastern railway as well as within (73), elaboration and coordination of the facilities: TsDRP (15), TsDRV (24), Draft Waste Generation Standards and TsTR (18), TsT (19), DZhV (10). The audit Waste Disposal Limits (48), obtaining identified 3021 environmental protec- waste disposal limits (27), equipment tion violations in all including 2187 en- of waste accumulation areas. vironmental management violations. Industrial environmental monitor- Air protection drew 103 rebukes. The ing drew 240 rebukes. Generally, these

94_ Russian Railways Social Report 2010

are issues of industrial environmental an onboard analytical equipment monitoring organization, environmen- system and by 55 vehicle-mounted tal monitoring staff appointment and laboratories; training. • from mobile sources (diesel loco- The rebukes of every facility were im- motives) – by 89 ecological control puted to the divisions of the branches. stations. All diesel locomotives with Auditors gave recommendations as to repaired engines underwent manda- all rebukes. tory testing of ecological indices at the specified stations. 6488 diesel Performance Environmental Automated control system (ACS) locomotive units were tested during “Ecology” the year. Hazardous vehicle emis- In 2010 6 railways of Russian Railways sions were controlled at ecological (Gorki, North-Caucasian, Kuibyshev, control stations located at the central Volga, South-Eastern) implemented motor depots. a nature conservation control system Russian Railways attends to develop- ACS “Ecology”. In 2011 the system is ing material and technical basis of the planned to be implemented within the environmental laboratories. In 2010 whole railway network. All environ- Transbaikal railway arranged a mobile mental activity is planned to be carried environmental laboratory equipped out using ACS “Ecology” starting from with analytical instrumentation and 2012. labware within the framework of investment project “Ecological Safety”. Industrial environmental The mobile laboratory of Kuibyshev monitoring railway was renovated. An important driver of ecological station of South Ural railway commis- safety and observation of the envi- sioned modular laboratory facilities ronmental protection legislation as to for water, air, soil monitoring; noise, industrial environmental monitoring vibration, electromagnetic radiation organization is availability of industrial measurement; water and waste toxic- environmental laboratories within the ity assessment. railway network. One of the main tasks of such laboratories is to inform the railway divisions about actual impact of their economic activity on the environ- ment in order to take timely preventive measures to mitigate development pressure on the environment. In 2010 there was held industrial environmental monitoring of air and water pollutant emissions and soil contamination: • from stationary facilities – by 56 environmental laboratories as well as by 9 mobile laboratories with

_95 Russian Railways Social Report 2010

5.2.12. Activity of Environmental Divisions of the Railways

During 2010 the environmental 101.9 million rubles were saved due laboratories of the railways performed to protection of enterprises’ interests around 273.3 thousand air, waste wa- when settling environmental protec- ter, soil analyses, 28.7 thousand vehicle tion controversies. emissions analyses and 45.9 thousand Measurement of environmental pol- other analyses, made an inventory of lution emissions using instrumental 37.9 thousand sources of hazardous methods and correction of environ- environmental emissions, elaborated mental payments claimed by territorial Environmental Performance Environmental 1273 volumes of regulatory ecological authorities of Rostechnadzor allowed documents, prolonged 2423 environ- to reduce claimed payments by 21.0 mental pollution and waste disposal million rubles. permits of environmental authorities. Economic benefit from introduction of Elaboration of mandatory regulatory environmental protection technologies documents for the railway divisions, into industry enterprises was equal to obtaining environmental pollution 76.2 million rubles. and waste disposal permits, industrial Road maintenance costs were cut environmental monitoring allowed not down by 521.8 million rubles. to engage outside organizations to perform the specified work and to save up to 321.9 million rubles.

96_ Russian Railways Social Report 2010 Environmental Performance Environmental

_97 Russian Railways’ Management System Pursuit of a Single HR Potential Industrial Policy Concerning in Terms of Corporate Policy Development Competition Staff Interaction Staff Interaction Concerning Staff Interaction and Management in Russian Railways in Year 2010

Key Risks and A Strategy and Russian Railways’ Russian Railways Corporate Social Collective Contract Capacities in Terms Programs for Staff Personnel Holding’s Competency Policy Relations and of Staff Interaction Interaction Characteristic Models Interaction with Trade Unions 06

Corporate Social On Implementation Russian Railways’ Culture and Sport Corporate Pension Remuneration of Public Health Responsibility of the Russian Youth Policy Program Labor and Staff Protection Railways’ Residential Motivation Program

Labor Protection and Assessment of Risks Industrial Injuries Planning of Labor Financing of Labor Operating Safety Protection measures Protection Measures

Evaluation of Workplaces Staff Interaction

Personal Protection Awareness and Equipment Competence of Employees Regarding the Labor Protection Russian Railways Social Report 2010

6.1 Russian Railways’ policy concerning Staff Interaction

Following the guidelines of socially of policy targets in terms of interaction responsible business dealing, Russian with the Russian Railways’ personnel is Railways is carrying out a social policy carried out following several key guide- aimed at effective interaction with per- lines (see Figure 6.1): sonnel. The company regards employ- • Advertising and professional staff ees as the main resource determining selection; economic results of operation of Russian • Industrial regulation; Railways as well as competitiveness • Personal labor remuneration and Interaction with personnel with Interaction and market value of the Company. Due motivation; to this, professional staffing in all the • Social support of employees; branches of activity of Russian Railways • Development (training, continuing and motivation of employees towards education and skill upgrading) of productive and effective labor pose Russian Railways employees; as first and foremost targets of the • Labor protection and professional Company’s social policy. Implementation safety.

6.2 Management System in Terms of Staff Interaction 6.2.1 Key Risks and Capacities in Terms of Staff Interaction

Successful implementation of the and strategic approaches to social Company’s policy of interaction development. with personnel depends both on the Human resources’ management and Company’s available potential and the Company’s labor resources’ quality capacities and on acting and po- increase as well as their corporate social tential risks associated with impact support are carried out on the basis of the of the external and internal busi- Functional strategy of human resources’ ness environment. Russian Railways development. Besides, the Company has capacities in terms of interaction with designed and is carrying out a number of personnel are determined, on the programs on individual fields of social de- one hand, by combination of long- velopment. Russian Railways is applying terms experience of implementa- considerable effort to social partnership tion of social programs, substantial development as well as development of material and technical facilities in cooperation with trade union organiza- the field, and, on the other hand, tions representing the interests of the – by introduction of new methods Company’s employees.

_99 Russian Railways Social Report 2010

Fig 6-1. Major policy for Staff Interaction in Russian Railways

Main lines of social policy of Russian Social Policy Goals of Russian Railways Railways

Organization of active search and Interaction with personnel with Interaction recruitment of potential employees

Recruitment and occupational- Training of Executive Staff reserve qualification selection of personnel Creation of conditions for professional and career growth of Development of interraction with Young personnel Professionals

Education, training, conversion training and advanced training of personnel

Improvement of Increase Increase of salary and motivation of salary and motivation

Social support of employees

Health safety and environment operations Evaluation of work safety

Medical health

Social welfare and life quality Sanatorium-resort and pharmacological improvement for the Company’s support for the Company’s employees, their employees and their families families and employees on retirement

Improvement of regulatory and legal Support and develepoment of sports, framework related to employees’ issues culture, entertainment etc.

The Company’s planned and imple- • possible decrease of effectiveness of mented social policy activities are the current activity due to increase aimed at not just implementation of of personnel turnover, temporary available capacities but also at effec- incapacitation, decrease of motiva- tive management of the Company’s tion for high-capacity labor; existing and potential risks in the field • with threats to the Company’s of interaction with personnel. Negative strategic development due to lack of impact of such risks is associated with skilled human resources for im- the following factors: plementation of new projects and

100_ Russian Railways Social Report 2010

branches of activity envisaged in the • risks of injury, employees’ profes- Strategy of development of railway sional diseases determined by transport up until year 2030. poorly organized and protected The Company points out the following workplace labor; strategic risks types of risk in the field of interaction (risks of HR shortage) determined with personnel (see Figure 6-2): by unfavorable demographic situ- • operational risks; HR risks (personnel ation in the country, shortage of turnover risks, losses of skilled and high-quality human resources and Interaction with personnel with Interaction prospective personnel), determined enhanced disproportion in the by insufficiently effective person- population structure, by widening nel management and irrational of the gap between the sizes of employee motivation system as well labor remuneration in the railway as nonconformity of labor remu- transport sector and other branches neration level with labor costs and of economy. conditions;

Figure 6-2. Types of risks related to personnel relations

Environmental Factors Operational Risks Internal Corporate Environment

Degradation of Social-Demographic Personnel risks (risks of employee Need for specialists able to accelerate Figures (reduction of the country’s turnover, loss of qualified/skilled and introduction off new equipment population, including productive age prospective employees) and technologies, improve labor cohort, especially in and Far East quality, improve economy and finance regions) management efficiency Risks of injury and occupational diseases in employees Growth rates of actual earnings in Aggravating of competition in Russian Railways are restricted with transportation services market in available labor productivity, while in the background of development of other industrial sectors (and on the whole producing industries and backbone in the national economy) economically industrial sectors of the national grounded relation between labor economy productivity dynamics and actual earnings is not complied with, thus leading to Lowered prestige of some occupations Strategic risks worse positions in the labor market in railway sector because of low rating of earnings, operational work and work in shifts, high level of requirements, Some enterprises utilize a sufficient part responsibility and work stress as Labor resource deficiency risks of low-qualified heavy manual labor compared to other industries

Cases of process deviations and Growing competition in labor resource violations of labor discipline, road traffic markets between employers and requirements, professional ethics and growing requirements to personnel corporate culture quality

Further improvement of career Governmental regulation of railroad development planning and personnel tariffs loyalty are required

_101 Russian Railways Social Report 2010

Measures taken by the Company to with management of internal business mitigate risks are mainly associated environment factors (see Table 6-1).

Table 6-1 Key risks and opportunities in personnel relations Description of risk Activity lines Evaluation of activity lines Interaction with personnel with Interaction Development, training, conversion training, advanced • Implementation of training of employees Functional Development Labor motivation and payment Strategy Social support of employees, their families and • Improvement of labor veterans Personnel risks payment and motivation Housing program system Organization of Employees’ recreation • Improvement of welfare and Employees’ health care life quality in the Company’s Youth policy employees and their families Collective agreement and relations with trade unions

Industrial injuries Implementation of Work condition and safety Risks of Employees’ injury Provision of work safety and improvement program and occupational diseases accident prevention Certification of working places Ensuring employees’ awareness and competency in work safety

The risks and opportunities connected taken into consideration in the frame- with the factors of external environ- work of development and implementa- ment are less susceptible to corporate tion of the strategy of staff potential management, but nevertheless they are development.

6.2.2 A Strategy and Programs ifor Staff Interaction

The tasks and main branches of the the aim of which is to provide for the Company’s activities in the field of need of Russian Railways for skilled interaction with personnel are defined personnel and effective mid-term HR in “The Functional Strategy of Russian potential development (see Figure 6-3 Railways’ HR Potential Development” of the original). (approved on 10 May, 2006, No 933p)

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Figure 6-3. Strategic tasks in development of personnel potential of Russian Railways

Strategic tasks in development of personnel Approaches to solution of strategic tasks in development of personnel potential of Russian Railways potential of JSCo. “RZD”

Analysis of situation in the regional labor market

Setting up an effective system of collaboration with participants in the

Supply of human resources personnel with Interaction regional labor market

Occupational and qualification tests

Application of economical mechanisms: labor payment, motivation and labor productivity Effective use of human resources Organization of an internal labor market with active use of horizontal and vertical personnel rotation

Formation of career planning mechanisms

Personnel development; training, conversion Improvement of work with personnel reserve and young specialists training and advanced training of employees Shaping uniform corporate culture and values

Development of multiple-level compensation packages (for workers, specialists and managers, including with reliance on individual wishes of an employee) Improvement of labor motivation and payment Formation of motivation mechanisms for securing of highly skilled personnel

Development of social infrastructure in health, cultural entertainment Social support of employees and their families, and sports and retired employees in non-production environment Improvement of housing conditions for employees and their families

Ensuring effective youth personnel policy and Higher attention towards youth as a strategic resource and future of the organization of target programs Company

Utilization of social partnership agreements Formation of stable corporate mechanism of agreement between aimed to develop personnel potential interests of the Company and employees

Adaptation of personnel to new corporate Development of relations which shape high occupational and character environment values in employees

Within the framework of implemen- and I carrying out a number of pro- tation of HR potential development grams aimed at fulfillment of the basic strategy, the Company has developed tasks of the Strategy.

_103 Russian Railways Social Report 2010

6.3 Pursuit of a Single Corporate Policy concerning Staff Interaction and Management in Russian Railways in Year 2010

The Company’s single HR policy is • Enhancement of the personnel activ- pursued in compliance with Russian ity effectiveness due to improvement Railways’ HR potential development of the motivation and labor results strategy for a period of up until year estimation system; 2015 (hereinafter referred to as Strategy) • Achievement of the scheduled labor and is aimed at enhancing the efficiency productivity growth rating as com- of activity and involvement of personnel patible with financial and economic in implementation of corporate tasks. performance indicators; Interaction with personnel with Interaction The Strategy allows for mid-term and • A unified corporate personnel rota- long-term prospects of reforming the tion and use system based on HR Russian Railways into a holding, deter- reserve and vacancies’ base; mines target parameters in the sphere of • Use of state-of-the-art information the Company’s human resources’ man- and management technologies in agement and also includes an outline the HR management sphere. plan of activities in terms of implemen- Target status achievement will con- tation thereof up until year 2015. tribute to establishment of the JSCo The Strategy implementation envis- “RZD”’s role as one of the major ages achievement of Russian Railways’ Russian employers as well as to the target status in the sphere of human employees’ social welfare growth resources’ management with the fol- and their life quality improvement. lowing qualitative features: Thus, provision will be made for the • High competitive performance of the Holding’s contribution to solution of Russian Railways holding as employ- long-term tasks of social and economic ee at the labor market; development of Russia. • Compliance of competences of With a view to achieve the main target medium-level and top-level manag- of the Strategy, 7 functional tasks have ers with the corporate requirements, been pointed out in each of which sev- their mastering the organization eral ways of implementation thereof management technologies aimed at have been defined. the Holding’s development strategy The human resources’ management implementation; unit has organized purposeful work • Developed system of continuous aimed at implementation of these training of the Holding’s employ- tasks, and the 2010 work results’ ees based on planning of indi- analysis confirms that the Strategy vidual development and knowledge implementation activities’ schedule has monitoring; been fulfilled.

6.3.1 Russian Railways’ Personnel Characteristic

The Russian Railways’ staff list head- its obligations in terms of admission of count as of year 2010 amounts to 976 students who graduated from higher 116 employees. Work is continuing in education institutions and colleges by the Company on transfer of employees limit-purpose recruitment and people due to re-organization and reforma- just out of their military service – tion. The Company has complied with 12.9 thousand people. Proportion

104_ Russian Railways Social Report 2010

of personnel categories in the total 097 people (30.8%). Women hold 51.6% headcount is distributed as follows: of the total number of positions of the workers amount to 68.6% (670 088 Company’s chief executives and special- people), managers – 6.9% (67 417 ists; their total head count occupying the people), specialists – 20.8% (202964 positions of these categories amounts to people), office workers – 3.7% (35 139 809. 647 people). In year 2010, the Russian For purposes of reinforcement of man- Railways’ personnel’s educational level agement of subsidiaries and structural has increased: subdivisions by the Russian Railways’ • Number employees with higher nomenclature 424 managers have been education amounts to 20.9% of the appointed. 3.5 thousand people have total headcount (1.9% increment to been appointed by orders of heads of the beginning of the year); functional subsidiaries and structural • Number of employees with a techni- subdivisions of Russian Railways. On the

cal secondary education amounts whole, in year 2010, personnel turnover personnel with Interaction to 25.5% (0.6% increment to the in the Company has decreased by 0.6% as beginning of the year); compared with the similar period of the On the whole, in year 2010, in the last year to amount to 9.0%. Company no personnel shortage in Decrease of turnover percentage in terms of basic blue-collar occupations comparison with the similar period of has been detected. The staffing level the last year is being observed in all the has amounted to 98.25 (as compared main facilities and leading professions: to 97.9% in year 2009). The Company’s car inspectors – by 1.3%, cargo and young employees’ percentage in an age baggage acceptance/delivery agents – under 30 in a year has increased by 4% by 1.1%, railway diesel engine opera- to amount to 26.9%. The average age of tors – by 1.1%, railway electric engine the Company’s employees is 39.7%. The operators – by 0.7%, overhead system share of women employees in the total electricians – by 0.7%, signals and employees’ headcount amounts to 301 interlocking electricians – by 0.5%.

Percentage of various staff categories in overall Age of the Company’s employees headcount

68,6% – workers 6,9% – managers 26,92% – under 30 20,81% – over 50

20,8% – specialists 3,7% – clerks 24,60% – 36-35 14,35% – 46-50

13,32% – 31-35

_105 Russian Railways Social Report 2010

6.3.2 HR Potential Development

In the modern context, work on HR and “excellent” academic excellence development becomes increasingly grades as well low-income and socially important. The major way to imple- vulnerable students. ment this task is to increase training Beginning from year 2005, the effectiveness by focusing on corpo- Company annually allocates money to rate priorities of skills improvement, higher education institutions and col- individualization of needs for training. leges of railway transport for student For purposes of provision with skilled Spartakiada. 30.4 million rubles have Interaction with personnel with Interaction personnel, in year 2010, over 54 thou- been allocated for these purposes in sand workers have taken professional year 2010. training and 132.7 thousand of work- Work is continuing to train new forma- ers as well as over 72 thousand senior tion managers to make them acquire managers and specialists have taken new forms of management of struc- skills improvement. tural subdivisions in compliance with A great focus has been made on train- global experience, to send prospective ing specialists in higher education insti- managers for career development to tutions and colleges. Subsidiaries and foreign and domestic business schools affiliates of Russian Railways have sent, using MBA programs. In year 2010, on for a full-time course of study, 3741 the basis of this program, domestic people to higher education institutions business schools (Russian Academy of of railway transport, 3695 people to National Economy and Public Service, colleges – which meets the Company’s The Financial University, the Russian needs for specialists. All-in-all, full- Plekhanov’s Economic Academy, time study in terms of target training Moscow State University of Railway in higher education institutions is Engineering) has provided career provided for 17.2 thousand people, in development for 124 people and is still colleges – 13.1 thousand people. providing it for 286 people. Prestigious In year 2010, in subsidiaries and business schools (England, Spain, Hong other structural subdivisions of Russian Cong and others) by 5 senior manag- Railways, 12.1 thousand students of ers, 8 senior managers are still being higher education institutions have trained and still 17 of them are prepar- taken practice, including those at paid ing for admission. Besides, with a view working positions – 5.1 thousand peo- to study the advanced experience of ple, and 8.8 thousand college students, leading global companies, in 2010, 235 including those at paid working posi- senior managers have passed practi- tions – 2.8 thousand people. cal training abroad (Germany, Spain, Students and post-graduates of insti- Japan, the USA, Great Britain and tutions of railway transport have been China). granted 200 personal scholarships of Over 500 senior managers have been Russian Railways amounting to 15 – trained in project management, invest- 4.5 thousand rubles per month; 500 ment management quality manage- grants of Russian Railways for develop- ment and lean production. Since year ment of diploma projects amounting 2007, the Company is implementing to 35 thousand rubles students of a program of foreign language skills higher education institutions and 25 enhancement for employees engaged thousand rubles for college students; in international activities. For the time fringe benefits have been set in an being, over 200 of the Company’s amount of 1 – 2 thousand rubles per employees are taking training courses month to state scholarship of target- in the English, German and French oriented students receiving “good” languages – both full-time and remote.

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Two groups of young prospective man- people, 1390 of them are employees agers have completed training courses of the Russian Railways and 183 of in Germany: 29 of them – following them are employees of subsidiaries and the “International Links Management” affiliates of Russian Railways. 1507 of program; 19 of them – following the the Company’s senior managers have program of “Organization of Work been assessed in terms of the assess- with Foreign Partners According to ment center technology based on the International Standards”. The practical corporate competencies model. 61 Interaction with personnel with Interaction training was held in English by leading senior managers of the vice-presidents’ specialists in International Law. On the groups and relevant reserve groups 1st of July, 2010, the Russian Railways’ have been assessed in terms of personal corporate university has started its and business capacities using a technol- work; its major task is implementa- ogy of profound interview with a coach. tion of the Concept of establishing a According to the assessment results, the system of extra corporate education for SHro group (high-potential employees) the Russian Railways’ senior manage- has been entered by 389 people (26% ment. The number of participants of of the total number of assessed manag- the training programs, by the results ers) for whom individual development of year 2010, has amounted to 1573 plans for year 2011 have been made up.

6.3.3 Russian Railways Holding’s Competency Models

In year 2010, corporate competencies The basis of corporate competencies is have been developed and approved the model that includes competency, the purpose of which is to translate client focus, corporativity and respon- to employees the Company’s require- sibility, quality and safety, creativity ments to behavior and actions of and innovation + leadership. They are personnel striving to be successful, differentiated for each category of that is, to set development guideposts. personnel.

