Duma Deputy Lugovoy Suspects that RZD is Overpaying for Scrap

Duma Deputy Lugovoy Suspects that RZD is Overpaying for Scrap

Photo: https://newvz.ru/

Andrey Lugovoy, a deputy of the State Duma for the Liberal Democratic Party of Russia (LDPR,) has made a query to the Interior Ministry about the agreements on buying scrap metal by the Russian Railways (RZD) state railway corporation from Translom. According to Lugovoy, the latter takes advantage of its exclusive position selling scrap to RZD at twice the price it buys the same scrap from the very same RZD.

Lugovoy asked Andrey Kurnosenko, head of the anti-corruption department of the Interior Ministry, to check the pricing of these deals and to establish their legitimacy. Then he asked Oleg Belozerov, CEO of RZD, to do price analysis of scrap iron purchases and sales by various departments of the company.

Lugovoy draws attention of law enforcement officers to three contests for the purchase of scrap metal in 2018 and 2019. They were organized by the subsidiary of RZD: Vagonnaya Remontnaya Kompaniya-1 (VRK-1), worth more than 113 mln rubles ($1,687,632.4.)

Translom was the only participant of the contest and, consequently, its winner. According to the data from the government procurement website, that company won only one auction. However, Lugovoy insists that two other contracts were also awarded to this company.

According to the documentation of one of the contests, for VRK-1 scrap metal costs an average of 17,000 rubles ($253.89) per tonne. At the same time, Lugovoy insists that, in accordance with the agreement on formula pricing between the parties, the price should not have exceeded 9,000 rubles ($134.41) per tonne. He claims that Translom could buy scrap from one branch of RZD and resell it to another at twice the price.

Analysts note that in 2018, the price of 17,000 rubles ($253.89) per tonne of scrap metal was highly possible. According to them, in 2017 and 2018, due to the deficit, prices for scrap in Russia increased by 52% to 17,700 rubles ($264,35.) In addition, it is noted that when buying unsorted scrap, Translom has the right to set a surcharge for its sorting within a 30 percent limit.

RZD said that the price in the contracts was determined on the basis of market prices, with account of the terms of calculations and delivery. The company insists that the purchase of scrap was made by VRK-1 in full compliance with the current legislation.

It should be reminded that at the beginning of the year, it became known that Dmitry Kozak, who was then deputy prime minister, issued an instruction to check the number of contracts between RZD and Translom. Experts of the Federal Antimonopoly Service, the Ministry of Industry and Trade and the Ministry of Economic Development will check the economic feasibility of the deal.

Officially, three agreements with Translom were signed by the Federal Passenger Company, a subsidiary of RZD. Under the terms of the contracts, the Federal Passenger Company will hand over 2,000 decommissioned couches for further dismantling. Translom is expected to fulfill its obligations by the end of 2022.

Lugovoy also paid attention to the dubious nature of these deals. He asked Kozak to clear out the situation. In addition, he sent letters to the Interior Ministry and RZD. In Lugovoy's opinion, the terms of the agreements are extremely unfavorable for the Federal Passenger Company, which loses at least 1 mln rubles ($14,934.8) per car.

Translom, a former subsidiary of RZD, went private in autumn 2016. It was bought out by the Kronosсompany, owned by Alexey Zolotarev. Previously, he had run a business with Igor Levitin, the former head of the Ministry of Transport and the incumbent aide to the President of the Russian Federation. Translom specializes in selling scrap that comes from railways and the Ministry of Defense.

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