Bulgarian State Railways now has its first private competitor in passenger transport

Pimk, a Plovdiv-based transport company, received a license as a passenger railway carrier from the Bulgarian Railway Administration agency. The new business activity will be carried out through the Pimk Rail Express EOOD subsidiary, which was established and registered in the country’s Commercial Register in April this year. Thus, for the first time in Bulgarian history, the state-owned railway company BDZ - Passenger Transport has a competitor in that market sector.

The decision to issue the license was made on 28 September, and it was signed by Transport Minister Georgi Gvozdeikov on 4 October, according to the document uploaded on the Railway Administration agency website.

Why is this important?

The news is important not only because Pimk, which has been transporting goods for years, is now expanding its activity to the passenger sector, but also because for a long time, BDZ - Passenger Transport (BDZ-PT) had enjoyed the comfort of being the only railway passenger carrier in Bulgaria.

Now, it seems that the layers are shifting, and when announcing its upcoming public service contract bid, BDZ will have to face real competition. Given the poor financial and material condition of the state-owned company, its future looks uncertain.

The issuance of the license comes against the backdrop of expectations for new rolling stock funded under the Recovery and Resilience Plan (RRP). We remind you that the new train carriages and locomotives will be used by the operator that wins the state contract by demonstrating sustainability standards and profitability. At the moment, one of the tenders has been suspended, and a complaint has been filed against another one by an international company.

Thus, in addition to the passengers’ hearts and minds, BDZ will also have to compete with Pimk Rail Express for rolling stock worth billions. Everything will depend on how the lots will be divided in the upcoming public service contract.

Storm clouds for BDZ?

In an episode for the Economic.bg podcast, Martin Yanev, vice-chairman of the Green Transport Cluster, commented that BDZ-Passenger Transport should nevertheless continue to exist independently of the new operators on the market since the state-owned company acts as “a regulator of the ticket prices”, whereas the private operators will act as regulators of the service quality.

Only a few days ago, Transport Minister Gvozdeikov spoke about an increase in ticket prices. Before that, he had announced, as a matter of urgency, that the ministry was asking all major train manufacturers in Europe if they could deliver rolling stock for BDZ's needs, outside of the RRP, as soon as possible. As part of the modernization process, Gvozdeikov also made personnel changes in the state railways management board.

We remind you that according to the program of the Bulgarian government coalition, the fate of BDZ - Passenger Transport should become clear by the end of 2024, as the cabinet plans to start the procedure for the transport contract call by March 2024.

Does BDZ have any chance of winning?

Gvozdeikov is not the first transport minister to claim that he wants to improve the state of the Bulgarian railways. Before him, Nikolay Sabev (with the same portfolio in the Kiril Petkov cabinet), had ambitious plans for BDZ-Passenger Transport. He made it his goal to make the enterprise profitable, and he almost succeeded. Through some accounting tricks, he managed to achieve a positive result for the half of 2022.

Immediately afterwards, however, the caretaker government (which took over the Petkov cabinet) reported that the company was not in a good state, neither financially nor materially. Even during the Sabev term, it became clear that this hides the danger of having BDZ-PT lose access to the brand-new rolling stock, financed under the RRP.

During the last days of the 48th National Assembly, two MPs from the Bulgarian Socialist Party (Georgi Svilenski and Borislav Gutsanov) and one from the Revival party (Ivaylo Chorbov) proposed a decision that would oblige the Ministry of Transport to provide the new railway cars and locomotives directly to BDZ - PT. It was rejected, but it also raised an important question about the fate of the railways, which, however, has been ignored since.

An option was then outlined in which the railroad network would be divided into separate routes and different carriers would serve different lines. However, most likely, a private carrier will win the best lots, while the rest will remain for BDZ.

The second option that was discussed was related to an EU regulation that makes it possible for the state to directly award activities to a carrier without public procurement and tenders if the mileage to be performed amounts to less than 23 million km. However, the MPs argued whether that regulation applies only to the cases when a derogation was activated - something which Bulgaria had not requested.

The current transport minister also spoke about that last option. However, according to experts, this possibility has been missed, as Bulgaria should have requested the derogation years ago. If, however, the state somehow decides to tilt the scales in favour of BDZ-PT, then sanctions from the European Commission may follow, since any such tricks may be interpreted as hidden subsidies.

Translated by Tzvetozar Vincent Iolov