Brand values 4C+Q+L Competence Model

Competency Skill Client focus

Corporate Spirit and Responsibility Integrity Quality and safety

Creativity and Innovation Renewal Leadership

_107 Russian Railways Social Report 2010

The purposes of introduction of corpo- technologies of preparation of plans of rate competencies in the Company: individual development of succession • to focus the activity of all the candidates, performance of monitor- Company’s employees on imple- ing of social tension in groups in the mentation of the Russian Railways region, as well as implementation Holding development strategy; of youth personnel policy, regional • To lay the foundation for system centers for assessment and monitor- work on personnel assessment and ing of personnel and youth policy have Interaction with personnel with Interaction development; been set up. Need for establishment • To contribute to introduction of the of regional centers of assessment and Company’s brand values to work of monitoring of personnel and youth the employees; policy is determined by tasks outlined • To contribute to formation of pur- in the Russian Railways HR potential pose-oriented management culture development strategy for a period of of the Company. up until year 2015. In year 2010, key purposes by each branch of activity of Regional Centers of Assessment, the centers have been laid down. Personnel Monitoring and Youth Policy For purposes of assessment of candi- dates to personnel reserve by unified

6.3.4 Industrial Competition

On a quarterly basis, the Company’s of the South Urals, East Siberian and management board sums up the West Siberian railways won the com- results of network competition among petition. 446 have been awarded the staffs of railways, other subsidiaries following honorable titles: and structural subdivisions and em- • “The best medium-level manager at ployees of Russian Railways. According the railway” – 110 people awarded; to the competition results, in year • “The best foreman of the rail- 2010, 699 staffs have been awarded. way transportation” – 86 people Among 27 staffs who have achieved awarded; the best results, as summarized over • “The best one in profession at the the year, the following staffs have been railways” – 250 people awarded; acknowledged as winners: the North • “The best group of a brigade” – and the North-West railways as well as (column, sector, shift) – 195 groups staffs of Solvychegodsk department awarded. of the North Railway, Petropavlovsk department of the South Urals railway Bonuses and Kuzbass department of the West In year 2010, all types of rewards have Siberian railway. In the first quarter of been granted to over 7745 employees year 2010, the staffs of the North and of the Company and people who, not Kuybyshevskaya railways, in the second being employee of the JSCo “RZD”, quarter – the staffs of East Siberian, have contributed to development of Oktyabrskaya and Gorkovskaya rail- the Company, including those awarded ways , in the third quarter – the staffs state awards: 97 employees; employees

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of the Russian Transport Ministry – generation with traditions and history 729 people; those awarded corporate of railway transport, raising the pres- awards of the Company – 6919 em- tige of non-state educational institu- ployees including 355 people who have tions of JSCo “RZD”, the following sub- been awarded the supreme award – a ject competitions were held in 2010: badge of “Honorable Railwayman of 1. For the best composition on railway the JSCo “RZD” “. transport. 18 students of educational institutions of Privolzhskaya, South Interaction with personnel with Interaction Work of State Educational Urals, South East, Kransoyarskaya and Institutions Kuybyshevskaya railways became prize JSCo “RZD” is the founder of 310 winners of the competition. non-state educational institutions 2. “The School of the Year of JSCo including 28 comprehensive schools, “RZD”” and “Kinder Garten of the 30 boarding schools and 252 preschool Year” were competitions where work educational institutions. The number of the institution of the whole was esti- of students and pupils of these institu- mated, and one of the most important tions is over 42.2 thousand people criteria of estimation of participants including 37.2 thousand (88.1%) of was effectiveness of the vocational the Company’s employees’ children. guidance performed. Boarding school 6 thousand educators are employed No 20 at the station of of the in the JSCo “RZD”’s non-state educa- and kinder garten tional institutions. The number of the No 198 at the station of Krasnoyarsk of 11th grade school leavers of the JSCo the Krasnoyarskaya railway became the “RZD”’s general education institutions prize winners of the 1st degree com- was 871 people including 65 school petitions. Close interaction has been leavers (7.5%) that obtained gold and established of the general education silver medals “For Special Academic institutions with institutes and colleges Excellence”. 10 students (1.1% of the of railway transport. Jointly with higher total headcount) failed in two man- education institutions, vocational datory exams and failed to obtain guidance and pre-institute preparation intermediate (full) general education centers have been established on the certificates (the number of students basis of 18 institutions. A continuous who have failed in the two mandatory education system has been set up fol- exams in Russia is 1.1%). In 2009 – 201 lowing the scheme of “kinder garten academic years 243 students of general – school – higher education institution education institutions of JSCo “RZD” – railway subdivision”. became winners and prize holders of A polygon of introduction of pre- international and all-Russian subject profile and profile training is broad- Olympiads and competitions; about ening. Currently profile training is 900 children won prizes in similar being implemented at boarding municipal and regional events. In schools of Oktyabrskaya, South East, year 2010, in non-state educational Privolzhskaya, Sverdlovskaya, South institutions of JSCo “RZD” work was Urals, West Siberian, East Siberian rail- carried out following the guidelines of ways. As a result of this activity, annu- activities: youth occupational guidance ally up to 50% of graduates of general to railway professions, organization of education institutions of JSCo “RZD”” field-specific studies for pupils in terms become students of institutes, universi- of pre-professional education and pro- ties and colleges of railway transport. fessional training if school students. For The strategic purpose of JSCo “RZD””’s purposes of familiarizing the younger policy in the sphere of education

_109 Russian Railways Social Report 2010

is bringing up competent, socially with talented children, improvement responsible, competitive and enterpris- of occupational guidance activities ing young people who will make up a among students and pupils, develop- potential HR reserve of JSCo “RZD”” ment of infrastructure of educational including that of filling the topmost institutions. positions in the Company’s manage- To solve these problems, a program ment. In order to implement this of actions aimed at implementation purpose, an JSCo “RZD”” pre-school of the pre-school and general educa- Interaction with personnel with Interaction and general education system develop- tion system development concept for a ment concept has been developed and period of 2010 – 2015 years with extra approved; its main tasks are education financial support of about 1 billion quality increase, extension of work rubles has been adopted.

6.4 Corporate Social Policy 6.4.1 Collective Contract Relations and Interaction with Trade Unions

The most important achievement of Company’s social responsibility to the the year 2010 is signing a Corporate test of the contract which has a high Contract of Russian Railways for a social resonance. Benefits, indemni- period of 2011–2013 years. The draft is ties and guarantees for employees elaborated on the basis of the Industrial have been preserved almost in full, Agreement as well as the structure and some allowances for non-working and principles of the Personnel Social pensioners gave also been envisaged. Support System Optimization Concept An important novelty in the section was considered and approved at the of “Employer’s Responsibility above meeting of the board of the Russian Legislation” is its structuring into 4 logic Railways” board on the 24th of groups determined in compliance with November, 2010. The contract was the personnel social support system: signed on the 29th of November, 2010 • Guarantees, indemnities and ben- in a solemn ceremony. It was registered efits associated with the production on the 30th of November, 2010, and and technological process; on the 1st of January, 2011, it was ac- • A corporate social package which is cepted for execution. aimed at creation of loyalty towards The new collective contract focuses the Company; mainly on attraction, development • Various kinds of material assistance retaining and motivation of employ- which are allocated to social protec- ees. A principle of responsibility of tion in case certain life situations employees for production results has ensue; been introduced. • Individual social package whose Especially noteworthy are two key main role is to attract, develop, mo- innovations – an opportunity to use a tivate and retain employees in the reimbursable social package as a moti- Company; vation tool in the hands of an employer The new version excludes paragraphs and adding a section dedicated to the directly repeating the RF Labor

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Code and the Company’s regulatory Considering health improvement in documents. In 2010, the Company has rest resorts, medical care and other complied with all its obligations stated social guarantees, expenses per one in the collective contract despite the employee totaled over 53 thousand ru- continuing financial crisis. bles and expenses per a non-working About 84 billion rubles, are expect- pensioner amounted to 8 thousand ed to have been allocated to this. rubles. Interaction with personnel with Interaction

6.4.2 Corporate Social Responsibility

The Corporate Social Report for year social report for year 2009 was pre- 2009 has been prepared. A commis- pared not only at the formal level but sion has been carried out (p. 922 of the also at the level of subsidiaries. In com- MOM of the final meeting of the board pliance with the decision of the final of Russian Railways for year 2009, as of meeting of the management board on the 23rd – 24th of December, 2009, No distribution of practice of preparation 50) of distribution of corporate social of corporate social accountability to responsibility practice. subsidiaries in year 2010, 15 subsidiar- To organize work on fulfillment of ies of Russian Railways have prepared the set task, a system-based network reports on corporate social responsibil- seminar was held with representa- ity – Kaliningradskaya, Oktyabrskaya, tives of railways and other subsidiaries Moskovskaya, Gorkovskaya, Severnaya, of Russian Railways on principles and Severo-Kavkazskaya, South East, approaches in the field of prepara- Privolzhskaya, Kuybyshevskaya, tion of corporate social accountability Sverdlovskaya, Krasnoyarskaya, East according to international standards Siberian, Zabaikalskaya and Far East (SC-1) and improvement of collective railways as well as the railway stations’ contract relations. The seminar was Directorate. held in a health complex called “Staraya A great breakthrough is including a Ruza” on the 17th and 18th of February, new section entitled as “Corporate 2010. To improve skills of employees of Social Responsibility” in the Russian railways, functional subsidiaries and af- Railways’ Collective Contract for a filiates, a short-term training course was period of years 2011 to 2013. This organized from the 22nd until the 26th section declares voluntary adher- of March, 2010, in the Russian Railway ence of the Company to international Academy. Besides, on the 16th of principles of corporate social respon- March, 2010, a round table meeting was sibility and stable development where held with participation of concerned ad- socially significant provisions are ministrative management departments concentrated that have a high social of Russian Railways, Union of railway resonance. Since year 2008, the Russian transport employers (Zheldortrans), rep- Railways has been a member of the resentatives of railways, other subsidiar- national (Russian) network of the ies and Rosprofzhel. Global contract of the United Nations In year 2010, a new approach has been Organization participating in all the applied meaning that the corporate network meetings.

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6.4.3 On Implementation of the Russian Railways’ Residential Program

On the Russian Railways’ Mortgage regulatory documents have been Residential Program developed and approved allowing A record has been organized for those for prolongation of validity period who need corporate support in the thereof and the validity period of the structural subdivisions and subsidiaries Residential Policy Concept until year of Russian Railways: the total record 2015 (order of Russian Railways as of list includes 24555 employees of the 3rd of December, 2010, No 2495). Russian Railways. There are statistics and record lists for each subsidiary On Establishment of a Specialized and structural subdivisions thereof. Housing Fund A mechanism of providing the Russian Jointly with the subsidiaries of Russian Railways’ employees with corporate Railways, a schedule of construction, support is being implemented. design and purchase of technological The number of granted credits is 2717 – residential space was established and for a total amount of 4 180.7 million

Interaction with personnel with Interaction signed on the 8th of December, 2009 for rubles (the initial forecast estimate is a total amount of 3284.4 million rubles 2701 credits for an amount of 4 503.3 (without VAT). Provision has been made million rubles) (100.1%). The number for fulfillment of plans of construction of of granted non-repayable subsidies the Company’s housing Fund facilities, 44 (total amount is 49.8 million rubles) systematic monitoring and analysis of ful- (the initial forecast is 50 million rubles), fillment of the above-mentioned plans i.e., 100%. The number of non-repay- and schedules, preparation and imple- able subsidies granted on the occasion mentation of trouble shooting activities, of child birth is 1305 (total amount is fulfillment of tasks of commissioning of 403.1 million rubles) (initial forecast is the Company’s housing fund facilities 50 million rubles), that I 160%. and application of the allocated funds There is a demand for the funds to pro- within the set limits. The investment pro- vide Russian Raiways’ employees with ject plan for year 2010 has been fulfilled. copporate financial support in terms As regards the investment project plan real estate acquisitions.. for year 2010 for 3284.4 million rubles, In compliance with the JSC ZDI’s sales the fulfillment percentage is 3 276.3 schedule and the succession established million rubles (100%). 69.9 thousand in the subsidiaries, the Central Residential square meters has been commissioned Committee of Russian Railways, on the (the scheduled amount was 69.79 10th of March, 2010, distributed means thousand square meters or 100% – 941 of corporate support to subsidiaries. The apartments). Construction and pur- total amount distributed: chasing of residential properties of the • Mortgage subsidies – 362.7 million Company’s housing fund in 2010 have rubles; been carried out in compliance with • Non-repayable subsidies – 50 million the targeted program of formation of rubles; the Company’s housing fund for years • Non-repayable subsidies on the 2009 – 2010 approve by the order of occasion of child birth – 250 million Russian Railways as of the 24th of July, rubles (not distributed). 2008, No 1564. A register of residential In view of the actual birth rate figures, premises of the specialized housing the Central Residential Committee of the fund was set up in 2010; according to Russian Railways has increased the non- this register, as of 1st of January, 2010: repayable subsidy limit for child birth • Total area of the residential premises occasion up to 403.1 million rubles at the is 635.5 square meters; cost of the mortgage subsidy limit. • Their balance value is 15 539.9 mil- Proposals have been set up to improve lion rubles; the system and mechanisms of residential • The amount is 10626; mortgage crediting as well as other forms In 2010 will be accomplished: of effective attraction of the Company’s • The Company’s housing fund area – employees’ and third party investors’ 69.9 thousand square km; money to residential construction. • Balance value – 2.5 billion rubles; Amendments of and addenda to the • Amount – 241.

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6.4.4 Russian Railways’ Youth Policy

Figure 6-10. Russian Railways’ Youth Policy

Project Groups Projects

Professionalism of the Company’s youth

International Youth Cooperation

Young Professionals Young researcher and innovator Interaction with personnel with Interaction

Advancement of cooperation between railway transport educational institutes for Company’s professional training

Self-organization support among Company’s young professionals

Civil-patriotic and spiritual-moral education of youth Corporate youth culture Youth in information environment

Participation in projects and collaboration with non-profit organizations

Health of the Company’s youth

Healthy life style Social benefits for youth Young family

Housing for youth

Development of infrastructure for program implementation

For purposes of implementation of pri- • For children of the Russian Railways’ ority strands of the Russian Railways’ employees (age of 7 to 14 years old), youth policy in the field of organiza- a summer corporate recreation camp tion of recreation, health improve- called “The Roads of the Future” has ment, extra education for adolescents, been successfully set up at the Black children and young employees of the Sea coast in Krasnodar Territory; dur- Russian Railways, the Company has ing winter school brake are arranged developed and is implementing social New Year’s excursion programmes; corporate projects. These projects • For teenagers (14 to 17 years old) cover all the age categories of the tar- facing the choice of the future geted program entitled as “The Youth profession, a program is set up called of the Russian Railways” (2006–2010): “The Company’s Open Doors”;

_113 Russian Railways Social Report 2010

• Network 3D:Road, Home, Friends” employees; that was a specially devel- project has been launched for students oped vocational guidance program of and youth (from 17 to 30 years old). additional education. In all the subur- The programs are intended for each ban children’s health-improving camps, age group to understand fundamentals sports and health-improving programs of the corporate ideology, versatile de- were held – “Presidential Competitions” velopment of not only personal but also and “Locobol – DOL” – in which over 53 professional skills. All the projects are thousand children participated. Interaction with personnel with Interaction united by a block of main objectives: career guidance, creation of personnel Organization of Adult Recreation reserve, anchoring of young employees, and Health-Improving Activities fostering patriotism and loyalty to the Arrangement is made for recreation Company, healthy life style propaganda and heakth improvement of the Russian and development of corporate culture. Railways’ employees and members of All-in-all, throughout the years 2007– their families as well as non-working 2010, the number of participants of the pensioners in health-improving and projects totaled 22.7 thousand people recrestional resorts governed by local (including about 4 thousand people in railway authorities as well as central 2010). In December 2010, JSCo “Russian headquarters. In 2010, about 150 thou- Railways” was awarded an honorable sand people took part in a recreational diploma of a participant of the pro- and health-improving courses. Special gram called “All the Best to Children” focus in terms of distribution of vouch- of the national program of promotion ers was made on employees immedi- of the best Russian goods and services ately associated with management of for children and also recieved three train traffic safety. quality mark certificates of “All the Best to Children” for organization of a Juvenile Railways vocational guidance program for youth For the time being, there are 25 juvenile entitled as “Road, House, Friends”, set- railways functioning in the Russian ting up a children’s corporate recreation Railways system. In 2010, over 15 thou- camp called “The Roads of the Future” sand juvenile railwaymen took training and a occupational guidance program courses at juvenile railways – 1031 of for teenagers called “The Company’s them have entered railway educational Open Doors”. institutions. During the summer prac- tice of 2010, juvenile railways trans- Organization of Children Vacations ported over 330 thousand passengers. During the 2010 summer season, 70 Throughout the years 2008–2010, a health-improving facilities for children stage-by-stage upgrading of rolling provided children’s recreation and stock of juvenile railways was carried health improvement. On the whole, out. In 2010, juvenile railways acquired about 56 000 children of the employees 5 diesel locomotives and 15 carriages managed to rest in health resorts – (Oktyabrskaya, Novomoskovskaya, 14000 of this number – on the Black Sea Gorkovskaya, Volgogradskaya, coast (including 8 000 bought vouch- Yuzhno-Sakhalinskaya). Since 2007, ers). At the children’s health-improving the Company, on parity conditions with camp “Zeleny Ogoniok” of the North the Government of Saint-Petersburg, Caucasus railway the fourth corporate is building the Malaya Oktyabrskaya camp called “The Roads of the Future” Railway which will go along the old was successfully held for 2.5 thou- tsar roadway and connect Saint- sand children of the Russian Railways Petersburg with Pushkin. From the

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2nd until the 6th of August, 2010, the Railway Station Master on Duty”, “The Malaya Oktyabrskaya Railway housed Best TU-2 Diesel Locomotive Operator”, the Rally of pupils of juvenile railways “The Best TU-7 Diesel Locomotive of Russian Railways in which the best Operator”, “The Best Car Inspector”, pupils of juvenile railways from all over “The Best Passenger Car Attendant”, Russia participated. The rally included a “The Best Electrician for Signals, contest called “The Best One by Railway Interlocking and Communication”, “The Professions” in 7 nominations: “The Best Best Track Serviceman”. Interaction with personnel with Interaction

6.4.5 Culture and Sport

Russian Railways has 192 sports facili- of railway employees participate but ties which accommodate 39 thousand also all those people willing to. In people of whom 24 thousand people between the 22nd and 27th of April are railway employees and members of 2010, in the city of Nizhny Novgorod their families. In 2010, internal corpo- (the Nizhegorodskaya Region), the rate sports events like the Spartakiada 18th Table Tennis Championship of the of Russian Railways employees, the International Sports Union of railway Spartakiada for the children of the employees (ISURE) was held with Russian Railways employees, the participation of railway employees Russian Railways President’s volleyball from 18 countries. The team victory cup, championships and competitions went to the RFSS team “Locomotive” in popular sports took place. Russian composed of Russian Railways employ- Railways attaches special importance ees. 185 sports culture facilities feature to healthy lifestyle, popularization around 1.5 thousand club formations of physical culture and sports among with a total headcount of over 46 its employees. Special focus is made thousand people of whom almost 25 on this topic in the Company’s youth thousand people are railway employ- policy. In 2010, in all the railways, All- ees and members of their families. In Russian Games were held – “Sports of 2010, over 26 thousand cultural and the Generations” – among the Russian mass-scale activities were arranged. Railways Holding’s employees and Solemn ceremonies were held dedi- students of railway educational institu- cated to the Fatherland Defender’s tions. With financial support of Russian Day, the International Woman’s Day Railways, jointly with the “Locomotive” and the Great Patriotic War Victory football club, “Locomotive – Kuban” Day, the Railway Worker’s Day and the basketball club and “Locomotive – Company’s day. Employees of all the ” volleyball club, all-Russian railways participated in an Avocational children’s competitions were held: Art Festival (“Russian Railways Lights football competitions called “Locobol”, Up the Stars”). Over 4 thousand people basketball competitions called “the participated in the Festival; the partici- School League”, street basketball pants represented 513 amateur troupes competitions called “”Locomotive” of the railways. In contest games of Cup” and volleyball competitions called “Russian Railways’ KVN League”, 13 “Locovolley” where not only children teams participated (340 participants).

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6.4.6 Corporate Pension Program

Under conditions of implementation of of June 2004, No. 1002004001 – 233 a structural reform of railway transport, dated 24th of November 2010, No. 92, attracting and retaining skilled person- order of Russian Railways dated 21st nel is one of the Company’s most impor- of December 2010, No. 2641hp “On tant tasks. Non-governmental pension Amending Paragraph 6.8 on Provision provision is not the least on the list of of Commencement of Economic Activity important matters. Development and of Affiliate and Dependent companies improvement of the NPP system enables of Russian Railways and Termination of the Holding to obtain an economic Activity of Subsidiaries on whose property effect in the Form of the competitive ad- base they were established”, order of vantages as compared with other actors Russian Railways dated 29th of December in the labor market. Implementation of 2010, No. 2775p “On amending the the Russian Railways corporate pension Clause of non-governmental pension program is carried out by the non-state provision of Russian Railways employ- pension fund called “WELFARE”. ees. Throughout of 2010, explanatory Interaction with personnel with Interaction In 2010, the number of participating letters by the Central Committee for investors increased over the reporting Non-governmental Pension Provision of year by over 66 thousand people. The Russian Railways employees, replies to non-state pension provision contract appeals of legal and physical entities on was joined by 127.8 thousand Russian issues connected to non-governmental Railways employees over the year. The pension provision, 27 conclusions to total headcount of the participating boards of directors of affiliates of Russian investors in the Company reached 650.6 Railways on issues of coordination of thousand people which is over 68% of Clauses on non-governmental pension the total number of Russian Railways provision of Russian Railways subsidiaries employees. Corporate pension is provided and affiliates were prepared. for over 220 thousand former railway em- ployees. In 2010, 20 687 Russian Railways Social Guarantees to Non-Working employees were assigned with pensions; Pensioners the average amount of the non-state Russian Railways’ orders were prepared pension assigned in 2010 was 4030 rubles. over the year to determine the procedure Given this, the average amount of the of provision of social guarantees to non- non-governmental pension by progres- working pensioners of Russian Railways – sive total is 2 281.30 rubles which exceeds dated 12th of April 2010, No. 780p; dated the 2009 level by 159 rubles. In 2010, 16th of June 2010, No. 1283p; No.1282p organizational and regulatory provi- dated 16th of June 2010, and No. 1440p sion of activity of the non-governmental dated 2nd of July 2010. pension provision system was carried out. In compliance with the above-mentioned 4 meetings of the Central Committee of orders, material status of non-working non-governmental pension provision pensioners of Russian Railways was of Russian Railways employees, three improved – in 2010 they additionally meetings of the work group on improve- recieved material support in the amount ment of Russian Railways employees’ of 2 636 million rubles, including: non-governmental pension provision • Victory Day payments – 184 million system and 1 correspondence meeting of rubles; Russian Railways on the issue of modifi- • Monthly material support – 1 896 mil- cation and amendment of the Provision lion rubles; on Non-governmental Pension Provision • Payments to conservators of sub- of Russian Railways employees. In the division and production museums – course of the year, regulatory documents 8 million rubles; were prepared aimed at the non-state • Material support for purchasing of pension provision system improvement: domestic fuel – 370.6 million rubles; Regulation on Electronic Document • Monthly allowances to chairmen and Exchange between Russian Railways and deputy chairmen of the board of vet- “WELFARE” NPF within the framework erans – 49.1 million rubles; of servicing of the non-governmental • Holiday payments – 111.9 million pension provision contract dated 14th rubles, etc.

