In 2024, announced Georgia’s Deputy Minister of Finance, Giorgi Kakauridze, a significant restructuring plan for one of the country’s largest state-owned companies. This initiative, in line with Georgia’s commitments to the European Union, seeks to enhance competition and liberalize the railway sector.
Currently, Georgian Railways operates as a unified entity, managing tracks, stations, and trains. However, following the proposed changes, the company will be divided into three distinct entities. One will oversee track ownership and infrastructure, another will handle freight transportation operations and own freight trains, while the third will focus on passenger transport operations.
This strategic move is poised to bring about a more competitive and efficient railway system in Georgia, benefiting both the industry and its clientele.
“Dividing the railway is an obligation. Three different companies should be created here. Passenger, freight, and the company that owns the infrastructure itself, i.e. tracks. Inside the company, all three directions are divided, although next year we will have to divide them legally.
“Passenger transportation being subsidized by freight transportation is prohibited by the European Union, and there is a direct reference to this,” said Kakauridze.
The Deputy Minister of Finance further disclosed that the government intends to support railway passenger transport through dividends generated by the railway company itself. According to Kakauridze, the company recorded a profit of up to 400 million GEL last year. A portion of this sum will be allocated from the budget to subsidize passenger transportation.
Additionally, Kakauridze highlighted that within the ongoing corporatization reform, an independent board will determine the extent of employee optimization. Presently, the company employs a workforce of 12,000 people.
“So far, we have not provided 50 million GEL for the subsidy, and it is not included in the budget. We will make this subsidy from the dividend withdrawn from the company. Last year, the railway had a rather large profit of 400 million. I will not say that we will take all this money into the budget, because the railway will have to make a large investment – the resources it has are on the verge of exhaustion, and it is necessary to improve and renew the infrastructure in this regard. Accordingly, we will take at least the amount of dividend or more that is needed for the subsidy into the budget. In the end, there will be no direct subsidy, but the budget will include the revenues from freight transportation, and passenger transportation will be subsidized from the budget.
“As for the number of employees, it is quite difficult to fire 3-5 thousand people from a company in one year, yet I do think that optimization is necessary. An independent board should decide what the optimal number of employees is,” said Kakauridze.