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Russian Railways’ Private Pension Insurance (Basic Indicators)

2281,3 2122 1955 1803

1650

1429 1196 Interaction with personnel with Interaction 70 000 000 94 126 200 152 300 250 170 000 200 000 220

2004 2005 2006 2007 2008 2009 2010

Total Amount of Pensioners at the End of the Average Pension at the End of the Current Year, Reporting Period, thousands of people roubles

6.5. Remuneration of labor and staff motivation

In compliance with the decisions taken August — by 1.2%, in November — by at the final session of the Management 1.8%. In 2010 the average monthly of Russian Railways in 2010 all wage of the Company employees Company employees were systemati- involved in the shipping operations cally transfered to the full-time sched- amounted to RUB 29432 with an ule with the recovery of the incentives. increase by 17.4% in comparison with In order to fulfill this task and go away 2009. In real terms (accounting for an from the part-time schedule and recov- inflation) the wages increased by 9.8%. er the incentives in 2010 many branches As to the Russian Federation the aver- have received additional financing in age monthly wage was RUB 21193, the amount of 20 Billion Rubles that and the real wage-push was 4.6% in substantially replenished the funds, comparison with 2009. Comparing the withhold in 2009 due to the crisis. wage level of Russian Railways with As a result, number of workers who other industrial sectors in the Russian worked part-time has dropped to prior Federation the Company ranked 6th crisis values. Russian Railways being after oil and gas producing companies, socially oriented Company fulfill all un- coke production, power supply and dertaken obligations in terms of labor distribution, and metal ores mining remuneration. industries. In compliance with the Collective In 2010 the wages of railway workers Agreement of 2010 the wages of the in 5 regions: Lipetsk and Belgorod, Company workers have been indexed the Republic of Tatarstan, Khanty- to the consumer’s goods and services Mansiysk and Yamal-Nenets autono- level, namely: in May – by 3.9%; in mous areas remained lower than the

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wages of railway workers in other • To workers of Russian Railways regions. affiliates and non-governmental For the development of the general cor- or private or health care facilities , porate strategy of the motivation of the included in the engineer and medical workers to achieve fixed targets both in- teams – for the achievement of posi- dividual and collective, Russian Railways tive results in labor protection and issued a Decree No.1573p on June 20, improvement of the health condi- 2010 about corporate system of award- tions of Russian Railways employees Interaction with personnel with Interaction ing bonuses for the Company employees (Order No. 2423p dated November on three-level grounds. This system 24, 2010); started to function in the IV quarter of • For the lean production resulted 2010 in Russian Railways affiliates. in savings (Order No. 2179p dated In order to fulfil specific tasks associat- October 21, 2010). ed with the traffic safety, the reduction In 2010 the bonuses for the traffic safe- of operation and maintenance costs, ty in 2009 have been paid to railway the best control over labor conditions workers who personally transported and protection, the improvement of cargoes and passengers and guaran- services and more competitive salaries teed safety. Over 119 employees who for Russian Railways workers in the took the leading positions and profes- labor market, the Company issued the sions and showed the best results in Regulations regarding the additional their work have received bonuses. The awarding bonuses as listed below: average sum of bonus amounted to • For discovery of defects in freight 16.8 thousand Rubles. and passenger cars that are difficult Within 2010 the single-time bonuses to detect (Order No. 1815p dated have been paid for the devotion to August 30, 2010); the Company. The total sum of such • For efficient use of fuel and energy bonuses reached 9.7 Billion Rubles. (Order No. 162p dated January 28, 2010);

6.6. Public health protection

The medical protection of the traffic. professional impropriety of workers The important aspect is the medical servicing the trains was 1.0 for 100 protection during the transporta- checked (in 2009 — 1.1), including the tion. In 2010 two hundred and ten locomotive crews in the number of 0.9 medical and expert commissions (in 2009 — 1.2). functioned in order to ensure the The reasons for such professional medical protection of the railway impropriety of movement and shunt- workers (in 2009 — 216). The teams ing crews like previous years were such carried out 1.27 Million compulsory diseases as disorders of internal organs and regular medical inspections (в (62%), including the blood circulation 2009 —1.29 Millions). The level of organs of 78%.

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In the railway system 1503 medical railway workers who suffered from examination rooms operate to check accidents, working or present in the the personnel before the trip (in 2009 – territory of the railway station (or sta- 1550). During the year around 24 tion) is provided by the employees of Million medical examinations were aid stations – structural sub-divisions done before the trips (in 2009 – 23.3 of Russian Railways private health care Million). Over 24.6 thousand workers facilities. or 0.11% have been removed from the In 2010 the number of passenger visits Interaction with personnel with Interaction trip as compared with 23.4 thousand to first-aid stations located at the people in 2009. The main reasons for railway stations (stations) was 202.8 such removal were acute respiratory thousand people (in 2009 — 215.0 viral infections (44.5%) and high blood thousand); the number of independ- pressure (34%). ent visits to paramedics (nurses) was The psycho-physiological state of the 902.0 thousand people in comparison locomotive crews is especially impor- with 958.7 thousand people in 2009. tant for the traffic safety. The number of medical procedures 11 offices and 4 divisions function in the during visits to doctors and paramed- regional administrations that carry out ics working at the railway stations the psycho-physiological selection of (stations) was 673.9 thousand people the personnel; in addition to that private in comparison with 622.7 thousand health care facilities of Russian Railways people in 2009. The number of calls of have 205 laboratories examining the medical personnel to render medi- psycho-physiological health of the work- cal assistance outside the aid stations ers, including the psychologist’s offices. amounted to 102.2 thousand calls. The There are 136 offices of professional number of sick people in the trains psycho-physiologists and 115 rooms for throughout 2010 was 78.1 thousand relaxation and mobilization in loco- people. 5.3 thousand people out of motive (motorcar) depots. About 543 this number has been taken off the specialists examine psycho-physiological train in comparison with 5.03 thousand health of locomotive crews. people in 2009; 4.9 thousand people In 2010 the number of psycho-phys- has been hospitalized (in 2009 — 4.6 iological examinations of locomotive thousand patients). 12.9 people stayed crews carried out, include: in parenting rooms as compared with • Primary psycho-physiological selec- 25.5 thousand people in 2009. tion (PPS) — 36 thousand people; • Regular psycho-physiological selec- tion — 43 thousand people, Medical assistance to and stay • Extensive psycho-physiological sur- in health care centers of Russian vey — 56 thousand people; Railways by employees, members • Dynamic control of functional of their families and non-working state — 225 thousand people. pensioners. Over 127 thousand workers of locomo- There are 255 private health care tive crews went through rehabilitation. facilities (PMF) functioning to render Around 471 thousand medical proce- all kinds of medical assistance to the dures were administered to the staff. employees of Russian Railways, mem- bers of their families and non-working Emergency medical assistance to pensioners (in 2009 – 256), out of this passengers. number – 123 hospitals (in 2009 – The emergency medical assistance 131) and 123 out-patients’ clinics to the sick and those passengers and (in 2009 – 125).

_119 Russian Railways Social Report 2010

As of December 31, 2010 the number of orthopedic and urology centers, etc. Russian Railways employees attached During the season of epidemics in to private health care facilities was 3.2 2010-2011 372 thousand of Russian Million people (in 2009 —3.3 Million). Railways employees providing the traf- Among the people attached to Russian fic safety have been vaccinated against Railways private health care facilities flu and acute respiratory infections the number of the Company employees which makes 98% of the total plan. amounts to 32.2% (in 2009 — 35.7%), 111.2 thousand workers of Russian Interaction with personnel with Interaction railway transport pensioners — 19.3% Railways, including medical person- (in 2009 — 20.7%), members of families nel of non-governmental health care of Russian Railways employees — 14.6% facilities have been vaccinated against (in 2009 — 15.5%), employees of subsid- highly pathogenic flu А(H1N1)/2009 iaries — 5% (in 2009 — 4.1%), municipal which makes 66% of the whole population — 28.9% (in 2009 — 23.9%). number of people. In order to prevent The level of primary diseases is 460.8 the risk of contamination during the cases per 1 thousand attached adults (in operation activities 98 thousand work- 2009 — 474 cases). ers of 42 professions and positions of The disease resulted in a temporary the Company have been vaccinated disability (TD) amounted to 62.7 cases and revaccinated against viral vernal per 100 Russian Railways employees (in encephalitis in enzootic areas. The plan 2009 — 62.4), in days it was —865.5 (in of vaccination has been 100% fulfilled, 2009 — 866.6 days). The tendency to including 96% revaccination plan. decrease remains. The firstly defined 937.4 thousand employees under- level of occupational disease per 1 000 went the clinical examination. All in people among all Russian Railways all around 97% of workers has been employees is 1.47 in comparison with examined in clinics in comparison with 1.16 in 2009. 95.7% in 2009. Around 88 thousand The promotion of engineers and medi- diseases were detected. As a result 36.7 cal teams in the industrial activities of thousand employees of the Company Russian Railways is very essential. The were hospitalized in comparison with whole complex of associated measures 38.5 thousand patients in 2009. The is undertaken in order to protect and number included 1526 patients who improve health of Russian Railways needed high tech medical care or 4.1% workers: mandatory preliminary, regu- in comparison with 1351 patients or lar and targeted medical examinations, 4.1% in 2009. For the first time out of vaccination, therapy in outpatient clin- the number of people who underwent ics and in hospitals. clinical examinations 58.3 thousand Moreover, a great attention is paid to people have been put on the record in the improvement of specialized, in- the medical institutions in comparison cluding high tech medical aid (HTMA). with 60 thousand workers in 2009. For instance, in 2010 about 28 thou- 5 (five) mobile advisory and diagnostic sand patients received HTMA in com- centers (hereinafter MADC) functioned parison with 27.5 thousand patients in on 5 rail roads in 2010 to render the 2009, including 6.6 thousand (23.6%) medical, advisory and diagnostic as- employees of Russian Railways, 7.5 sistance to railway workers, members thousand (26,8%) of non-working of their families, pensioners and local pensioners of railway transport. The populace, living in remote regions new rail road (inter-road) centers of Russia in comparison with 4 such are established such as neurologi- centers in 2009. MADC routes crossed cal, eye microsurgery, traumatology, 18 RF Federal Subjects territories and

120_ Russian Railways Social Report 2010

serviced the population within the patients in 2009. The number of visits boundaries of 5 rail roads: Severnaya, to various doctors amounted to 197 Dalnevostochnaya, Krasnoyarskaya, thousand. Zapadno-Sibirskaya and Vostochno- In 2010 95412 people have stayed in Sibirskaya railways (around 1 Million health and health-improving centers attached people and over 2 Million local or 32.7% of those who needed such people). treatment in comparison with 31.1% or In August 2010 MADC “Surgeon 99168 people), including current work- Interaction with personnel with Interaction Nikolai Pirogov” of the Severnaya ers on the railways — 66966 people, Raiways worked in the regions that or 34.1% (in 2009 — 69563 people or suffered of forest fires. 33.4%), members of families — 8735 In 2010 the experts of private health people or 42% in comparison with care facilities who worked in MADC 31.9% or 8187 people, non-working made 74 trips and visited 335 stations pensioners of the industry — 19711 in comparison with 62 trips and 335 people or 26.4% (in 2009 — 21418 stations in 2009. people or 27.6%), including 1962 Medical assistance has been provided veterans of the Great Patriotic War or to over 64 thousand patients in 2010 48.2% in comparison with 2090 veter- in comparison with 43.7 thousand ans or 43.8% in 2009.

6.7. Labor protection and operating safety.

Labor protection, environment protec- In Russian Railways the management tion and industrial safety policy of of labor protection functions since the Russian Railways is oriented at the establishment of the Company. Such balanced solution of the social and system being the part of the whole economic tasks in the process of imple- management system of the Company mentation of all Company activities. provides the comprehensive approach In accordance with this policy the and single labor protection order on requirements to the labor protection all levels. The labor protection and include the following: industrial safety on the Company facili- • Permanent improvement of labor ties has been provided in compliance protection and conditions due to the with the federal legislation, being the promotion of advanced technolo- integral part of the dynamic develop- gies, technical equipment and higher ment and one of the priorities in the skills of the personnel; Company’s operation. Labor protec- • Effective planning and implemen- tion measures in Russian Railways are tation of programs oriented at the realized together with trade unions labor protection; involving the scientific and research • Efficiency of preventive actions institutes, design bureaus, training and aimed at the observation of labor other organizations, including indi- protection standards; vidual experts dealing with the labor • Reduction of potential risks in terms protection. of labor protection; The labor protection system is the part • Promotion of labor safety and respon- of the Management system of the sible attitude to employees’ health. Company being one of the principal

_121 Russian Railways Social Report 2010

activities of the Company. The system power supply devices used for auto- is based on the distribution of man- matic block system of “RZhD” OJSC agement functions, establishment railways; of relations between the various • Labor protection instructions for the governing bodies and officials of operator of flaw inspection carriage the Management Board of Russian and operator of measurements on Railways, railways, other affiliates and railway lines; structural divisions of Russian Railways. • Labor protection instructions for Interaction with personnel with Interaction For the promotion of management a man-on-duty on the railway systems and for better implementation crossings; of labor protection policy, industrial • Labor protection instructions for and fire safety, non-occupational workers, greasing the cars and rails; injuries on the railways regional com- • Safety instructions for contact sys- missions mentioned below have been tem electricians; established: • Instructions on the fencing of • Labor and health protection of the isolating removable towers during workers; the works in the contact system of • Industrial processes safety; “RZhD” OJSC railways; • Fire and technical safety; • Instructions on labor protection dur- • Prevention of injuries of the people. ing the maintenance of electric units Commissions both in transient and and equipment in Russian Railways. target state shall provide the coor- The standards of Russian Railways have dination and general approach to been approved, namely: the solutions of the tasks implied • Labor protection management sys- by the single technical policy of the tem in Russian Railways. The attesta- Company, including the operation of tion of work place as per working such commissions in the designated conditions; fields. • Labor protection management sys- tem in Russian Railways. The organi- Corporate legal framework for zation of the training process. labor protection. The methodological documents have In compliance with the requirements been prepared, namely: stated in Article 212 of the Labor Code • Provision about the Central of the Russian Federation and to follow Commission on Labor and Health the requirements to labor protection protection of Russian Railways and performance of duties by Russian employees. The standard regula- Railways employees single legal frame- tion about the regional commission work and methodological documents on Labor and Health protection of regarding labor protection have been Russian Railways workers. Regulation elaborated. on engineers and medical teams; In 2010 legal framework documents • Provision on the works associated have been prepared, namely: with the information system of • Labor protection instructions for Russian Railways “A man on the rail handling the cargoes and commercial road”; operations associated with freight; • Standard provision on labor protec- • Labor protection instructions for tion service (division) and industrial maintaining speed and high speed safety of the railway management on Russian Railways railway lines; body. • Safety rules for operation and In compliance with the above Regulation maintenance of contact system and the Management of the Company

122_ Russian Railways Social Report 2010

interacts with federal executive au- labor protection, industrial and envi- thorities, RF subjects, federal supervising ronment safety of RTK; authorities and other public authorities • Working group on the implemen- as per procedures established by Russian tation of RF decree No. 870 dated Railways for the achievement of targets November 20, 2008 (the group has imposed on the Management. The rep- been established by the Ministry of resentatives of the Management Board Public Health and Social Development participate in the work of the following of the Russian Federation). Interaction with personnel with Interaction advisory bodies: The Management Board submits • RUIE Committee on the environ- regularly suggestions to RUIE, Mintrans ment, industrial and technological of Russia, Ministry of Public Health safety; and Social Development of the Russian • Working group of the Commission Federation and other departments on on the Law of master and servant, the improvement of legal framework.

Figure 6-12. Main activities in industrial safety policy of Russian Railways

Main activities in industrial safety policy of Russian Railways

Evaluation of risks of industrial accidents and breakdowns, ensuring acceptable risk level, improvement of occupational safety during transportation of cargo and passengers by train

Compliance with established regulatory and legal requirements and corporate regulations, fulfillment of collective agreements, and improvement of working conditions and work safety

Development and introduction of front-line and safe technical aids, equipment and technological processes, mechanical aids and automation all focused on removal of employees from hazardous areas, removal of manual labor

Coordination of efforts between railroads, other branches and structural subdivisions of Russian Railways and their collaboration with subsidiary enterprises

Support of public control over compliance with rights and lawful interests of employees

Continuous improvement of work safety management system

Formation and support of high image and reputation of Russian Railways in industrial safety on the Russian and international transport markets

_123 Russian Railways Social Report 2010

6.7.1. Assessment of risks

Under the labor protection policy to develop the measures aimed at framework Russian Railways imple- prevention of potential hazards and ments the regular actions oriented at reduction of risks, including the plan- the detection of hazards and assess- ning of activities for improvement of ment of risks. working conditions. The detection The assessment of the occupational of hazards and assessment of risks risks is made for the earlier detected is conducted in compliance with the most dangerous industrial facilities, Methodology of the evaluation and Interaction with personnel with Interaction technological processes and oc- assessment of occupational risks elabo- cupations of the workers in order rated by Russian Railways.

6.7.2. Occupational injuries

One of the most important targets of on the whole dropped by 7% and Ktotal Russian Railways under any kind of amount of injuries in Russian Railways is performed activities is the provision of 0.55 in comparison with 0.59 in 2009. safe working conditions, preservation The incidence of deaths (the number of health and life of the Company’s of deaths per 1 thousand workers) employees. remained on the level of 2008–2009 The procedures of the Company and equaled to 0.07 Кdeaths in Russian oriented at the creation of safe and Railways. favorable working conditions, pre- The coefficient of the disease severity vention and reduction of accidents at (number of missed days per year due to work allowed to keep the decline of severe diseases per 1 thousand work- occupational injuries in 2010 among ers) has dropped by 3% and amounts the workers of Russian Railways. to Кseverity Russian Railways = 44.2 in In 2010 the number of occupational comparison with 45.6 in 2009. injuries in Russian Railways dropped as The occupational injuries in Russian follows: Railways are given in diagrams 1 and 2 • The number of total injuries dropped below. by 14%; 534 people have been in- The main share of injuries (68%) hap- jured in comparison with 620 people pens on the railway. Considering this in 2009; in 2010 the situation with occupational • The number of deaths dropped by injuries on the railways has considera- 6%; 73 deaths in comparison with 78 bly worsened in comparison with 2009. in 2009. Despite the drop of the total number The incidence of total injuries (the num- of occupational injuries by 11%, the ber of injured per 1 thousand workers number of injuries with fatal outcome as compared with 2009 in the Company increased by 13%.

124_ Russian Railways Social Report 2010

Dynamics of industrial traumatism in Russian Railways in 2003-2010

Diagram 1

1123 1049

922

757 751

649 620 534 personnel with Interaction

146 106 98 96 95 80 78 73

2003 2004 2005 2006 2007 2008 2009 2010

Total injured persons, men including deaths, men

The principal accidents that cause inju- Company with fatal outcome in 2010: ries of the workers and might lead to • Rail road accidents — 67 injured, death are as follows: collision with train, including 20 deaths; impact, rolling stock grip; rail road ac- • Collision, impact, rolling stock grip – cidents; electrical shock. Such accidents 41 injured, including 19 deaths; caused the death of 54 workers that • ➢ Electrical shock —36 injured, in- amounts to 73% of all injured of the cluding 16 deaths.

Percentage death casualties during accidents in Russian Railways by accident types in 2010, %

Diagram № 2 27% – road accidents (20 men)

26% –collision, hit, gripping by rolling stock (19 men)

21% – electric shock (16 men)

11% – falling from a height and from rolling stock (8 men)

5% – exposure to moving cargo, moving or flying parts, goods, materials (4 men)

4% – falling or collapsing of materials, cargo, facilities (3 men)

3% – injury during natural disasters (2 men)

3% – murders (2 men)

1% – collision with, hinting or nipping with hoisting mechanisms (1 man)

1% – nipping, impact onto neighboring structures (1 man)

1% – exposure to moved cargo, moving or flying parts (1 man)

_125 Russian Railways Social Report 2010

The main causes that result in injuries In order to improve safety measures as shown in diagram 2 accentuate the oriented at the personnel safety and deficiencies in the organization of safe prevention of accidents at work as well working conditions and absence of as at the enhancement of the role and due supervision on the side of manag- responsibilities of managers on every ers of affiliates and structural divisions level, specialists and all Company em- of Russian Railways in terms of the ployees to guarantee safe and healthy observation of requirements to the ex- conditions at every workplace, Russian ecution of works and labor discipline. Railways has prepared the recommen- The Company pays special attention to dations on the preparation and imple- the labor protection, and, first of all, mentation of behavioral safety audits to prevention of occupational inju- (BSA) on the labor protection in 2010. Interaction with personnel with Interaction ries. In 2010 the Department of Labor The purpose of recommendations is Protection, Industrial safety and envi- the behavioral change of the worker ronment protection has conducted the due to the detection and elimination inspections aimed at the implementa- of dangerous deeds and conditions tion of labor protection measures in which might cause the injuries to such the affiliates and structural divisions worker. of Russian Railways in compliance with It is planned to enforce the recommen- the established schedule. Such inspec- dations in Russian Railways since 2011. tions are listed below: The Department of Labor Protection, • 2 comprehensive inspections on Industrial Safety and Environment pro- Zabaikalskaya and Dalnevostochnaya tection has reviewed the documents Railways; referring to the circumstances and • 7 targeted inspections on cause of injuries with the fatal out- Gorkovskaya, Jugo-Vostochnaya and come to inform the managers of the Juzhno-Uralskaya Railways, in the Russian Railways and its affiliates and Department of Social Development, subsidiaries about the revealed major Central Administrations of communi- deficiencies and violations. cations and rail road repairs, and ad- The situation with injuries and prob- ministrative – economic department; lems associated with right implemen- • 1 unscheduled trip to Ufa locomo- tation of the preventive measures tive service depot of Kuibyshevskaya oriented at the labor protection were Railways caused by the complaint re- discussed many times at the confer- ceived by the Central Administration ence call meetings, i.e. every quarter of Russian Railways from one of the with the participation of the Senior depot workers as the depot has con- Vice-President of Russian Railways, cealed the injury case of this worker. every month with the participation of Along with the traditional supervision representatives from the Department used for labor protection the Company of Labor Protection, Industrial Safety introduced the new standard on and Environment protection. February 1, 2010 “The internal audit The questions connected with the over the labor protection and indus- organization and implementation of trial safety” that defines the approach preventive measures, including the to monitoring of labor protection and advanced labor practice exchange have industrial safety in Russian Railways. been discussed in 2010 in the Railways In 2010 the standard has been tried on Grid School dealing with the labor Kaliningradskaya and Kuibyshevskaya protection considering Krasnoyarskaya Railways. The principal purpose of the Railways as an example, with par- internal audits is the identification ticipation of top-managers of the both strong sides and components Departments, affiliates of Russian of labor protection and industrial Railways, federal executive authorities, safety needed in order to improve scientific and research institutes and and develop correctional measures. higher education institutions.

126_ Russian Railways Social Report 2010

6.7.3. Planning of labor protection measures

The plan of actions oriented at the • Bringing the noise and vibration improvement of working conditions levels to the standards — 65.9 Million for the labor protection is based on Rubles; the perspective, current and operative • Bringing the illumination levels implementation of the measures tak- to the standards — 130.3 Million ing into account the detected factors Rubles; which affect the working conditions • Reduction of the severity and inten- and labor protection of the workers. sity of the working process – 107.5 In 2010 the Program aimed at the im- Million Rubles; provement of working conditions and • Improvement of sanitary and dwell- labor protection in Russian Railways for ing conditions of workers — 783.6 2010–2012 was adopted. Million Rubles; Interaction with personnel with Interaction In compliance with approved Program • Training and promotion of labor pro- it was assumed to spend 5.0 Billion tection issues — 291.2 Million Rubles; Rubles for its implementation in 2010. • Other — 510.1 Million Rubles. Actually, for the purpose 6.1 Billion 317.1 Million Rubles has been allocated Rubles has been spent. At the cost of for the implementation of measures budgetary funds of Russian Railways aimed at the improvement of working affiliates the finances have been used conditions and labor protection at the for the implementation of the meas- cost of centralized investments. The fol- ures as follows: lowing equipment has been procured, • Prevention of the hits of workers by i.e. portable radio stations; module rolling stock – 407.8 Million Rubles; heating stations; heat screens; devices • Prevention of electrical shocks — protecting the personnel from induced 263.7 Million Rubles; voltage at work with the contact • Prevention of other occupational system; isolating removable towers; injuries – 3030.4 Million Rubles; educational examination materials on • Reduction of the exposure to haz- the labor protection; training complex- ardous chemical agents and aerosols, es for acquiring the skills to render the predominantly, fibrogenic agents first medical aid to injured; apparatuses (dust) — 46.9 Million Rubles; for air cleaning off pollutants; machines • Creation of microclimatic conditions for chemical cleaning of overalls; sets in compliance with the standards of technical means “Labor safety” for and standards — 152.1 Million electricians working with communica- Rubles; tion devices and with LAZ and ATE, etc.

6.7.4. Financing of Labor protection measures

In 2010 Russian Railways developed and labor protection amounted to the measures aimed at the improve- 7.8 Billion Rubles, including 4.5 Billion ment of working conditions and labor Rubles, but excluding expenses for per- protection and allocated 9.6 Billion sonal protection equipment, or 0.8% Rubles for the purpose, including of the operating costs. 5.7 Billion Rubles and excluding the The evaluation of the submitted expenses for overalls, special boots and reviews demonstrates that all affiliates other personal protection equipment, and economic divisions have fulfilled i.e. 0.8% of the operating costs. The the requirements of the Collective total financing of the measures for the Agreement in terms of allocation of improvement of working conditions funds for the improvement of working

_127 Russian Railways Social Report 2010

conditions and labor protection in the of the executed works, planning of sum of 0.7% of the operating costs, at expenses for the labor protection in least, excluding the expenses for the Russian Railways. personal protection equipment and One of the additional sources of the medical examinations. financing associated with the labor The expenses for the above purposes protection are the repayable funds of per one worker of Russian Railways the Social Insurance Fund of Russia. amounted to 11.5. On the whole, Russian Railways al- Interaction with personnel with Interaction In December of 2010 the Department located over 192 Million Rubles for of Labor Protection, Industrial Safety the accident preventive measures, and Environment protection has held 142 Million Rubles being spent by the the training courses on the basis of the Railways and about 50 Million Rubles – Russian Academy of Railway Transport by administrations. (RART) for 60 railway employees of The principal part of these funds has railways, administrations, departments been spent for the procurement of and management divisions dealing personal protection equipment (124 with labor protection problems on Million Rubles), 25 Million Rubles – for subjects “Managerial accounting of the attestation of workplaces as per expenses for the labor protection, working conditions and 21 Million assessment of respective expenses, Rubles for bringing the dust/gas pollu- the reporting skills for the assessment tion to the standards, etc.

6.7.5. Attestation of workplaces

One of the primary tasks is the creation including the attestation at the cost of of safe conditions for health and life for repayable funds of the Social Insurance employees at workplace. Fund of Russia. The attestation of workplaces as per The most popular hazardous industrial working conditions is the effective aspects in the Company are the labor instrument that allows to evaluate intensity (about 70 thousand workplac- real working conditions and becomes es), noise (61 thousand workplaces), la- the ground for further evaluation of bor severity (61 thousand workplaces), the potential occupational risks and microclimate (51 thousand workplaces) injuries of the workers. In 2010 Russian and vibration (32 thousand workplac- Railways has performed the attesta- es). As a whole, 16 thousand workplac- tion of 107466 workplaces in compli- es have been brought to the standards ance with the centralized agreement. and working conditions have been The total number of attested work- approved at 48.5 thousand workplaces places was 130.3 thousand workplaces, in Russian Railways.

128_ Russian Railways Social Report 2010

6.7.6. Personal protection equipment

One of the most important issues to- electrification and power supply facili- day is the provision of modern personal ties against the thermal component of protection equipment for the workers. electric arc and induced voltage. Such It substantially affects the occupational measures already allowed to avoid the diseases and occupational injuries, and irreversible consequences for Russian quite often personal protection equip- Railways workers. ment is the only way to reduce many Russian Railways has prepared and hazardous aspects. approved Decree No. 2744p dated Interaction with personnel with Interaction The employees of Russian Railways December 28, 2010 “The order of pro- are provided with special working vision of Russian Railways employees clothes and other personal protec- with personal protection equipment” tion equipment in compliance with in order to provide special working the Regulation and plans of Russian clothes, boots and other personal pro- Railways and other branches. In 2010 tection equipment, taking into account the Company has spent 3.9 Billion the structural reorganization of the Rubles for procurement of special Company. working clothes, boots and other Russian Railways has introduced personal protection equipment. In amendments in its Decree No. 1880p order to provide the special overalls for dated September 7, 2010 “Relations Russian Railways employees in compli- between Russian Railways and con- ance with standards for the provision tractors in labor protection sphere”, of special working clothes, boots and in compliance with earlier approved other personal protection equip- Decree No. 1722p dated August 17, ment free-of-charge, approved by the 2009 “The need of wearing yellow Ministry of Public Health and Social vests by workers of contractors”. Development of September 23, 2010, While signing the contracts with po- the Company approved the relevant tential contractors for the execution of “The allocation of additional funds for works in the territories and at facilities financing of special working overalls’ of Russian Railways, the Company in- procurement“. cludes special item in the chapters that In IV quarter of 2010 additional 600 commit the contractor to follow the Million Rubles has been allocated requirements of the labor protection and in II quarter – 335 Million Rubles. established by Russian Railways, stating Mainly, the procurement in general for that all workers of contractors shall the protection of workers servicing the wear high visibility vests.

_129 Russian Railways Social Report 2010

6.7.7. Awareness and competence of employees regarding the Labor Protection

One of the basic organizational meas- Monitoring of Labor Protection in ures associated with the prevention of Russian Railways and the organization occupational injuries and occupational of the training process”. The document diseases is the effective training of the shall come into force on March 1, 2011. workers, raising their awareness about This document defines the require- labor protection. ments of the training process for the In 2010 16.8 thousand people have managers, specialists and workers of been trained on labor protection, Russian Railways. Interaction with personnel with Interaction including 11.8 thousand managers Last year the Tentative Educational and specialists of the Company and its Program for the occupational train- affiliates and 5.0 thousand experts. 8.8 ing of workers “Labor Protection” thousand employees passed training has been reviewed and updated, thus on rail roads, including 5.8 thousand allowing formulating the principles of managers and 3.0 thousand experts. occupational activities unity and safety. 100 top managers and experts from 291.2 Million Rubles were spent for Management Department have been the training process and promotion of trained as well, including the examina- labor protection ideas. tion of their knowledge. 18 labor protection rail cars operate in 139 employees of Russian Railways re- Russian Railways. Such rail cars func- ceived remote education in the Russian tion as a single system of the training Academy of Railway and passed exams process for the employees of railway to the commission of the training or- structural divisions. The rail car presents ganization. Such kind of education has the mobile training complex, and one been firstly tried as the pilot project of the main functions of such rail car is and received positive response from the methodological and organizational the trainees. assistance during labor protection For the improvement of the training training courses using audio, video and process Russian Railways approved computer techniques, including the the document 1.15.011-2010 “The preventive measures directly on the railway facilities.

130_ Russian Railways Social Report 2010 Interaction with personnel with Interaction

_131 07

Observance of Human Rights Russian Railways Social Report 2010

In its observance of human rights and other employees of the Company the Company is governed by Russian are obliged to be decent and honest in legislation, follows provisions of Human their work activity, adhere business eth- Rights Declaration, ILO Declaration on ics standards generally accepted and set Fundamental Principles and Rights at by internal documents of the Company. Work and meets other international Principles, rules and regulations pre- requirements in this field. The Company scribed by the Code were developed is being a party to the UN Universal and given in other internal documents Declaration which imposes human of the Company. Rights Human of Observance rights requirements onto business cir- Labor relations of the Company are cles. The Universal Declaration demands subject to requirements of the Labor that its parties support and respect Code of the Russian Federation. Article the approach stipulating protection of 253 defines jobs with restricted female international human rights. According employment; Article 265 defines jobs to the Universal Declaration, business with prohibited under-age employ- circles must not be privy to violation ment; Article 4 forbids forced labor, of human rights. As per the Code of and Section XIII considers matters of Business Conduct of Russian Railways, protection of labor rights and free- one of business values of the Company doms, establishes grievance procedure is human respect and care. All officials and amenability for violation of the

_133 Russian Railways Social Report 2010

labor code and other acts containing Resource Development Strategy of standards of labor law. Russian Railways, Rules for Internal For the purpose of effective ob- Labor Order of Administrative servance of employees’ rights, the Machinery of Russian Railways, Job Company regularly reviews appeals Descriptions and Salary Grades of concerning various issues as well as ap- Managers, Specialists and Workforce peals of law enforcement and judicial of Russian Railways, Regulations on bodies, trade union organizations, Corporate Employee Compensation Observance of Human Rights Human of Observance Federal Labor and Employment Service. System in the Branches and Divisions With staff development and social of Russian Railways, Regulations assistance programs, the Company on Graduates, Regulations on secures a number of socio-economic Mentoring, programs “Youth of the rights of its employees such as right Company of 2006–2010”, “Housing to social insurance, education, family for Youth”, projects “Healthy Life- welfare, housing, artistic freedom, Style”, “Young Family”, “Health of participation in cultural life. the Company’s Youth”, “Qualification All regulatory documents prevailing of the Company’s Youth”) have in Russian Railways and social and been elaborated in strict compliance labor relations programs (Collective with the Constitution of the Russian Agreement, Functional Human Federation, the Legislation of the

134_ Russian Railways Social Report 2010

Russian Federation including the Labor dismissal, answers to social and labor Code of the Russian Federation and relations appeals). do not contain any provisions relat- The Company’s obligations on obser- ing to gender, age or other inequality vance of rights of the population affect- and unstipulated by the applicable ed by the Company’s activity are mainly legislation (there are restrictions on associated with observance of the female and under-age employment in environmental protection legislation hard and hazardous jobs). As stated and apply to the right of citizens for in Decree of Russian Railways No. enabling environment. Environmental Rights Human of Observance 268 dated December 5 of 2006 “On activity of the Company is aimed at strengthening of labor law compliance ensuring observance of this right. control in Russian Railways branches”, Prospective lines of activity in the field the legal divisions of the braches must of security of human rights are organi- preliminary approve draft documents zation of staff training in human rights, about social and labor relations (local evaluation of investment agreements enactments such as collective agree- and contracts concluded with contrac- ment, rules for internal labor order, tors and suppliers in terms of observance regulations on compensation and bo- of human rights as well as strengthening nuses as well as labor contracts, orders of labor law compliance control over the for recovery of penalties, orders for Company’s officials in their activities.

_135 Policy of Cooperation Russian Railways The Company's Cooperation with Interaction with of Russian Railways management system fulfillment of federal executive Business with Society in public relation field governmental authorities Communities objectives

Risks and Participation of Cooperation with Cooperation with opportunities Russian Railways in chambers of Federal Regional Authorities building of Assembly governmental policy in 2010 08

Charitable activities Evaluation of compliance of the Company’s activities with regulations and laws with respect to Public Relations

Information Transparency of the Company’s activities

Public relations Russian Railways Social Report 2010

8.1. Policy of Cooperation of Russian Railways with Society

An important component of Russian specific problems according to priority Railways’ policy is its cooperation (both for the society and Company) with society including population, areas and lines of economic and social federal and regional authorities, local development of the regions where the governments, public associations and Company might choose to participate. movements, and non-commercial The task of welfare gain and improve- organizations. ment of living standards of the popula- relations Public A primary goal of Russian Railways’ tion consists of the fact that, besides policy in public relations consists in participation in implementation of formation of positive attitude towards federal, regional and local programs, the Company as a socially responsi- Russian Railways, with its nation- ble industrial and economical agent. wide network of social infrastructure The Company actively participates facilities is in a position to provide local in resolving of issues of economical residents with educational, medical, and social development of regions, and utility services. Highly significant is especially those where division units of the fact that departmental institutions Russian Railways are principal employ- of Russian Railways (unlike municipal ers in their residential communities. To ones) often have more developed fa- achieve this goal, the Company solves cilities, are better equipped in technical closely interrelated tasks of setting up terms, can dispose of highly skilled spe- mutually profitable collaboration with cialists, thus ensuring high quality and governmental authorities and local diversity of services provided. governments in the issues of social Welfare gain and improvement of living development of regions, welfare gain standards of the population contributes and setting up an effective system of to improvements in operations of mu- cooperation with parties concerned. nicipal facilities of social infrastructure, As to cooperation with governmental to which the Company provides support authorities and local governments, and assistance in repairs, technical out- Russian Railways actively participates fitting, purchases of necessary equip- in development and implementation ment and implements. In the regions of governmental policy for develop- where Russian Railways is present, its ment of railway transport, programs important activity lines for the popula- of social development of the country tion include assistance and pecuniary and regions where the Company and aid provided to socially unprotected its subdivisions have their seat. With population groups, public non-commer- its significant industrial, investment cial organizations, provision of oppor- and intellectual potential, Russian tunities for development of creative tal- Railways is able to participate in stud- ents, going in for exercises and sports, ies and projects for development of occupational guidance for youth, which science, technology, advancement and the company provides under charity and introduction of new technologies. In sponsor assistance programs. each specific case, form and extent Public relation goals and objectives are of participation of Russian Railways being implemented along the lines in is determined in implementation of which specific events and measures are respective programs or solving of developed and organized (see Fig. 8-1):

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Figure 8-1. Objectives and main lines of Russian Railways’ public relations

Objectives of Public Relations Projects Public relations Public Participation in formation of governmental policy Collaboration with governmental bodies and local governments in social development of regions Share participation in federal, regional and municipal programs of social development

Performance and support of meaningful (for the Company and to society) researches, studies, programs, events and actions for scientific and educational development

Provision of social services by departmental Improvement of welfare and life institutions to the population quality of the population

Support and assistance with development of facilities of municipal and social infrastructure

Charity and sponsorship

Information support of the Company’s public relations Making people aware of the Company’s activities

8.2. Russian Railways management system in public relation field 8.2.1. Risks and opportunities

In view of problems in the number responsible participation in the life of of regions related with population local communities in the regions where employment and local budgets not suf- the Company is present. In this regard ficient to ensure required social devel- the following risks and opportunities opment level, Russian Railways assumes occur in the Company’s public relations voluntary obligations as to socially with society (see Table 8-1):

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Table 8-1 Main risks and opportunities in collaboration between Russian Railways and society Pos. Risk definitions Activity lines Measure of efficiency

Agreements with regional authori- ties and local governments on eco- The scope of suburban pas-

Excessive expectations relations Public nomical and social development. senger transportation services. 1. and increased social load Transition to the system of govern- Amount of funds allocated to on the Company ment social welfare contracts for charity and sponsor assistance suburban passenger transportation

Number of publications about Negative perception of Making the society aware of the the Company, including 2. the Company in the re- Company’s activities positive, negative and neutral gions and local residents publications

Slower performance Agreements between the Company Implementation of the Com- of action plans and and regional authorities and local pany’s investment program 3. programs implemented governments on economical and (see Section 4.4 “Investment by the Company in the social development Activities”) regions

8.3. Participation of Russian Railways in building of governmental policy in 2010 8.3.1. The Company’s fulfillment of governmental objectives

Conditions and quality of Russian During the period of its operations Railways’ operations determine both (Russian Railways launched its op- the prospects of growth of the Russian erations in October 1, 2003) Russian economy and ability of the State to ef- Railways has ensured systematic fectively perform such crucial functions growth of efficiency and quality of rail- as protection of national sovereignty way transport service for the country’s and security of the country, integrity of economy in strict compliance with the the united social and economical envi- goals of the structural reform. ronment, provision of equal conditions The growing demand for railway for implementation of constitutional transport services is fully satisfied. rights and freedoms of citizens (includ- Throughout the years of dynamic ing the right for freedom of travel) growth of the national economy all over the country. Today Russian (2003-2008) we saw gains in pas- Railways forms the basis of trunk senger traffic by 11.6%, shipments by line railway transport of the Russian 12.3%, net freight turnover by 26.8%. Federation. Notwithstanding the crisis, in 2009

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Russian Railways preserved stability 1%, while freight rail car turnover rose of transport service of the country’s by 1.9%. economy and population with quality Improved efficiency of Russian of transportation process improved. Railways operations became the basis According to 2009 results shipments for solution of the task (formulated fell by –15% (with –19% decrease by the Reform Program) of increasing Public relations Public initially forecasted), freight turnover the total national economy costs for – by 6.3% (with allowance for empty freight railway transportations. The mileage of private and leased rail cars), share of income from railway transpor- while passenger traffic fell by 12.7%. tation in GNP (Gross National Product) Against 2008’ results, schedule speed during the Company’s operation years increased by 2.5%, hauling capacity of fell by more than one third, i.e. from a freight locomotive unit rose by 2.9%, 4% in 2003 to 2.6% in 2009. weight of a freight train increased by

8.3.2. Cooperation with federal executive authorities

Governmental-Private Partnership Rubles and by 20 billion Rubles, respec- In 2010 implementation of the follow- tively. These funds were directed to ing projects continued – “Organization construction of transport infrastructure of high-speed passenger service at facilities under preparation for the section “St. Petersburg – Buslovskaya XXII Winter Olympic Games and the Station” (Oktyabrskaya Railroad)” ХI Winter Paralympic Games in 2014 and “Renovation of section “Oune- (Sochi). Vysokogornaya” with construction of the new Kuznetsovskiy tunnel at sec- Custom preferences tion Komsomolsk-on-Amur-Sovetskaya As a result of work performed in fed- Gavan” – at the cost of the Russian eral executive bodies, the Committee Federation Investment Fund. For the of the Customs Union issued a resolu- said purposes, 11,964.05 million Rubles tion No. 534 from January 2011 “On were allocated from the RF Investment changes in the common customs Fund in 2010. tariff of the Customs Union relative to individual types of motor and non-self- Governmental Support of propelled rail cars”. This Resolution Construction of Olympic Game came into force on February 16, 2011, Facilities setting a 2-year long zero rates for im- According to Decrees of the RF port customs tariff on motor and non- Government No. 2144-р dated self-propelled rail cars intended for December 31, 2009 and No. 2150-р operations within electric railway trains dated December 2, 2010 “On increase with maximum running speed not less of authorized capital of Open Joint than 140 km/hr and less than 250 km/ Stock Company “Russian Railways”, hr which complies with specifications the authorized capital of Russian claimed by Russian Railways for Desiro Railways was increased by 60 billion Rus suburban electric train.

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As a result of the resolution made, route “Vladivostok – Knevichi customs tariff for imported electric Airport” in the amount of 3.6 bil- trains to serve passengers during 2014’ lion Rubles Winter Olympic and Paralympic Games will be reduced by 1.1082 billion Passenger traffic Rubles. One of the main social responsibility Public relations Public indices of Russian Railways in collabo- Financing individual Russian ration with governmental authorities Railways’ activity lines out of is implementation of Federal Law No. federal budget 122-FZ (On Monetization of Benefits) In 2010 the Federal Budget allocated which came into force on January 1, to Russian Railways the following 2005. By 2010 Russian Railways made a amounts: contract with the RF Ministry of Health • subsidies for compensation of losses and Social Development on trans- in incomes arising from govern- portation of citizens — recipients of mental regulation of tariffs, duties social (suburban traffic) service in the and payments for freight railway amount of 4.05 billion Rubles. transportations, totaling to 23 billion Besides, Federal Budget funded imple- Rubles; mentation of social support measures • subsidies for performance of capital aimed at individual categories of repairs of public facilities of railway population and related with benefits transport infrastructure, totaling to for trips to medical treatment places 19 billion Rubles; and back in long-distance trains in • subsidies for transportation of new the amount of 792.4 million Rubles, passenger rail cars manufactured handicapped persons and individual in Russian Federation to railroad categories of the population belong- stations located in Dalnevostochny ing to veterans for travels to location of Federal District and in the opposite organizations which provide veterans direction, totaling to 1.3492 billion with technical rehabilitation aids and Rubles; orthopedic products, in the amount of • subsidies for compensation of losses 8.74 million Rubles. in incomes related to setting of Besides, that in accordance with the exclusive tariffs for transportation RF Law “On governmental guaran- of nephelinic concentrate to Apatity tees and compensations for persons Station of Oktyabrskaya Railroad – working and residing in Far Northern Pikaleveo-2 Station, totaling to 0.26 territories and areas equaled to the billion Rubles; said territories”, payment of railway • subsidies of Russian Railways for charges for pensioners to places of compensation of losses in incomes resort and back amounted to 8.25 mil- related to setting of exclusive tariffs lion Rubles. for grain transportation, totaling to According to Decree of the RF 2 billion Rubles; Government No. 207 dated April 7, 2007, • allocations to authorized capital of funds were allocated in 2010 from fed- Russian Railways in the amount of eral budget for compensation of losses 103.6 billion Rubles, including: in income resulting from governmental • capital repairs at public facilities of regulation of long-distance passenger railway transport infrastructure in transportation tariffs (for travels in third- the amount of 20 billion Rubles; class sleepers and in general service cars), • organization of intermodal pas- in the amount of 35.795 billion Rubles. senger transportations along According to Decree of the RF

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Government No. 916 dated December travel benefits for school and pupils 21, 2007, in 2010 307 million Rubles suburban transportation service, in were allocated from the federal budg- the amount of 1.16 billion Rubles et in form of subsidies to compensate losses of income resulting from leveling Security and Anti-terrorist of tariffs on passenger transportations Protection of Railway Transport Public relations Public along route Russia – Kaliningrad. Facilities A significant stage in development of In view of exigent transition to a suburban passenger transportation and radically new transport security level suspension of their cross subsidizing as a result of joint activities of Russian became a government-level decision to Railways and federal authorities, on support suburban passenger traffic in the July 27, 2010 Federal Law No. 195-FZ amount of 25 billion Rubles. Respective “On making changes in individual leg- budget financing is planned for that in islative acts of the Russian Federation in accordance with 2011, as stipulated in connection with enforcement of trans- Federal Law dated December 13, 2010 port security” was adopted intended No. 357-FZ “On federal budget for to prevent the threat of terrorist 2011 and planning period for 2012 and attacks and unauthorized intervention 2013”. Another important result of active in transport operations by increasing cooperation with federal authorities was liability for violation of security require- setting up a regulatory structure for com- ments at transport, and introducing pensation of shortfalls in income for travel more severe punishments for unlawful privilege of students and school pupils: intervention in its activities. • Resolution of the RF Government No. In 2010, Integrated Program of 163 dated December 27, 2010 “On Enforcement of Transport Security approval of Rules for subsidies out of Population (Decree of the RF of federal budget to Federal subjects Government No. 1285-р dated July of the Russian Federation for partial 30, 2010 with regard to changes made compensation of losses in income of by Decree of the RF Government railway transport organizations in con- No. 2341-р dated December 20, 2010), nection with decisions made by the under which 2.5703 billion Rubles was al- RF Federal subjects aimed at adoption located for implementation of measures of travel privileges for students and for enforcement of population security foster children of general education at railway transport. Work as under way institutions, full-time attending pupils to prepare regulatory acts on technical of educational institutions of basic regulation at railway transport, with the level professional education, middle following three technical regulations level professional education and high approved in 2010 by resolutions of the level professional education during Russian Federation Government, namely: their travel by public railway transport • No. 524 dated July 15, 2010 “On in suburban transportation service. approval of technical regulations on • The following funds were allocated rolling stock security”; from federal budget in 2010: • No. 525 dated July 15, 2010 “On • subsidies for transportation of approval of technical regulations pupils and students by long-distance on security of railway transport railway transport in the amount of infrastructure”; 0.8788 billion Rubles; • No. 533 of July 15, 2010 “On ap- • subsidies granted to the RF Federal proval of technical regulations subjects for compensation of loss of on security of high-speed railway income of carriers because of use of transport”.

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Development of high-speed Agreements railway traffic Russian Railways and the RF Ministry In order to expand the range of trans- of Regional Development signed an portation services provided, introduce agreement on cooperation in devel- new front-line transport technologies, opment of railroad stations, the said which, when developed, will ensure agreement stipulating development of Public relations Public improvement of transport linkage, agreed positions on the draft program create more attractive conditions for “Railroad stations — a point of econom- passengers, improve comfort level and ical growth of the Russian Federation security of passenger traffic, Decree Federal subjects” in terms of integrated No. 321 dated March 16, 2010 “On territorial development of regions and measures intended to organize high- focused on implementation of invest- speed railway traffic in the Russian ment projects in construction and reno- Federation” was signed. vation of railroad station facilities.

8.3.3. Cooperation with chambers of Federal Assembly

The important line of cooperation is of zero percent VAT rate applica- legislative and regulative enforce- tion procedure” was signed by the ment of the Company’s interests. Russian Federation President. This Law In 2010 the Company continued its stipulates application of a zero tax long-standing efforts to prevent rate to transportation and forwarding adoption by the Federal Assembly of a services, locomotive traction services number of draft federal laws “Charter and preserves significant working of Railway transport of the Russian assets of the following subsidiary com- Federation” introduced by deputies panies of Russian Railways, namely, of the RF State Duma, as to cancel- PGK, VGK, “TransKonteiner”, etc. lation of charges for excess utiliza- According to a decision by the Board tion of rail cars and freight storage, of Directors of Russian Railways, the making public of locomotive traction procedure of review of the draft law service contracts, and lowering penal “On customs regulation in the Russian liability. If the said draft laws are Federation” in chambers of the RF adopted, the loss of Russian Railways Federal Assembly was monitored, too. income will amount to about 7 billion The law in edition that did not impair Rubles. As an important outcome the Company’s standing was adopted of the Company’s cooperation with by the RF State Duma, approved by governmental authorities, Federal Law the Federation Council, signed by No. 309-FZ “On making changes in the Russian Federation President on Part 2 of the Russian Federation Tax November 27, 2010 under No. 311-FZ Code in connection with improvement and published on November 29, 2010.

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8.3.4. Cooperation with Regional Authorities

Transportation of citizens with the scope (as agreed by the customer) of regional benefits transport services at the tariffs estab- Pursuant to Federal Law No. 122-FZ, lished. Such contracts were signed with all Federal subjects of the Russian 66 regions; besides, in 3 regions pas- Federation, where passenger suburban senger suburban transportation services transportation service is conducted by are provided on the basis of interaction Public relations Public railway transport, made regulatory acts and cooperation agreements. The total to provide benefits to citizens, social sup- amount of budget support for passenger port of whom was assigned to powers suburban transportation amounted in of the Federal subjects of the Russian 2010 to 3.9 billion Rubles (1.1 billion Ruble Federation. Every year, Russian Railways gain against 2009), including 1.9 billion signs contracts (agreements) with execu- Rubles received by passenger suburban tive authorities of the RF Federal subjects transportation service companies with on payment of travel charges for citizens participation of regions. belonging to regional benefit category. As of 2010, contracts were signed with Suburban transportation service all 55 regions where centralized payment providers is stipulated for payment of transpor- The railway transport reformation pro- tation services covering recipients of gram stipulates setting up of suburban regional benefits (18 regions decided to transportation service companies in order monetize benefits). to increase budget support of suburban In 2010 the Company received 3.8 billion transportation services from the side Rubles for transportation of regional of the Federal sublects of the Russian benefit recipients. Federation, thus lowering loss ration of such operations. During 2010, 7 suburban Regulation of tariffs in passenger transportation service companies were suburban transportation service incorporated with participation of a According to the Resolution of the RF number of Federal subjects of the Russian Government No. 239 dated March 7, Federation. As of January 1, 2011, 22 1995 “On measures intended to normal- suburban transportation service compa- ize governmental regulation of prices nies covered all 73 Federal subjects of the (tariffs)”, the right to introduce govern- Russian Federation with suburban traffic. mental regulation of tariffs for transpor- tation of suburban passengers is granted Regional investments to executive authorities of the Federal The crossing point of interests of subjects of the Russian Federation Russian Railways regional and local providing disbursement of losses caused authorities are issues of construction tariff regulation out of relevant budgets and renovation of railroad stations pas- of the RF Federal sublects. senger terminals, development of near- Meanwhile, no legislative act of the station areas, enforcement of safety Russian Federation has regulated the and security on rail-highway crossing issue whether losses of income suf- points and at road junctions. In order fered by infrastructure owners and car- to expand cooperation with regional riers as a result of governmental tariff business, the Company developed and regulation were to be disbursed. approved a clean-cut procedure of joint In order to fully compensate shortfall of financing of construction and renova- incomes, contractual conditions of subur- tion of railway transport facilities. In ban transportation service organization 2010, the scope of regional budget and a standard transport service contract investments allocated to railway infra- were developed. The contract stipulated structure facilities, were:

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• 271.9 million Rubles, including: • capital repairs of a railroad station • repairs of access motor roads to rail- terminal, Almetievskaya Station way crossings amounting in total to and passenger landing platform, 10.9 million Rubles, including: Almetievskaya Station (Republic of • 2.0 million Rubles (); Tatarstan) – 11.64 million Rubles • 4.0 million Rubles (); On additional funding sources relations Public • 2.9 million Rubles ( during implementation of Oblast); investment projects • 1.0 million Rubles ( Oblast); Since end of 2008 active measures • 1.0 million Rubles (Altay Territory); were taken to receive enterprise profit • capital repairs and renovation of and property tax rebates granted by passenger platforms (Leningrad the RF constituents to major investors. Oblast) – 80 million Rubles; In 2010, 28 regions enabled the • construction of a railroad station Company to receive tax rebates. at Priobie Station (Khanty-Mansi According to results of the year, tax Autonomous Area) – 97.36 million exemptions amounted to 1.1 billion Rubles; Rubles, which exceeded by 298.9 million • construction of a railroad station Rubles (or by 37%) the 2009’s figures. terminal at Nyagan Station — 52.04 Top benefit recipients were million Rubles (Khanty-Mansi Oktyabrskaya (420 million Rubles). Autonomous Area); Sverdlovskaya (209 million Rubles), • renovation and restoration of Privolzhskaya (64.3 million Rubles) railway transport facilities located Railroads. Expansion of the existing in memorial zone of Lev Tolstoy tax exemption practice will help to Station () dated to the create additional favorable conditions anniversary of the writer’s death, in provided implementation of ‘Strategy November 2010 (13 million Rubles in of Railway Transport Development 2009; 20.4 million Rubles in 2010); until 2030’.

8.3.5. Interaction with Business Communities

Cooperation of Russian Railways with was examined and approved: business communities and public or- • draft federal laws on making amend- ganizations in 2010 resulted in support ments to Federal Laws “On railway of the Company’s initiatives, thus en- transport in the Russian Federation”, suring realization of symbolical events “Charter of railway transport of the on the following topics: Russian Federation”, “On specifics of management and administration of With Russian Union of railway transport property”; Industrialists and Entrepreneurs • Target model of the railway trans- (RSPP) portation market for the period In RSPP’s Transport and Transport until 2015 (approved by the RF Infrastructure Committee the following Government);

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• main directions and mechanisms • on making changes in Part 22 of the of regulation of the Russian mar- RF Tax Code in connection with the ket of international motor road zero VAT rate collection procedure transportations; (the Law was adopted); • issues of innovative approach to • on optimization of tax administra- organization of container traffic with tion procedures as to application of Public relations Public participation of enterprises of vari- a zero VAT rate with regard to trans- ous transport type; portation and forwarding services • port complex development issues; related to international transporta- • issues concerning organization of tions (the Law was adopted); the company “Vtoraya Gruzovaya • on development of the energy power Kompania” (already organized); market: measures to attract invest- • issues of interaction between con- ments into power engineering market; signers, carriers and the state: • on efficiency of taxation measures • in the field of development intended to stimulate innovations; of public railway transport • on the draft Development Concept, infrastructure; cumulative component of pension • in improvement of regulatory system being developed by the control; RF Ministry of Health and Social • in improvement of tariff Development; regulation; • proposals on governmental support • issues of organization of container of modernization and development transportation service; of railway system until 2015, in the • issues of main concepts of improve- amount of 447 billion Rubles; ment of efficiency of car fleet control • draft Federal Law “On Police”, as on the basis of infrastructure of to par. 6, Article 48 of the draft law Russian Railways. where responsibility of transport • issues of legislative enforcement organizations is fixed to provide of governmental support of mod- rooms, communication equipment, ernization of transport system in the hardware and services to territorial Russian Federation and improve- units and subdivisions of the Police on ment of its security. a grant basis (no support provided); • The Management Board of RSPP • proposals for improvement of secu- examined and supported the issue of rity at railway transport. “Integration of Russia into world eco- RSPP provided its support for the fol- nomical community, achievement of lowing draft laws, important for the top priority goals of the state via effec- Company, namely: tive utilization of its transit potential. • “On cargo transit over the terri- The following proposals of Russian tory of the Russian Federation and Railways were supported: introducing changes in individual • on the procedure of VAT collection legislative acts related to organiza- from consignors of petroleum prod- tion of transit traffic”; ucts during export operations (the • “On direct combined traffic”; Law was adopted); • on making changes to Law “On • on making changes in Article 164 of customs regulation in the Russian the RF Tax Code as to modification Federation” as to the provision stipu- of the list of services subject to zero lating obligatory advance notifica- VAT collection, and a list of persons tion of customs authorities; authorized to apply such tax rate • on making changes to Law “On (the Law was adopted); customs regulation in the Russian

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Federation” as to the provision stipu- • “Target model of railway traffic lating limiting the number of customs market until 2015” fully supported operations and the list of information by the Chamber; to be submitted to customs authorities • “Problem issues of transportation about cargo in transit over the territory of timber freight and other cargo by of the Russian Federation, and applica- railway transport”. Public relations Public tion of customs inspection as the main Russian Railways are made a member method of transit cargo control; of the RF Chamber of Commerce and • on making changes to Law “On sea Industry (February 2011). The CEO of ports in the Russian Federation and on Russian Railways is admitted to the making changes in individual legislative Board of Directors of the RF Chamber of acts of the Russian Federation” of pro- Commerce and Industry (February 2011). visions regulating interaction of various types of transport, cargo export from a With Union of Russian Carriers port, necessity of clarification of parties On the Company’s initiative, a panel and conditions of node agreements, discussion on the issue “Target model liability of operators, carriers and ports; of railway traffic market until 2015” • on making changes to Law “On fully supported by the Chamber; as a transport security”. result, the Company’s opinion was fully More than 20 representatives of the supported. On the Company’s initia- Company and specialists are included tive, Union supported proposals on in Committees of RSPP. the draft Federal Law “On Police” as to par. 6, Article 48, where the requires With Public Chamber of the transport organizations to provide of- Russian Federation fice rooms, communication equipment, On the initiative of the Company, public hardware and services to territorial hearing was held on the following issues: bodies and subdivisions of the Police • “Children’s summer recreational on a grant basis. campaign – 2010: problems and solutions” (March 25, 2010); With Guild of Forwarders of Russia • “Role of commuter railway transport Over 20 events were hold with the in social and economical develop- Guild which covered the Company’s ment of the RF constituents and acute interests. operational issues” (August 25, 2010); On the permanent basis, the Company • “Role of youth in modernization de- and the Guild jointly plan activities velopment of the Russian industry” aimed to implementation of projects, (December 15, 2010); most significant for the Company. A • “Big Moscow: review of transport joint Work Force was set up to follow problems and solutions” up legislative initiatives. (December 17, 2010). On the Company’s initiative, the Guild Based on the results of those hear- supported the following proposals: ings, recommendations were pre- • “On cargo transit over the territory pared which fully accounted for the of the Russian Federation and mak- Company’s position. ing changes to individual legislative acts related to organization of com- With the RF Chamber of Commerce bined (mixed) transportations”; and Industry • “On direct combined (mixed) On the initiative of the Company, pub- transportations”; lic hearings were held on the following • On making changes to the Law “On issues: customs regulation in the Russian

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Federation” concerning provisions of the Company were included in on obligatory prior notification of the working groups to complete the customs authorities; draft of federal laws, approved by • On making changes to the Law “On the Commission of RF Government customs regulation in the Russian on Legislative activities. . Federation” concerning provisions • The work oriented at the interaction Public relations Public which stipulate limiting of a number with Russian Union of Industrialists of customs operations and to the and Entrepreneurs (RSPP) was provision stipulating limiting the very successful. On February 16 number of customs operations and the expanded meeting of RSPP the list of information to be submit- Commission on transport was held ted to customs authorities about car- to discuss the issues of transport. The go in transit over the territory of the meeting was run by the Top officials Russian Federation, and application of the Company. The participants of of customs inspection as the main the meeting discussed the federal method of transit cargo control; law drafts and the amendments • On draft Federal Law “On Police”, as to be introduced in the following to par. 6, Article 48 of the draft law laws: “The Railway transport in the where responsibility of transport or- Russian Federation”; “The Charter of ganizations is established to provide the Railway Transport of the Russian rooms, communication equipment, Federation”; “The particularities of hardware and services to territorial the management and disposition units and subdivisions of the Police of railway transport assets”. RSPP on a grant basis. and freight owners supported the • The Chamber of Commerce has platform of Russian Railways. On signed the Agreement about the November 30, RSPP Commission on cooperation with Russian Railways. transport has unanimously approved The Chamber of Commerce ex- the project of the Target Model of pressed its wish to render assistance Rail Freight for the period up to 2015 to the Company in the promotion of and recommended to the Federal the reorganization of the suburban executive bodies to speed up the ap- traffic on the federal and regional proval of the Target Model and the levels as the new system assumes the preparation of relevant regulations state order. and legal norms. • The Agreements have been signed • In addition to the above, the about cooperation as below: Commission on the economic devel- • Between Russian Railways and opment and support of entrepre- “OPORA RUSSIA”; neurship at RF Public Chamber has • Between Russian Railways and considered the Target Model Draft All-Russian non-governmental for the period up to 2015 and unani- organization “Business Russia”. mously approved the project. • The certain work has been done to • The top officials of the Company took include the top-managers of Russian an active part in the discussions of the Railways in Commission on the mat- government program of anti-crisis ters of industrial and entrepreneur- measures. The meetings of the Public ship development that was formed Chamber with participation of T.A. as the consulting and advising body Golikova, RSPP Management Bureau at the Presidium of the General with participation of I.I. Shuvalov, and Council of All-Russian Political Party Russian Union of Transport were held “United Russia”. The representatives for the above mentioned purpose.

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As a result, the suggestions have a result of such trips. The national tax control over the usage of transfer been forwarded to I.I. Shuvalov, the business-communities have sup- prices and the main aspects of First Vice-Prime Minister. V.I. Yakunin ported the arguments of Russian custom and tariff policy for 2010 and accompanied D.A. Medvedev, RF Railways against the reduction further for 2011-2012 have received President, in his foreign trips many of financing or suspension of the the support. The close coopera- times, as a representative of the na- implementation of the Russian‘ pro- tion has been established between Public relations Public tional business (Russian and American jects with the use of the resources of Russian and American Presidential Summit on July 7, etc.) and V.V. Putin the Investment Fund of the Russian Commissions due to the appropri- in his foreign trips (Finland, June Federation. The relevant recom- ate mechanism for continuing the 3, and Chinese People’s Republic, mendations have been forwarded dialogue between Russian and October 13-14, etc.) to V.V. Putin, the Chairman of the American business communities. • The key agreements, protocols and Government. The arguments of the contracts have been concluded as Company on the improvement of the

8.4. Charitable activities

Figure 8-4. Lines of charity work of Russian Railways

Charity Work of Russian Railways

Assistance of activities Support for in disease prevention Care for retired railroad children’s pre-school and health care of the Support for the most employees, veterans of organizations, orphan population, promulgation vulnerable population the Great Patriotic War homes, shelter-care of healthy life style, groups, pecuniary aid and Labor Front facilities, school development of physical institutions culture and sports

Provision of pecuniary Provision of pecuniary aid to public, religious to citizens and other organizations

The charity of the Russian Railways is a of performed work. The total sum traditional trend of the Company, fo- spent by Russian Railways for such cused at the fulfillment of the free-will charitable activities upon the ap- and disinterested social responsibility. plications from various organizations Every year the Management of the and individuals amounts to about 0.5 Company defines and approves the billion Rubles. The traditional lines Plan of charitable actions for the of charitable activities of the Russian reporting period and in the end of the Railways are as follows: year the Company reviews the results

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• Wide range social support of dif- branches of Russian Railways (includ- ferent kind (from monetary support ing all rail roads in the country) took to medical care) to disadvantaged part in this project granting more people; than 110 Million Rubles. The program • The charitable donations to vari- covered over 800 railway veterans. In ous NGOs, religious and non-profit the apartments and the houses where Public relations Public organizations whose activities are these people lived necessary minor aimed at the achievement of targets and capital repairs were done. Russian useful for the communities for the Railways Company is well known for development of the spiritual, moral its active life position and readiness to and cultural values along with the respond and render any assistance to health of the communities; compatriots in difficult situations. • The support of the socially oriented This summer our country has faced a initiatives and projects aimed at the difficult situation, when vast forested education and development of the lands were burning, and the fires left young people; hundreds of families homeless and • The care of the children and railway without property. We have provided veterans, including the care of their the finances in an amount of 30 million health, lifestyle and living standards. Rubles to 7 regions that suffered of the Last year Charitable Foundation fires most. The spiritual revival of the “Transsojuz” was established to nation is impossible without revival of promote the development of railway the faith of our ancestors – the Russian transport in order to implement the Orthodox Church – the culture-forming tasks and consolidate financial resourc- religion of our country. Under the aus- es and charitable efforts of Russian pices of the Russian Orthodoxy Church, Railways, its subsidiaries and enter- the Russian community has overcome prises, associated with railway industry, the economic, political and moral for the further realization of charitable crises many times. Therefore it is very projects which are significant for the important for us to support the projects nation or recognized as major railway related to the religion. Besides the con- projects. Despite the difficult economic struction and restoration of cathedrals situation we managed to maintain the such actions might be considered the stable charitable support and respond due attention to the social activities of to a number of questions and requests the Russian Orthodox Church, covering of the people, NGOs, religious and all sides of the life of our society and other organizations. The Company each human, believing in God. A lot of pays a considerable attention to the is- examples of active participation of the sues associated with the improvement charitable foundation “Transojuz” of of moral and psychological state, living the Russian Railways might be given conditions, welfare and social protec- in this connection. Only some of these tion of the employees and veterans of examples are given below: the railway transport industry. For in- • Financial support in the restoration stance, a wide-range targeted charita- of The New Jerusalem Monastery (or ble project was realized by the Russian the Novoiyerusalimsky Monastery), Railways Company to commemorate also known as the Voskresensky 65th anniversary of Victory in the Stavropighial Monastery Great Patriotic War. The project was (Resurrection) Monastery (at present dedicated to the improvement of living moment the sum of allocated funds conditions of veterans who fought in amounts to 75 million Rubles); the Great Patriotic War. Twenty one • The support in the reconstruction

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of the Church of the Fyodor’s Icon are taking major and fundamental ef- of the Mother of God in Saint forts in the area of preservation of our Petersburg, located in close vicinity country’s cultural heritage. of Moscow Railway Station (includ- The examples of such activities are ing the financing of foundry and the restoration of State Museums – installation of bells); Preserves in Pavlovsk and Tsarskoye Public relations Public • The financial support in building Selo in the suburbs of ; of Strannopriimny House (Pilgrim the restoration work in Cathedral House) of the Russian Orthodox of Basil the Blessed in Red Square in Church at the site where Jesus Christ Moscow; the construction of the new was baptized in Jordan River (at Concert Hall in Mariinsky Theatre, etc. present the sum of allocated funds The effective charity work is based amounts to 75 million Rubles); on voluntary and disinterested help • The construction of the Church of of the people who inherited the best All Saints Resplendent in the Russian traditions of Russian entrepreneurs of Land – the only place where the the past, patrons who became famous unhappy people with a crippled owing to their mercy. The charity soul can enjoy the normal human becomes possible owing to ordinary attitude and, may be, for the first people who are not alien to such time in their life feel good, love and concepts as “compassion”, “mercy” spiritual joy – in the general regime and such a long forgotten, but es- colony of FSI 55/5 in Sukhinichi. sential word as “prizrenie” (“care”). And a lot of similar examples can be “Prizrenie” means to see, feel and cited in addition to the above said. share, and, if possible, to help those “Transsoiuz” and the Russian Railways who need your help.

8.5. Information Transparency of the Company’s Activities

Joint Stock Company “Russian disclosure, Russian Railways voluntar- Railways” adheres to the principles of ily submits information on its current maximum availability and transparency operational, social and other activi- for all customers and stakeholders. ties in order to provide a better and The Company strives to submit fuller presentation of the Company’s complete and reliable information operations. to shareholders, state authorities, Russian Railways promptly and ad- investors, personnel, NGOs, and equately react to events and changes mass media representatives. Russian of circumstances related to corporate Railways are committed to provide actions. The information that is made full and reliable information about publicly available is given below: all Company’s activities, however, the • Biographic and personal data of Company tries to prevent disclosure members of Board of Directors of its commercial secrets and leaks of and Management Board of the insider information. In addition to the Company; information that is subject to com- • Information about the corporate pulsory disclosure as required by re- social and personnel policy; spective Russian laws on information • Information about the Company’s

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participation in national and inter- Company’s official periodical, national projects; “Gudok” (“Horn”) newspaper; • Charity and sponsorship activities; • Regular meetings of the Company • Cases of environment pollution and Management with stakeholders for factors adversely affecting ecological clarification of the platforms and security of the population; opinions on principal issues associ- Public relations Public • Financial and economic activities; ated with the development and • Strategic issues and the develop- activities of the Company. ment projects; During 2010 the systematic work was • The progress of structural re- conducted by the Company with lead- forms associated with the railway ing Russian and foreign mass media. transport; The purpose of such work was to • Information on ratings awarded to present the platform of the Company the Company; on urgent debate problems to the • Information about procurement and public, including the innovations, intro- evaluation activities; duced by Russian Railways, the higher • Information about new services and loyalty of mass media and community other opportunities for stakeholders; to the Company. The comprehensive • Information about everything that programs connected with the com- might affect the adoption of invest- munication support of each functional ment and other decisions, related to direction of the Company business have Russian Railways. been implemented including as follows: The principal information instru- • Freight/Passenger transportation; ment of Russian Railways is the • Finances and economy; corporate Web portal (www.rzd.ru) • Modernization; which includes English site version. • Investment projects and innovations; The website posts all main news of • Social Policy; the Holding. In addition, the latest • Security. news is broadcasted in independ- The following events of the Company ent and industry specific mass media have been widely covered by mass channels. media in 2010: The Company’s Department of • Presentation of Allegro train; Corporate Communications is responsi- • Construction of railway infrastruc- ble for effective information exchange tures for Sochi Olympiad; with all stakeholders. The activities • Meeting “The Investment Program of the Department are governed by of Russian Railways for 2010” with the Regulation “Information Policy of participation of V.V. Putin, Prime- Russian Railways”. Minister of RF Government, held in To make the information available for Sochi; all stakeholders while observing the • Launch of regular services of principles of transparency, accessibility high-speed Sapsan trains en route and objectivity, the Company uses the Moscow – Nizhny Novgorod; methods as below: • Launch of regular services of • Information is posted in Internet a passenger train en route free-of-charge and is available to Moscow – Nice; everybody interested; During the year over 900 official press- • Information and documents of releases of the Company were issued the Company may be delivered on together with 4700 news from the requests of stakeholders; Company’s branches, subsidiaries and • Information is published in the affiliates.

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Every day mass media received over interviewed directly and indirectly dur- 25 new messages containing the new ing the last year. information about the activities of Besides, in 2010 20 press-tours to vari- the Company in the regions. Over 25 ous railway facilities and major trans- presentations were held by Russian port forums were held to demonstrate Railways during the year. The Company the changes in the Company so that Public relations Public presented the innovations in the the journalists and mass media repre- railway industry. The journalists and sentatives could get a deeper insight of reporters participated in such presen- such processes. tations, thus providing broad informa- As a result of the work done, over 25 tion support in mass media. Over 25 thousand materials containing the infor- press-conferences run by the Company mation about the Company’s activities managers and over 65 press-events appeared in mass media, including TV, in regions and abroad were held by radio, newspapers, journals, Internet Russian Railways Company. Top man- publications. At that, the majority of agers and CEO of the Company were mass media reactions were positive.

8.6. Evaluation of Compliance of the Company’s Activities with Regulations and Laws with Respect to Public Relations

The principal conditions to prevent Railways. In case of any such conflict, body. “Zheldorcontrol” and Security corruption in Russian Railways are the Russian Railways’ executive bodies Department undertake measures to transparency of all operations and ac- shall immediately inform the Board prevent and accordingly identify the tivities of the Company, including strict of Directors. This practice will secure damages caused to the economic in- regulation of decision-making order the Shareholders’ interests. Russian terests of the Company, in compliance and procedures and control over offi- Railways have issued the Instructions with the regulation in force regarding cials’ work. As to all said, the Company regarding the handling the informa- the cooperation during the audits of is guided by national and corporate tion that contains commercial secrets. the financial and economic activities of regulations and norms, in particu- The said Instructions were approved by affiliates, structural subdivisions and lar, by “Rules of Non-discriminatory the relevant Russian Railways’ order. other enterprises of Russian Railways. Access of Carriers to the Public Railway The Company pays close attention to In the case of such violations and Infrastructure’ approved by Decree the improvement of the financial and misuses, the internal investigations No. 710 of November 25, 2003 of the economic activities control. The special shall be conducted. Depending on the RF Government in accordance with division “Zheldorcontrol” (hereinafter results of internal investigations and the principles stated in Article 14 of “the Center”) was formed for this pur- circumstances, the decision is made Federal Law “Railway Transport in pose. Such Center conducts audits and whether the civil law shall be applied the Russian Federation”. The in- controls financial and economic activi- to compensate the damage or the case ternal documents of the Company ties of the Company. The Regulations shall be referred to the law enforce- contain the provisions stating the about the Center, its tasks, powers ment agencies as stated by the Laws. declaration procedure, in case of any and functions provide the grounds Russian Railways is a natural mo- conflict of interests by the members for the Center’s effective operation as nopolist so the Company shall strictly of the executive bodies of Russian the internal controlling and auditing adhere to the antimonopoly laws.

_153 Policy of Russian Liability to Customer Liability to Customer Railways with Regard Opportunities and Management to Liability to Risks Structure Customers

Liability to Customer Liability to Customer Management System Strategies and Programmes 09

Implementation of the Provision of Customer-Oriented Information to Social Responsibility Customers and Policy in 2010 Marketing Communications

Quality Management

Innovative policy of Russian Railways in 2010 Product and Service Liability Russian Railways Social Report 2010

9.1. Policy of Russian Railways with Regard to Liability to Customers

The liability policy of Russian Railways • timely and quality delivery of cargo, is based on the requirements of the luggage, and cargo-luggage; Federal Law dated January 10, 2003, • railway transport customers with No. 18-FZ “Regulations on the Railway up-to-date and reliable informa- Transport of the Russian Federation” tion about train departure and and comprises obligations providing: arrival time, passenger, luggage, • security of passenger transportation; and cargo-luggage transportation • security and safety of transported cost, opening hours of railway ticket cargo, luggage, and cargo-luggage; offices, left-luggage offices, location Product and Service Liability • quality passenger service at railway of the railway station facilities, about stations, railway terminals, on pas- customer services, and benefits senger platforms and in trains; provided to citizens. • train traffic in accordance with timetable;

9.2. Liability to Customer Management System 9.2.1. Liability to Customer Opportunities and Risks

The Company’s activity with regard to liability to customer bears a number of risks (please refer to table 9-1).

Table 9-1 Risks and opportunities of Russian Railways as to liability to customer No. Risk Line of activity Performance Indicator

• Performance of work for prevention and liquidation of fires, other accidents and emergency situations, incidents and performance of accident-recovery work; • Reduction of the number • Continuous monitoring of conditions of infrastructure of derailing, accidents, and rolling stock; emergencies, other • Organization of repairs and maintenance of rolling Derailing, incidents and unlawful acts; stock and other equipment; accidents, • Introduction of functional • development and use of engineering solutions to 1. emergencies, other quality management prevent negative influence of human factor during incidents and strategy; operation of railway transport; unlawful acts • Introduction of functional • compliance with legislative and regulatory strategy of guaranteed requirements concerning safety of products and safety and reliability of services; transportation processes • Training and advanced training of personnel; • Raise the level of safety culture, personnel motivation and initiative

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Table 9-1 Risks and opportunities of Russian Railways as to liability to customer No. Risk Line of activity Performance Indicator

• Insurance of freight and passengers; • Insurance of fright transportations, especially in case of Default on transportation of hazardous cargo and perishable goods Less number of complaints Product and Service Liability 2. obligations to by the cargo owner or consignees; and claims from customers customers • Training and advanced training of personnel; • Monitoring of customers’ satisfaction; • Introduction of quality management systems in the Company’s subdivisions

9.2.2. Liability to Customer Strategies and Programmes

The Company has adopted a functional • unity of safety management; strategy for promotion of guaranteed • integration of risk management pro- safety and reliability of transporta- cedures into the functional activities tion process, which determines the of Russian Railways in the field of main principles, areas and mechanisms safety promotion. for achieving the targeted state with The Company has adopted the Quality regard to promotion of transportation Management Functional Strategy safety. Russian Railways will be imple- developed in order to: menting the corporate safety manage- • enhance promotion of transporta- ment system in accordance with the tion safety based on the quality following major principles: control of all technological opera- • integrity (system approach) in tions in the course of transportation, carrying out safety management as well as in the course of repairs and procedures; preparation of rolling stock; • strategic orientation of safety man- • substantially improve the qual- agement activities; ity of services provided to develop • introduction of technical facilities new markets inaccessible before, monitoring and control systems in and to increase competitiveness order to eliminate the impact of hu- and strengthen presence in the man factor when analyzing malfunc- existing markets. For more de- tions of technical facilities; tails on the Quality Management • continuity of safety management Functional Strategy, please refer process based on monitoring and to Russian Railways web-site at: regular update of information used in http://www.rzd.ru/wps/portal/ the corporate management system; rzd?STRUCTURE_ID=1448.

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9.2.3. Liability to Customer Management Structure

In 2010, the train transportation the transportation safety issues. The safety control system was imple- structure of interaction between the mented through a three-level or- auditing administration for transpor- ganizational structure, the operation tation safety with branches and their of which was headed by Russian structural departments is shown in Fig. Railways Vice-President in charge of 9-1. Product and Service Liability Fig. 9-1. Security supervision staff: structure of interaction

Vice-President of Russian Railways

Traffic Safety Department

Central and Regional Directorates Technical Departments Railroad as a branch of Russian Railways of Russian Railways

Office of Chief Railroad Safety Supervisor

Services Railroad Directorates

Railroad districts

Offices of Railroad Traffic Safety Supervisors

Subsidiary and affiliated enterprises Structural subdivisions of Federal Structural subdivisions of railroad districts of Russian Railways Passenger Directorate, Central Directorate for Car Repairs, Central Directorate for Track Repairs and other branches Organizational and control functions • at the railroad division level — chief with regard to promotion of safety are auditors for transportation safety distributed in the following manner: of trains of the railroad divisions re- • at the network level — porting to the heads of the railroad Transportation Safety Department divisions. that works in accordance with The auditing administration for the regulations approved by the transportation safety exercise con- President of Russian Railways; trol over adherence to the regulatory • at the railroad level — chief auditors legal acts of the Russian Federation for transportation safety of trains of and regulations of Russian Railways the railways reporting to the heads regarding transportation safety issues, of the railways; emergency prevention and recovery,

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transportation of hazardous cargo. a complex of organizational and tech- The auditing administration submits nical measures aimed at correction of reports to the federal bodies of execu- violations detected during inspections tive power and to the central office of (audits). Russian Railways. The results of technical inspections (au- Auditors carry out audits and inspec- dits) carried out by the auditing admin- tions of organization of work for istration for transportation safety of promotion of train transportation the railways and railroad divisions are Product and Service Liability safety within offices, branches, and reviewed by the heads involved within structural subdivisions of the railways the established deadlines (including divisions, control remedial actions. development of measures aimed at Their functions also comprise analysis correction of the detected violations as of condition of transportation safety well). Increase of safety of the railroad on the railways and development of transport operation is one of the most preventive measures, regulatory docu- important goals of reform stated in ments on the matters of transporta- the Structural Reform Programme tion safety, emergency prevention and approved by the Government of the recovery, transportation of hazardous Russian Federation. In order to reach cargo, elaboration of proposals on this goal, principles of graduality their modification and addition. and minimization of the irreversible Main work for control of organization action risk have been provided for. of train transportation safety in Russian Over a period of the last 3.5 years, the Railways departments, directorates, main direction with regard to promo- at the railways and railroad divisions tion of transportation safety in the is carried out by means of technical Company is the “Functional Strategy inspections (audits). These inspec- of Guaranteed Safety and Reliability of tions are not just a tool to reveal and Transportation Process”. acknowledge the existing problems in The Strategy determined transi- work for prevention of transportation tion towards a new transportation safety violations. The most important safety management system — build- result of these inspections and audits is ing and development of the Safety detection of “bottle necks” and devel- Management System on the basis of opment of concrete proposals and rec- new principles, methods and tools. The ommendations aimed at elaboration of basic methodology of this system is risk remedial measures as well as evalu- management allowing to set out the ation of the level of preventive work system’s priority. During the period for promotion of train transportation that passed the following work was safety by command personnel of rail- accomplished: ways, railroad divisions and structural • structural subdivisions, railways, di- subdivisions. The results of technical rectorates together with the depart- inspections (audits) carried out by the ments were involved in solving major committees of Transportation Safety functional tasks of the Strategy; Department of Russian Railways are • analysis and improvement standards reviewed by the Russian Railways Vice- were developed; President in charge of the transporta- • railroad inspections were carried tion safety issues, or by the Head of the out using the elements of techni- Transportation Safety Department. At cal audit, results of the inspections the same time, heads of the structural are used to determine the “bottle subdivisions, railroad divisions and necks” for implementation of pre- independent branches are developing ventive measures;

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• based on the “Methodological measures will allow to improve the recommendations on traffic accident quality of goods supplied for the damage calculation”, multiple factor Company’s requirements, reliability of analysis was carried out with regard operation of the infrastructure facili- to transportation safety state taking ties and rolling stock, and the level of into account not only the instances transportation safety. of transportation events and ac- Continuous monitoring and analysis cidents, but their economic impact of safety violations and their eco- as well; nomic impact is an integral part of the Product and Service Liability • work on forecasting the risks of comprehensive system of transporta- emergence of hazardous states at tion safety management at the Russian the infrastructure and rolling stock Railways. A research-to-practice facilities was launched. conference “Train Transportation In order to develop the Strategy, the Safety” is held on an annual basis, Company decided to establish a situa- heads and specialists from depart- tion room for emergency monitoring ments, directorates, branches and and management at Russian Railways. their structural subdivisions of Russian For this purpose a concept of the Railways, as well as the representatives Situation room was developed and of sectoral science, higher education approved, as well as measures for its institutions, design bureaus, factories establishment and operation. Modern and the CIS countries take part in it. economic situation requires the The Company’s management par- Company to have an efficient mecha- ticipates in the conference. After the nism to response the transportation conference, recommendations on work safety situation to use a complex of aimed primarily at solving accumulated economic, legal, and technical meas- problems in the field of transportation ures. To implement such a mechanism safety are developed. In April 2010, the Company systematically works measures for optimization of structure on the issues of labour motivation of chief auditors’ administrations for of the railway employees ensuring railway train transportation safety transportation safety. In 2010, over 2 were adopted. Auditors for transporta- billion Rubles were paid as bonuses tion safety from the railways divisions for promotion of train transporta- were transferred to the administration tion safety to 119,000 employees. 184 of the chief auditor for railway train persons received a badge of honour transportation safety of the railways “For Transportation Safety” together executive body — Russian Railways with a bonus of 12,000 Rubles totaling branches. 2,208,000 Rubles. This reorganization allowed for more During the years of its activity, Russian efficient use of the auditors admin- Railways invested over 33 billion Rubles istration, harmonization of work of only in implementation of transporta- regional auditors. In 2010, technical tion safety enhancement programmes inspections of organization of the without taking into consideration the transportation safety were carried out comprehensive projects. On February at Gorkovskaya, Zapadno-Sibirskaya, 25, 2010, at a special meeting of the Dalnevostochnaya, Oktyabrskaya, Board of Russian Railways a complex of Severnaya, Sverdlovskaya, measures for improvement of techni- Moskovskaya, Kuibyshevskaya, cal facilities reliability and promotion Severno-Kavkazskaya railways, also of transportation safety was adopted. inspections at Kaliningradskaya, Implementation of this complex of Privolzhskaya, Yugo-Vostochnaya,

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Yuzhno-Uralskaya, Vostochno- locomotives has increased by 62%. Sibirskaya, Sakhalinskaya, In 2010, 65 instances of fire outbreak Zabaikalskaya, Krasnoyarskaya rail- took place in locomotives, that exceeds roads, including inspections at struc- the level of 2009 by 81%. The main tural subdivisions of the central direc- causes of fire outbreaks in locomotives torates and other branches of Russian were defects and failures of: Railways located within the boundaries • electric wiring and electric equip- of the corresponding railways. ment (19 instances); Product and Service Liability As a result of these inspections, 8,318 • traction motors and cables locomotives were removed from op- (20 instances); eration, work at 1,623 shops and units • Diesel motors and equipment was suspended, 1,230 passenger and (8 instances). goods trains were declared not ready Within the car park, the main problem for operation; 399 station-to-station is breakage of solebars of freight car blocks, 22,209 turnout switches, and trucks due to the fault of manufactur- 6,252 station tracks were closed for ing plants: transportation. • 10 instances of breakage happened within the responsibility of “NPK Safety in figures “Uralvagonzavod” JSC; In 2010, 38,000 highly defective rails • 5 instances in case of closed-up JSC were detected in the railway network, “Azovelektrostal”; at the same time 56 rails were bro- • 4 instances in case of ken (58 in 2009), in five instances rail “Promtraktor-Promlit”; breakages caused four train derail- • 1 instance each in case of the ments and one railway disaster met by Bezhitsky and Kremenchugsky steel a goods train. Permanent increase of works. the portion of continuous welded rails • 86 per cent broken car frames were and string lengths (in block section and manufactured during 2006-2008. station-to-station block) results in an On repeated occasions, Russian increase of welding joints, however, Railways JSC informed the manufactur- welding machines and joints welded ers of the low quality of the cars sup- by them do not meet the up-to-date plied, and, primarily, of the moulded requirements. During the period of the pieces of trucks, however, the problem Company’s operation, 194 instances of the quality of products still remains. of rail breakage at welded joints took In order to reduce the train derail- place, or 30 per cent of total breakage. ment risk, in 2010, Russian Railways Main causes of rail breakage are as had to carry out unscheduled techni- follows: cal inspections of the crucial parts of • defect detection equipment fallibil- open box cars. From the beginning of ity in non-selective rails inspection; 2010, technical maintenance of cars • inefficient management engineering within the scope of TO-3 requirements of the defect detection equipment 6962 has been serviced, by way of utilization quality control; which 3,453 solebars and 396 bolsters • insufficient quality of welded joints. were rejected as defective. In the last Handling the problem of detection of 3 years, 52,621 cars were serviced in all kinds of rail defects at early stages accordance with TO-3, by way of which will make it possible to minimize the 9,174 solebars and 1,552 bolsters were risk level of rail breakages. Within rejected as defective. As matters stand, the locomotive park, the amount of such measures should be taken on the damage caused to passenger train railways in the future as well. In order

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to prevent road traffic accidents, each were installed. The problem of safety year the Company takes measures to at the railway crossings can be solved equip the crossings with up-to-date only through the construction of warning devices and fenders, allocates viaducts (tunnels). At the moment, the about 500 million Rubles to maintain speed of construction is very low. As the railway crossings. Each year, over for now, only 23 viaducts out of 118 200 road traffic accidents happen at planned ones have been built. railway crossings in Russia, causing According to the data provided by a big number of road users to die or the railways and functional branches, Product and Service Liability get injured, which is accompanied by financial losses incurred by Russian serious damage to property. Almost Railways in 2010 due to transporta- all road traffic accidents at the railroad tion safety violations amounted to crossings happen because motor car 280.384 million Rubles. The Company’s drivers do not observe the require- loss through the fault of its structural ments of the traffic regulations. In subdivisions makes up 171.1 million 2010, the number of road traffic ac- Rubles, while 109.3 million Rubles cidents at crossings amounted to 260 are losses caused by the third par- instances, which is 29 per cent higher ties of traffic. The total sum of losses than in 2009. There were 79 collisions decreased in comparison to previous of motor cars with passenger trains. years. 225 persons were injured, 72 of whom died. 107 locomotives and 26 rail cars were damaged. Direct losses amount- ed to over 27 million Rubles. In order to prevent road traffic accidents and to expound the rules of passing the railway crossings to motor car drivers preventive social work carried out on the railways, at the motor transport enterprises and right at the crossings. 93 agreements have been concluded with the agencies of the State Traffic Safety Inspectorate (GIBDD) with regard to operation of extra control posts, 1,210 GIBDD groups were es- tablished and operate, together with Russian Railways employees they carry our inspections at the railway cross- ings. In 2010, over 11,000 inspections of compliance with the rules of passing the railway crossings were carried out. A programme for enhancement of transportation safety at the railway crossings developed for the period from 2006 to 2010 was implemented by Russian Railways. A camera system of visual recording is being installed, the information from cameras being transmitted to displays at the GIBDD Departments. In 2010, 19 such systems

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9.3. Implementation of the Customer-Oriented Social Responsibility Policy in 2010 9.3.1. Quality Management

Implementation of measures aimed at compartment. In summer, a new ser- improvement of the quality of service vice is offered to the passenger — an provided to passengers at the railway option to choose a compartment for stations and when moving continues. men, women, or a compartment of In recent years, a number of new, a mixed type. More and more routes more up-to-date and readily con- are being equipped with comfortable structible, railway stations have been luxury night coaches, the up-to- opened; passenger car depots have date design and equipment of them Product and Service Liability been renovated and completely re- providing the highest level of service paired. Every year, the Company pur- and comfort available today en route. chases modern comfortable passenger The programme for equipment of cars cars and widens the range of services with “Safety control and passenger provided. Among them: arrangement train communication system” with of children’s rooms, libraries, taxi call GLONASS/GPS for Russian Railways service, hotel booking services, railway in 2008-2011 will allow to obtain ticket booking and purchase services, a comprehensive solution for the broadcasting of video shows, etc. In improvement of passenger train trans- order to enforce safety of passengers, portation safety, operative response cars are equipped with video surveil- to emergencies, improvement of the lance systems, allowing the passenger rolling stock amortization analysis and car attendant to maintain order in the planning of repairs and recovery of car while observing from the service the property assets.

9.3.2. Provision of Information to Customers and Marketing Communications

Russian Railways informs the customer and in other places where passengers about the services provided, as well as are provided with services. At the of the outcomes of its work via mass railway stations almost all crowded media, the Internet, text advertising. places – platforms, ticket offices, wait- The Company provides for accessibility ing rooms, metro entrances and exits, of the rules and regulations govern- as well as the buildings of the railway ing the use of railway transport and stations – are furnished with ads. Train behavior of the railway transport cus- schedules for passenger trains includ- tomers. The Company is also working ing suburban trains, as well as postal in the field of marketing communica- and baggage trains are made available tions, informing target customers the to the passengers by the carrier using type of its services while taking into ac- wall-mounted information media, count the requirements set forth in the specialized information boards and regulatory and legal documents with reference guides. Loudspeakers at regard to marketing communication. the railway stations and in the railway The information about the services terminals are used to inform about the rendered by Russian Railways is pro- changes in passenger train schedules. vided free of charge at the railway On the Web site of Russian Railways, stations, railway terminals, in trains in the “Passenger Transportation”

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section, (http://pass.rzd.ru/wps/portal/ the feedback with passengers as pass) one can look through the sched- for the matters of service in a rela- ules of long-distance trains, select tively short time and to take measures a suitable itinerary, find a detailed promptly both of organizational na- itinerary description (duration of travel, ture, and those aimed at improvement arrival and departure time), ticket of technological process and service. availability and prices, as well as book and buy a ticket. The “” Provision of information to section contains information on the senders and receivers of cargoes Product and Service Liability speed aeroexpresses going from the In the course of 2010, work on imple- centre of Moscow to the capital’s mentation of a payer’s joint per- airports, as well as about the schedule sonal account (hereinafter the “ELS”) and ticket prices. In the “International technology was carried out at the Routes” section, there is a list of railways — Russian Railways branches. international routes and other useful Thanks to introduction of the ELS information (rules of transportation, technology, a payer for cargo transpor- discounts). A long-distance train ticket tation (a sender, a receiver of cargo or of Russian Railways can be bought a shipping agent) gets an opportunity on the Internet from any place in the to pay for the cargo transportation world. This service is provided for both with delivery (receipt) all over the Russian, and foreign citizens. In order railway system in Russia provided that to obtain hard information about the one payment management agreement passenger’s satisfaction with the level is concluded based on the following of service provided and service stand- principle: one legal entity — one pay- ards supported, a system for monitor- ment management agreement. Thus, ing the quality of rendered services there is a uniform process solution was implemented. with regard to financial settlements As a part of this system, a list of criteria of the Russian Railways transportation used to evaluate the satisfaction of service users for cargo transportation. passengers’ requirements was devel- A Decree of Russian Railways dated by oped. Questionnaires for registration December 8, 2008, No. 2615r sets forth of passenger satisfaction level and a procedure for organization of work evaluation of the grade of meeting the with regard to using bank guarantees service quality standards based on the as securities of transportation payment “Mysterious passenger” method were obligations, that allowed to increase created and introduced. quality of services provided to the Passenger complaints, proposals and customers of Russian Railways. wishes coming through the hot line In order to speed up document turno- real-time routine represent an actual ver in the course of collaboration with source of emotional information about senders, receivers of cargo, payers the problems of service. for cargo transportation and own- Passengers’ perception of Russian ers of the rolling stock, the Premium Railways activities is being constantly Transportation Service Centre worked monitored and studied. on implementing electronic document The Web site of Russian Railways and turnover when preparing documents “Goudok” newspaper always publish for transportation of cargo and empty answers of the directorate officers to rolling stock, including the applica- passengers’ questions, coming to the tion of an electronic digital signature “hot line” of Russian Railways. These (hereinafter the “e-signature”). measures make it possible to support The use of e-signature considerably

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increases the quality of services pro- the required amount of rolling stock vided by Russian Railways to custom- irrespective of its ownership; ers. At the moment, all Regional • agreements concluded between the Agencies for Premium Transportation shipper and rolling stock owners, Service (RAFTO) and Agencies for governing the use of the private roll- Premium Transportation Service ing park. (AFTO) are equipped with e-signature Work on implementation of a compre- certificates allowing them to speed hensive service for the cargo transpor- Product and Service Liability up work with customers, for instance, tation in accordance with a specially the senders of cargo can submit and designed schedule was carried out as modify their applications for trans- well. In order to provide people inter- portation of cargo right from their ested in development of a custom-de- workplace, obtain approval of Russian signed schedule for goods trains with Railways on their applications, sign a comprehensive service for the cargo transportation documents, record transportation in accordance with a cards, final statements and car spot- specially designed schedule, Russian ting/picking statements. Rolling stock Railways adopted the Regulations for owners got an opportunity to do all consideration and approval by Russian the paperwork for transportation of Railways applications for develop- their own empty rolling stock using ment of a custom-designed timeta- the e-signature. In 2010, comprehen- ble for goods trains by Decree dated sive approaches to cargo transporta- December 5, 2008, No. 2597r. tion services and supply of rolling stock were implemented. In order to Publicity activity improve the quality of transporta- Publicity activity of Russian Railways tion management and provide for is an important factor supporting the efficient interaction between Russian Company’s growth; it informs the so- Railways and senders of cargoes and ciety of its policy aimed at implemen- owners of the railway rolling stock tation of Strategy-2030 and changes during the cargo transportation, the taking place within the Company. Centre for Premium Transportation Service (CFTO) of Russian Railways to- gether with the departments involved worked out the patterns of interac- tion between the participants of the transportation process, providing the market with a comprehensive service for organization of the cargo trans- portation (“on a turnkey basis”) and timely supply of the required quanti- ties of rolling stock by the shipper irrespective of its ownership. This service is rendered based on: • agreements concluded between the shipper and cargo senders for provision of a comprehensive cargo transportation service on condition that the cargo owner supplies the approved amount of cargo for trans- portation and the shipper provides

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Fig. 9-2. Objectives of publicity and information activities

Objectives of publicity and information activities Product and Service Liability

Ensuring architectural Acquisition of income Advertising of services and artistic appeal of from the publicity and provided by Russian the facilities of Russian information activities Railways Railways

Preventing and Ordering of placement suppressing placement of of the publicity and improper ads at facilities information materials of Russian Railways

9.4. Innovative policy of Russian Railways in 2010

Innovative development of complex of the country. This was stated Russian Railways in resolutions of the board of direc- The objectives of the innovative tors of Russian Railways dated April 27, development of the economy set by 2010. Within the process of implement- the leaders of the country that were ing the corresponding decisions of the developed in the list of messages of board of directors, the White Book of the President of the Russian Federation Russian Railways was made up-to-date dated January 4, 2010, No. Pr-22, de- the Strategy of innovative development termined the necessity to make the fun- of Russian Railways for the period up damental documents of the Company to 2015 was developed on its basis. The more up-to-date and to bring them in Company’s innovative development line with the new level of its scientific figures were made more precise, the and technological development and present level of its technological devel- the capacity of the machine-building opment was evaluated. 12 directions

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for the innovative development of the of scientists, enhancing the potential of Company were formulated, covering the research institutes, developing and the following issues: supporting of a network of engineer- • creation of modern transportation ing centres, promoting the invention and logistics systems, including high- and implementation of breakthrough speed and speed transportation; technologies in the field of railway • development of intellectual trans- transportation. The Strategy deter- portation management systems; mines the main targets, indicators and Product and Service Liability • introduction of innovative materials, performance figures, which are made technical facilities and technologies more precise when working on the in the realm of infrastructure and innovative development programme rolling stock operation and mainte- of Russian Railways. The Company nance, that enable the decrease of consistently implements the policy the lifecycle cost and the increase of aimed at the effective development of reliability; partnership relations with the leading • learning to use new rolling stock scientific, financial organizations and production technologies, comprising industrial companies of the world. the basic characteristics (efficiency, In October 2010, a new cooperation speed, reliability) of the best samples agreement with the Russian Academy in the world; of Sciences was signed. In order to • provision of efficient resource unite financial and scientific resources management based on formation of to develop drastically important railway a system infrastructure and rolling transportation technologies, coop- stock reliability and safety param- eration agreements between Russian eters, and application of methods Railways and Russian Fundamental taking into consideration evaluation Research Fund (RFFI) with the state of risks at every stage of the lifecycle. corporations “Rosnanotech” and If compared with the previous edition “Rostechnologii” were concluded, as of the White Book, the following direc- well as with a number of foreign and tions for development were added as domestic companies. Implementation the key ones: of the Innovative Development • increase of energy efficiency of the Strategy and work on the Programme Company’s main activity; should be carried out with a view of • environmental protection; formation of technological platforms. • improvement of the technical regu- In 2010, the Company initiated the lation system; creation of a technological platform • introduction of innovative satellite called “High-speed intellectual railway and geoinformation technologies. transport”, which was included in the In accordance with the Company’s list of technological platforms ap- course for innovative development, in proved on April 1, 2011, by the resolu- 2010, the level of aggregate financing tion of the Government committee for allocated for the research and ad- high technologies and innovations. vanced development (NIOKR) amount- In 2010, the Company arranged ed to 4.7 billion Rubles. At the same for working-out of the Innovative time, it is proposed to make the NIOKR Development Programme. This expenses equal to 1% of the income by Programme provides for implementa- 2015. By this time, the Company’s inno- tion of 12 main directions for innova- vative development programme should tive development determined in the have been implemented, its outcomes Strategy and contains a number of encouraging the restoration of schools measures aimed at the development

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and introduction of new technolo- the introduction of “Sapsan” electric gies, innovative products and services trains, the annual volume of traf- meeting the global standards, as well fic provided for by such speed trains as stimulating innovative develop- as “Nevsky Express”, “ER-200” and ment of the key industries in the “Aurora” on the St. Petersburg — Russian Federation. Moscow road amounted only to These measures are aimed at expansion 600,000-700,000 passengers per year. of the scientific and production coop- This project is in incredible demand eration, including international coop- with the passengers. Product and Service Liability eration, the development of business The occupancy rate of speed trains processes of the Company. An impor- on the road section Moscow — tant role in the Programme is assigned St. Petersburg from the beginning of to such directions as personnel training, operation amounted to 86.0%. For education of young people, provision daytime trains, taking into account of continuous education, aimed the passengers getting on and off at forming an “innovative man”, us- the train on intermediate passenger ing the term from the draft Strategy stations is over 100%. The occupancy for the Innovative Development of rate of speed trains on the road section the Russian Federation for the Period Moscow — Nizhny Novgorod from the up to 2020. Innovative Development beginning of operation amounted to Programme of Russian Railways was 64.1%. Technical maintenance of 8 approved by the board of directors af- electric trains is carried out in “cita- ter obtaining approvals of the Ministry tion” mode in a motor train depot of Transportation of Russia and the St. Petersburg — Moskovskoye of the working group for promotion of Oktyabrskaya railway (“Metallostroy”). public-private partnership in the field AG performs all works to sup- of innovation. port continuous operation of “Sapsan” electric trains, including technical Speed and high-speed maintenance and repairs of trains transportation throughout the entire period of their The summary as for the speed and operation (30 years). At the same time, high-speed transportation develop- Siemens AG provides the trains with ment, includes the following points: spare parts, components and modules, • full coverage of high-speed required for maintenance of the rolling transportation on the road sec- stock throughout the entire period of tion Moscow — St. Petersburg by their operation. In subsequent years, “Sapsan” electric trains, 8 electric increase of the potential demand for trains in operation; high-speed transportation on the road • On July 30, 2010, speed transporta- St. Petersburg— Moscow — Nizhny tion opened on the road Moscow — Novgorod is expected. In order to sat- Nizhny Novgorod; isfy this demand and to provide for sta- • On 12 December, 2010, speed trans- ble transportation in periods of major portation opened on the road St. repairs of “Sapsan” electric trains, pur- Petersburg — Helsinki. chases of additional high-speed trains In 2010, over 1.5 million passengers are required. The Company’s manage- were transported on the road St. ment is currently considering the very Petersburg — Moscow, and over 2.0 possibility of purchase of an additional million people taking into account lot of trains and their quantity. Moscow — Nizhny Novgorod section Development of speed transportation of the road. For comparison: before on St. Petersburg — Helsinki road is

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an equally important project. Russian the long-term program for the Railways together with the Finnish “Development of speed and high- Railways established a joint venture, speed transportation in the railway Oy Ltd., that purchased network of Russian Railways up to basing on the results of the interna- 2020”, in 2010, work on improvement tional tender 4 “Allegro” doubly-fed and modernization of infrastructure seven-car electric trains from on the road section St. Petersburg — ( Sm6)), with the design Buslovskaya in order to organize the Product and Service Liability speed reaching 220 km/h and occupan- speed transportation was accom- cy capacity of 344 seats. The certifi- plished. The total distance of the road cate for “Allegro” electric trains was section is 158 km, the train reaches obtained on December 9, 2010. And speed up to 200 km/h on a distance on December 12, 2010, speed trans- of 110 km long, amounting to 70% portation St. Petersburg — Helsinki of the total distance. In the course of was opened, which made it possible reconstruction of infrastructure to fit to reduce the time of travel between for speed transportation, works were those two cities (415 km) to 3 hours 36 carried out at the total amount of 27.3 minutes. Passengers go through the billion Rubles, comprising repairs and customs and passport control when modernization of tracks, reconstruc- the train moves. In 2011, the fourth tion of artificial structures, substitution train will be put into commercial op- of turnout switches, reconstruction eration. In 2010, the involved subdivi- of overhead wiring, modernization sions of Russian Railways were working of electric interlocking stations and on determining the top-priority equipment of the station-to-station projects for the speed and high-speed blocks with tonal rail circuits devices. transportation development. The fol- In order to implement the agreements lowing items were included into those achieved at the joint Russian-Ukrainian top priority projects: working group meeting on July 9, • beginning of design, construction 2010, dedicated to the problem of and installation works on the high- organization of speed transportation speed railway project Moscow — St. on the road Moscow — Kiev accord- Petersburg planned to be completed ing to the plan NTR-2011 Russian in 2017; Railways since December 15, 2010, • organization of speed passenger performed a comprehensive examina- transportation with maximum move- tion of infrastructure facilities of the ment speed reaching 160 km/h on road Moscow — Kiev using a universal the roads: diagnostic complex ADK-I “ERA” to • Moscow — (with possible conduct further analysis, determine prolongation to Sochi and Crimea); barrier spots and make calculations on • Moscow — —Krasnoye increase in train speeds on the road — Minsk (with prolongation to section Moscow — Suzemka. Warsaw and Berlin using rolling In order to perform work on the stock of the Talgo type); preparation of infrastructure on • Moscow — Suzemka — Kiev (using the road Moscow — Alexandrov — the rolling stock with body tilt for the launch of passenger technology of the Pendolino and trains reaching speeds of 140-160 km/h Talgo type); and travel time of about 2 hours 55 • Moscow — Yaroslavl; minutes, OAO “Roszheldorproject” • Omsk—Novosibirsk. developed projects amounting to 947 In accordance with the tasks of million Rubles, 450 million Rubles of

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which were spent in 2010 under the 13-9851, was completed. Continuing head of infrastructure moderniza- the cooperation Russian Railways and tion. A decision is made with regard to AO “Tatravagonka” with the participa- organization of transportation on the tion of OAO “PGK” the development road section Alexandrov — Yaroslavl of a universal covered car with axial Glavny with the speed of 140 km/h, at load of 25 ton-force is carried out, the the first stage traction rolling stock EP- car is designed for transportation of 2K, EP-20 with “Nevsky Express” cars packaged, palletized and piece freight will be used, providing for “” required to be covered from atmos- Product and Service Liability trains to be used on the road section pheric precipitation. Alexandrov — Yaroslavl Glavny begin- With the participation of Russian ning from 2013. Railways under the project of imple- Organization of development and pro- mentation of TVSZ ( Freight Car duction of innovative rolling stock Building Plant) Project, trucks Barber In 2010, with direct involvement of S-2-R with wheel set axles load on Russian Railways in preparations for the rails of 23.5 tons (model 18-9810) serial production of a number of were launched into manufacture. With locomotive: EP2K, 2ES6, 2TE25A, were the participation of Russian Railways accomplished. Development of turbine Amsted Rail adapted for operation on locomotives GT-001 was completed. the Russian Railways having tracks of During the 5th International Business 1,520 mm a goods truck, model 18- Forum “Strategic Partnership 1520”, 9836 Motion Control with axial load of Russian Railways concluded supply 25 tons. contracts for 200 new generation two- system speed passenger electric trains Innovative technical solutions in EP20 and 221 electric freight locomo- the infrastructure tives with asynchronous traction drives In order to create track structures of the 2ES10 type. For production of providing for long-time stability, com- electric locomotives 2ES10, in associa- prehensive solutions were developed tion with Russian Railways a joint ven- for transition to efficient railway track ture OOO “Uralskie locomotivy” was structures and its components meeting established at the plant OAO “Uralsky the international standards and ensur- zavod zheleznodorozhnogo machi- ing quality of domestic materials for nostroyeniya” (Urals Plant of Railway track superstructure. Machine Building)(Verkhnya Pyshma, Use of tracks of international stand- Sverdlovsk Region). As a result, for the ard, spring rail fastening, application first time in the Russian Federation of foreign innovative technologies for a commercial direct-current electric making the track superstructure, as locomotive with asynchronous traction well as introduction of efficient track drive was developed. repair techniques together with the In November 2010, acceptance tests use of modern track machines will of a specialized gondola car, model make it possible to increase the period 12-9828, for transportation of coal between repairs up to 1.1 billion ton with axial load of 27 ton-force were gross, that is by 1.6 times more than conducted. Within the framework of the ones in current operation. implementation of Memorandum for In order to implement in the railroad cooperation between Russian Railways network programmes for organiza- and AO “Tatravagonka”, work on tion of speed and high-speed train launching into manufacture of a flat transportation, Russian Railways since wagon of a multiple-unit type, model 2008 has been purchasing lots of

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certified rails made by the Japanese technologies for reinforced concrete company Nippon Steel Corporation, bridges and tunnels are being im- which proved their high performance proved. Advanced bridge superstruc- features during operation on the road tures with orthotropic steel plate St. Petersburg— Moscow. Cooperation deck, bridge superstructures made of with the Austrian company FestAlpine weathering steels are being developed GmbH continues, after obtaining the and introduced. Within the framework certificate it got an opportunity to par- of strategic directions for the scien- Product and Service Liability ticipate in the competition to supply tific and technological development Russian Railways with rails 100 m long of Russian Railways for the period up for high-speed tracks and high work- to 2015 (the White Book of Russian ing capacity tracks. Russian Railways Railways) the following tasks for the encourages efforts of Evraz Holding innovative development of the railroad and initiative of to fit out for automation and telemechanics (RAT) production and supply in 2011-2012 were determined: Russian Railways with high quality rails. • creation and introduction of inte- Systematic works on the expansion grated multifunctional control sys- of the area of tracks with continuous tems for train movement, shunting welded rail on reinforced concrete service, distributing station opera- cross-sleepers with spring rail fastening tion based on satellite navigation made in Russia of ZhBR and ARS types and control command transmission allowed the mileage of such track to over the radio, adapted for different make up 21 per cent of the main track categories of railway lines; mileage on reinforced concrete cross- • introduction of multilevel automated sleepers. Cooperation with the German system of technical diagnostics and company Vossloh-Werke GmbH monitoring of signals and interlock- continues to be aimed at creation on ing with simultaneous control over the territory of the Russian Federation statutory and maintenance works of a joint venture for production of accompanied by relevant archiving spring rail fastening of the W30 type. (STDM), including mobile diagnostics The global leader in development of complexes; structures and construction of ballast- • creation of low-maintenance track- less rail tracks is a German company side signal and interlocking equip- Rail One GmbH. In order to introduce ment, facilities for mechanized yard ballastless rail tracks on the Russian humps of the new generation with railroads, a test field was arranged on elements of reservation, diagnostics, the road St. Petersburg— Moscow. It protected against unauthorized was for the first time in Russia in 2010, access, made of composite materials that station-to-station block Sablino — using nanotechnologies. At present, was railed with ballastless track the following technical RAT facilities being a prototype of structure of al- are being introduced on the railways, ready existing high-speed transporta- they allow to ensure the required tion. At present, continuous welded rail standards of safety, reliability, structures and technologies are widely provide for expansion of functional used on bridges using expansion joints. capabilities if compared with the Bearings with spherical segments for relay analogues: bridge superstructures are introduced. • centralized traffic control systems Design of pedestrian bridges made “Trakt”, “Setun”, YUG”, “Dialog”; of composite materials was worked • microprocessor and relay-proces- out. Water-proofing structures and sor controls EC-EM, Ebilock 950,

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MPC-MZ-F, MPC-I, MPC-2, EC-MPK, UZP1-RU-1000, coal excess volt- “Dialog-C”, “RPC-Don”; age suppressor RU-I, R-600, R-900, • microprocessor automatic block RKN-900; signal systems ABTC-M, ABTC-Е, • modern electric power supply de- ABTC-ЕМ; vices with efficient protection along • microprocessor automation systems electrical feed circuits against excess for distributing stations KSAU SP; atmospheric and switching voltage • equipment for diagnostics of techni- SPU ABTC / ABTC-ЕМ/EC-EM, UEP- cal condition of RAT facilities — MPK, UEP “Ebilock 950”, PVV-EC, Product and Service Liability hardware-software complexes for PVV-AB. systems of technical diagnostics and monitoring (STDM) RAT facilities and Technical regulation mobile diagnostics equipment; Work on technical regulation in 2010 • shunting automatic cab signaling comprised approval of technical rules MALS. “Regarding safety of the railway With regard to trackside assets the rolling stock”, “Regarding safety of following technical facilities are being the railway transport infrastructure”, introduced: “Regarding safety of high-speed • turnout switches for high-speed railway transport” (decrees of the project 2956, providing for train Government of the Russian Federation movement at the speeds of up to dated July 15, 2010, No.No. 524, 525, 250 km/h with four electric drives 533 coming into effect in July-August of VSP-220 type and a new 9-wire 2013). 25 international and national control and management system; standards were worked out and sub- • railway traffic lights with new hard- mitted for approval to Rosstandart. ware components with LED light- 21 standards of Russian Railways were optical systems for decentralized approved. Expert evaluations of 18 automatic block systems; standards and 3 rule books of other • trackside RAT equipment (hermetic industries were arranged. A list of line boxes, cable sleeves, concentra- standardization documents was pre- tors) and bus clamps; pared and submitted to the Ministry of • air collector with control equipment Transport of Russia, compliance with of retarding mechanisms of the these documents will provide for fulfill- VUPZ-05M type; ment of technical rules with regard • retarding mechanism, universal, with to railway transport and for carrying pneumonic cells of the ZVU-5pk out conformity assessment. Proposals type; on establishment of an international • retarding mechanism, lever-type, of technical standardization commit- RZ-5pk type; tee “Railway Transport” based on the • device to control filling of the Russian technical committee “Railway yard hump tracks having an ex- Transport” were prepared and submit- tended section length under control ted to the Federal Technical Regulation KZP-IZD; and Metrology Agency. These propos- • excess atmospheric and switching als were discussed during the 40th voltage prevention devices in control meeting of the Scientific and techni- and actuating circuits of turnout cal standardization committee of the switches, circuit lines of microproces- International council for standardiza- sor electric interlocking lights. tion, metrology and certification of the • excess voltage suppressor UZP1- CIS (NTKS MGS, October 26-28, 2010, 500, excess voltage suppressor ), it was decided to establish

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an International technical standardiza- on the surface of ceiling and upper tion committee “Railway Transport” part of the walls of the working space No. 524 based on the Russian technical provided for energy-efficient heat- committee of the same name headed ing of big spaces. At the same time, by Russian Railways. the cost of 1 Gkal of consumable heat Efficient use of resources is lower by 3-5 times in comparison In 2010, 2.4 billion Rubles were allocat- to water heating systems. In order ed for implementation of the invest- to reduce operation expenses for Product and Service Liability ment project “Introduction of resource lubrication, release of locomotives and saving technologies on the railway locomotive crews, the management transport” (hereinafter the “invest- of Russian Railways decided to create ment project”), that allowed to provide a park of locomotives oiling the rails for the introduction of over 8,000 new based on new passenger cars travelling resource saving technical means. The as part of mail-luggage and passenger investment project priority is imple- trains. This will allow to: mentation of measures aimed at saving • free train paths occupied by locomo- fuel and power resources. Within the tives oiling the rails; framework of the investment project, • reduce the wear of wheel flanges full-scale implementation of automatic and rails by 3 times; train operation system was continued, • reduce movement resistance on the allowing not only to reduce the man- curves by 5-10%; power, but to save 3 to 8% of electric • reduce energy resources consump- power. Over 2,000 electric locomotives tion by 6% due to reduction of and almost 1,400 electric trains are movement resistance on horseshoe currently equipped with this system, its curves. capabilities allowed to start targeted During the period from 2008 to 2010, work on switching passenger trains the economic benefit of implementa- to energy-optimal timetables, and tion of the investment project amount- this year it is planned to save not less ed to over 1.8 billion Rubles, particular- than 30 million kW/h of electric power. ly due to reduction of specific con- Implementation of cost-effective in- sumption of fuel and power resources novative LED technologies is contin- used for train traction, reduction of ued. Evaluation of results of introduc- energy and materials consumption of tion of LED technologies proved the technological processes, as well as due important role of LED in power saving to increase in the labour efficiency. as power consumption at the facilities equipped with LED lowered by over 55%. In 2010, colour light signal heads on masts with LED systems (for colour light signals with digital coded circuit blocking) were introduced, their quantity made up 886 pcs. amounting to 92.5 million Rubles. Pilot projects for LED lighting of railway bridges and Severomuisky tunnel were imple- mented. New approaches to heating the working space at locomotive and car depots using infrared radiators for workplaces were efficiently applied. Placing the radiators in a certain order

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Appendices

Appendix 1. The Table illustrating the correspondence of Chapters and Sub-Chapters of the Report to GRI indicators Note: The additional indicators that may be omitted in the Report are typed in italics.

GRI Indicator Chapter

1. Strategy and assessment

Chapter 2

2. Characteristics of the organization

2.1. Name of the organization Chapter 1

2.2. Main brands, products and/or services Chapter 1

2.3. Functional structure of the organization, including main departments, operational com- Chapter 1 panies, subsidiaries and joint stock companies.

2.4. Location place of Headquarters (Main Office) of the Company Chapter 1

2.5. The countries where the Company operates and countries where the Company performs

its main activities or which are particularly significant in terms of sustainable development Chapter 1 Appendices and covered by the Report

2.6. The ownership title, organizational and legal framework Chapter 1

2.7. Markets where the Company operates (including the geographical position, serviced sec- Chapter 1, tors, categories of consumers and beneficiaries) Chapter 4

2.8. The caliber of the organization, including: – number of employees; Chapter 1, – net sales (for private organizations) or net proceeds (for state organizations); Chapter 4, – total capitalization, including loan and own capital break-up (for private companies); Chapter 6 – quantitative parameters of products or services.

2.9. Substantial changes in scale, structure or ownership for the reporting period, including: – regulation or other characteristics caused the change of the activities, including establish- ment, closure and expansion of business; Chapter 1 – the structural changes in share capital and other actions associated with the formation, maintenance or alteration of capital

2.10. Awards for the reporting period Chapter 1

3. Report parameters

General information about the Report

3.1. The reporting period (for instance, fiscal/calendar year) the information refers Introduction

3.2. The publication date of the last and previous reports Introduction

3.3. Reporting cycle (annual, two years, etc.) Introduction

Background 3.4.Contacts to obtain the information regarding the Report or its content information

Scope and limits of the Report

3.5. The definition of the Project content, including the definition of the substance; defini- tion of matter of priority and subjects under the Report, identification of stakeholders, as the Introduction potential users of the Report

3.6. The limits of the Report (for instance, countries, departments, subsidiaries, affiliates, Introduction leased capacities, joint stock companies, suppliers)

3.7. Refer to any limits in the scope of the Report Introduction

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GRI Indicator Chapter

3.8. Grounds for inclusion of information regarding the joint stock companies, subsidiaries, lease of production facilities, partial transfer of functions to external contractors and other No reasons organizations which may substantially affect the compatibility with previous reports and/or other organizations

3.9. The methods used for evaluation of data and calculations, including proposals and methodologies, used in the preparation of indicators and other information, included in the Introduction Report

3.10. The meaning of any rewording of the information given in previous reports as well as reasons for such rewording (for example, pooling/merger, the changes of the reporting peri- No reasons ods, business activities and evaluation methods)

3.11. Substantial changes in the content of previous reports, the limits or methods, used for

Appendices No reasons the preparation of the reports

GRI indicator of the content

3.12. Table, referring to the position of standard elements in the Report Appendix 1

Approval

3.13. Policy and used practical approaches regarding the external approval of the Report Introduction

4. Management, responsibilities and interaction with stakeholders

Management

4.1 The structure of the Company Management, including main committees in the Manage- ment Board, responsible for specific tasks, for instance, the development of the strategy or Chapter 1 general supervision of the company

4.2. Indicate if the Chairman of the Management Board Is the Company Executive Manager at the same time (if it is so, what’s the role of such manager in the company and what’s the Chapter 1 reason of such situation)

4.3. For organizations with the unitary Board of Directors, please, indicate the number of independent members of the Management Board and/or members, not related to the Com- N/A pany Management

4.4. Instruments used by shareholders or employees to regulate the actions of the Manage- Chapter 1 ment Board or give recommendations

4.5. The relations between the payments to members of Management Board, representatives of higher executive management and top-manager (including dismissal pay) and activities Chapter 1.2 results of the company (including social and environment results)

4.6. The valid processes in Management Board, oriented at the prevention of the conflict of Chapter 8 interests

4.7. The processes of the definition of qualification and competence of Management Board members to define the strategy of the organization on economic, environment and social Chapter 1 issues (sustainable development)

4.8. The statements about mission or value, corporate behavior charter and principles signifi- Chapter 3, cant in terms of economic, environment and social effectiveness, elaborated by the company, Chapter 7 and the practical realization of such documents

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GRI Indicator Chapter

4.9. The procedures used by Management Board to supervise and monitor the process of the evaluation of the company of its economic, environment and social effectiveness and Chapter 1 management, including the risks and opportunities, as well as the adherence to international standards, corporate behavior charter and principles.

4.10. The evaluation of the its own performance by Management Board, particularly, the Chapter 1 economic, environment and social effectiveness

Participation in the external imitative

4.11. The explanation whether the organization applies the principle of precaution and how Chapter 2

4.12. Economic, environment and social charters, principles or other initiatives proposed by Chapter 3, outside parties, which the organization supports or joined. Chapter 7 Appendices 4.13. The membership in associations (for instance, related to the sector) and/or national and international organizations protecting the interests and where the organization is one of the Chapter 1, management party, participates in projects or committees, grants substantial funds, exclud- Chapter 3 ing general membership fees, or considers its membership as strategically significant

Aspect: Nondiscriminatory measures

HR4. General number of discriminatory cases and taken measures Chapter 7

Aspect: Freedom of associations and collective negotiations

The activities associated with the substantial risks of the violation of the rights HR5. of the associations for freedom and collective negotiations and the actions Chapter 6 directed for the support of such rights

Aspect: Child labor

The activities involving the child labor risks and actions directed at the eradica- HR6. Chapter 7 tion of the child labor

Aspect: Involuntary and mandatory labor

The activities associated with the substantial risks of the use of the involuntary HR7. or mandatory labor and the actions directed at the eradication of the involun- Chapter 7 tary and mandatory labor

Aspect: Security measures

The share of security services employees trained in procedures and policies HR8. Chapter 7 regarding the human rights associated with the ongoing activities

Aspect: Rights of indigenous and ethnic groups of population

An indicator that The general number of cases when the rights of indigenous and ethnic groups HR9. may be omitted of the population were violated and taken actions in the Report

The effectiveness of the interaction with community

Aspect: Community

The character, promotion and effectiveness of any programs and practical strategy that might help to evaluate the influence of the company’s activities S01. Chapter 8 on the communities, including the actions monitoring such influence from the beginning till the end of the company life

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GRI Indicator Chapter

Aspect: Corruption

The share and total number of business-units, evaluated for the potential risks S02. Chapter 8 of corruption

S03. The share of employees trained in anti-corruption policies and procedures -

S04. The anti-corruption measures Chapter 8

Aspect: State Policy

The attitude to the State Policy, participation in the formation of the state policy S05. Chapter 8 and lobbying

Appendices An indicator that The financial and natural assistance to political parties, politicians and associ- S06. may be omitted ated organizations by countries expressed in monetary terms in the Report

Aspect: Prevention of the fair competitiveness

Total number of legal actions against the organization due to the prevention of An indicator that S07. the fair competitiveness and the practical measures directed at the prevention may be omitted of creating monopoly and the results of such activities in the Report

Aspect: Adherence to requirements

The substantial penalties and total number of financial punitive sanctions for S08. Chapter 8 the violation of relevant laws in monetary terms

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Appendix 2. The Table illustrating the correspondence of Chapters and Sub-Chapters of the Report to Indicators of RUIE Note: The additional indicators that may be omitted in the Report are typed in italics.

Chapter in Indicators Report

Economic indicators

1.1 Principles of business operations Chapter 4

1.2 Scopes of products (works, services) sold Chapter 4

1.3 Payable taxes and other deductions Chapter 4

Chapter 4, 1.4 Personnel expenses Chapter 6

1.5 Investments in fixed assets Chapter 4

1.6 Payments to capital suppliers Chapter 4

1.7 Investments in communities Chapter 4 Appendices

Chapter 4, 1.8 Voluntary pension funds Chapter 6

Environment indicators

Aspect: Materials

2.1 The portion of consumed secondary raw materials Chapter 5

Aspect: Energy

2.2 Energy consumption Chapter 5

Additional indicator that may 2.2.1 The specific energy consumption be omitted in the Report

Aspect: Water

2.3 The consumption of auxiliary fresh water Chapter 5

2.3.1 The specific water consumption Chapter 5

Additional indicator that may 2.4 The share of reused water vs. general auxiliary water consumption be omitted in the Report

Aspect: Emissions, discharge, disposals

2.5 Green gas pollution

2.6 The pollutants emitted to atmosphere Chapter 5

2.6.1 The specific pollutant emissions Chapter 5

2.7 Sewerage water discharge Chapter 5

2.7.1 The specific sewerage water discharge Chapter 5

Additional indicator that may 2.7.2 Contaminated sewerage water discharge be omitted in the Report

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Chapter in Indicators Report

2.8 Disposals Chapter 5

2.8.1 The specific volume of disposals Chapter 5

2.9 Number of accidents that affected the environment adversely Chapter 5

2.10 Recovered environment damages Chapter 5

Aspect: Procedures and services

2.11 Actions directed at the mitigation of adverse affects upon the environment, Chapter 5 parameters and the effectiveness of such actions

Appendices Aspect: General

2.12 Investments in environment protection projects Chapter 5

Social indicators

1. Sub-Chapter: The effectiveness indicators related to the labor organization and worthy labor indicators

Aspect: Employment

3.1.1 Number of workers with territorial break-up Chapter 6

3.1.2 The staff turnover rates Chapter 6

3.1.3 The staff turnover ratio, illustrating the working quitting the jobs in this organizations Chapter 6 due to any reasons

Aspect: Relations between employees and employers

3.1.4 The collective contract coverage Chapter 6

3.1.5 The industrial injuries rates Chapter 6

3.1.6 number of accidents with fatal outcome Chapter 6

3.1.7 number of workers with revealed occupational diseases -

3.1.8 Working time losses due to any disease Chapter 6

3.1.9 Labor protection expenditures Chapter 6

3.1.10 Training hours per one worker -

3.1.11 Training expenses Chapter 6

Additional indica- tor that may be 3.1.12 The participation of women in the management omitted in the Report

2. Sub-Chapter: Effectiveness of actions directed at the protection of Human rights

Aspect: Actions against discrimination

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Chapter in Indicators Report

Chapter 6, 3.2.1 Labor disputes Chapter 7

Chapter 7, 3.2.2 Discrimination cases p. 127-128

Additional indica- tor that may be 3.2.3 Cases of aboriginal and small peoples’ rights omitted in the Report

3. Sub-Chapter: Effectiveness of the interaction with communities

Aspect: Community Appendices

3.3.1 The relations with the Governing Authorities regarding the socially significant prob- Chapter 3, lems (social and economic development of the area showing the signs of the organization Chapter 8 presence

3.3.2 The relations with NGOs and non-profit organizations regarding the solution of prob- Chapter 3 lems significant for public

3.3.3 The evaluation of the organization activities influence upon the social and economic Chapter 8 development of local communities

Aspect: State Policy

3.3.4 The participation in the external initiatives, including the formation of the state policy Chapter 8

3.3.5 The participation in non-profit organizations (for example, industrial) and/or national Chapter 3 and international organizations which activities are interlinked with the Company interests

4. Sub-Chapter: Effectiveness in the sphere of responsibilities for the products

Aspect: Product and services trade marks

3.4.1 Information and trade marks Chapter 9

3.4.2 Product QC Chapter 9

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Appendix 3. Table illustrating the adherence of Chapters and Sub-Chapters of the Report to UN Global Agreement Principles

Chapter in the UN Global Agreement Principles Report

Human Rights

The enterprises shall support and observe the human rights, declared by the inter- 1 Chapter 7 national community

2 The respective actions shall be taken to avoid the violation of the human rights Chapter 7

Labor conditions

The enterprises shall support the freedom of the associations and unions, includ- 3 Chapter 6 ing the real recognition of the rights to sign the collective agreements

4 Support the principle of the eradication of all kinds of involuntary labor Chapter 7

Appendices 5 Support the principle of the complete eradication of child labor Chapter 7

Support the liquidation of the discrimination in the sphere of labor and employ- 6 Chapter 7 ment

Environment protection

Business circles shall support the preventive actions against the adverse affect on 7 Chapter 5 the environment

Support the initiatives regarding the increase of the scope of liabilities for the 8 Chapter 5 protection of the environment

9 Support and promote the bio-technologies Chapter 5

Anti-corruptive actions

The enterprises shall take respective actions against all kinds of corruption, includ- 10 Chapter 8 ing fraud and briberies

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