CELEX: 51977PC0266
Language: en
Date: 1977-06-15
Title: Proposal for a COUNCIL REGULATION laying down uniform costings principles for railway undertakings (submitted to the Council by the Commission)

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DOCUMENTS "COM"
COM (77) 266
Vol. 1977/0092
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 ---pagebreak--- COMMISSION OF THE EUROPEAN COMMUNITIES
                                           COM(77)266 final        v
                                           Brussels . 15 June 1977
                              Proposai
                               for a
                         COUNCIL REGULATION
                   laying down uniform costings principles
                      for railway undertakings
           ( submitted to the Council by the Commission)
 COM(77) 266 final
 ---pagebreak---                                        - 1 -
                            EXPLANATORY MEMORANDUM
                                   Section I
                Legal "bases , object ives and general principles
Légal bases
1*      Under Article 8 (2 ) of Council Decision 75/327/EEC of 20 May 1975
the improvement of the situation of railway undertakings and the harmoni­
 zation of rules governing the financial relations "between such undertakings
and States , "Before 1 January 1978 » the Council , acting on a proposal from
the Commission ••••••••••, shall lay down uniform costing principles'* for
railway undertakings .
2.      Paragraphs 3 and 4 of Article 8 of that Decision state that temporarily ,
"the railway undertakings must provide the State with the necessary data
to enable a detailed assessment         to be made of the financial results of
each of the categories of activity".
            " i ) passenger transport :
                  - by rail ( if possible subdivided into long and short distance
                    or into high-speed and express on the one hand and other
                    rail services on the other),
                  - by road
                  - by other means of transport ;
            ii) goods transport i
                  - fall trains and wagons ,
                  - paokages and parcels ,
                  - by road ."
( 1 ) O.J. n* L 152 of 12 June , 1975 .
                                                                           /
 ---pagebreak---                                       - 2 -
3.       The aim of this proposal is to meet the requirements of these pro­
visions in the context of the Council Resolution of 27 June 1974 ( l ) which
made costing an        important factor in commercial cooperation between rail­
way undertakings and in comparing the financial performance of these under­
takings .
Objectives
4*       Through the use of costing , this proposal attempts to meet two
principal objectives .
         The first is to promote cooperation between railway undertakings in
the context of the improvement of their financial situation .       As a first
step it is proposed to deal only with goods traffic of some importance .
Cooperation and management in this sector could be improved by taking into
account the costing principles set out in the propose,! for
              - costing from origin to destination ,
              - analysing the commercial advantages of accepting traffic ,
              and , as far as international traffic is concerned ,
              - allocating revenue between the railways involved in the same
                traffic .
5.       The second important objective is to provide a means of continuous
monitoring of the financial results of the various categories of the rail­
ways' operations ;       and the Commission has already put forward a proposal
for a Regulation ( 2 )      to meet the essence of the first requirement of
Article 8 ( 2 ) of the Decision of 20 May 1975 » ""to achieve comparability
between the accounting systems and annual accounts of all railway under­
takings ".      Nevertheless , this proposal does not fully meet the provisions
of paragraphs ( 3 ) and ( 4 ) of Article 8 . For that reason the present proposal
envisages additional measures in the field of relations between the railways
and their supervisory authorities on the one hand and in the area of com­
parability between undertakings on the other .
 ( 1 ) O.J. n® C 111 of 13 September 1974
 ( 2 ) Doc . COM ( 77)76                                                  ./
 ---pagebreak---                                    - 3 -
General principle
6.     To meet these objectives , it is proposed that , from 1 January 1979t
the railway undertakings should use the principle of particular costing
for two purposes , i.e. the determination of the costs of a specific gpods
traffic and the allocation of costs to categories of operations .
       Particular costs means :
6.1 . in the case of goods traffic :
      - a) for new traffic , those variable and fixed costs , or those direct
           and common costs , attributable to this traffic ;
      - b) for existing traffic , the termination of which at current con­
           ditions is being considered , those costs which would no longer be
            incurred if this traffic were discontinued ;
6.2 , in the case of railway operations as a whole , for each category of
      operations , those variable and fixed costs , or those direct and common
      costs , attributable to this category of operation .
                                  Section II
               Principles for costing a specifie goods traffic
7*     It is proposed that the principle of particular costing should be
applied to specific goods traffic . Since the more detailed analysis of
costs resulting from this approach can only be justified for traffic of some
importance , it is proposed to deal with specific goods traffic in full
train loads .
8,     The principle of particular costing should be applied in accordance
with the following approach :
- particular costs should be calculated for the same period as the expected
   duration of the traffic being costed ;
- the costing should take account of foreseeable changes .
 ---pagebreak--- 9.       During this first stage it is proposed to leave the choice of detailed
methods for working out the above costs to the railways themselves .
10 . v   In order to maintain a degree of comparability , the cost factors to
be taken into consideration in costing are listed in an annex to the proposal
which will provide the railways with a scheme of presentation .
11 .     The costs calculated in this manner would provide to the commercial
departments of the railways data for the terms and conditions of accepting
new traffic or for maintaining existing traffic on current terms .      These
costs would also constitute an important element in fixing prices and , in
international traffic , they could be used as an element to apportion revenue
between the railway undertakings involved .
12 .     In order to reinforce commercial cooperation between railway under­
takings and facilitate effective decision-making in a sector frequently in
competition with other modes of transport it is proposed that on request the
railway undertakings involved in carrying the same international goods traffic
in full train loads should inform each other of their particular costs in
respect of this traffic .      A requirement to this effect would be in harmony
with Article 11 § 1 of the Decision of 20 May 1975 *
                                       Section III
                     Principles governing the allocation of costs
                            to categories of operations
13 .      It is proposed that the principle of particular costing should be
applied to the process of allocating costs to categories of operations .
14 .      Costs for allocation are costs shown in the Profit and Loss Account
of the Accounting Plan mentioned in point 5 and broken down by type , less
any compensation and aids received under Regulation Nos .      1191/69 ( l )»
1192/69 ( 2 ) and IIO7/7O ( 3 ) which represent a reduction in cost8 .
 ( 1 ) and ( 2 ) O.J. N° L 156 of 28 June 1969
( 3 ) O.J. K° L 130 of 15 June 1970 .
 ---pagebreak---                                  - 5 -
15 •    The aim in this field is to allocate costs as far as possible to
the various categories of operations so as to leave a minimum of costs un­
allocated.   In applyin. the principle of particular costing as already
described , the allocation of costs should therefore be continued by using,
at the choice of the railway undertakings , the two different principles
of utilization and causality. This choice should enable each railway to
take into account its specific structure .
16 .    A comparison, between the particular costs for each category of
operations obtained as described above and the revenues shown in the Profit
and Loss Account in the Accounting Scheme referred to in point 5 would
allow the financial result of each category of operations to be assessed .
       In order to provide a better balance in the sub-categories of
operations as between passenger and goods traffic than the break-down
shown in Article 8.3 of the Decision of 20 May 1975 1 i"t is proposed to
add the following sub-category t
             "goods traffic carriage by other modes"
and to subdivide
             "full trains and wagons ".
     Costs which it would not be possible to allocate to categories of
operations should be taken into account when the total results of the
undertakings are examined .
17 *    It is proposed that the railways should communicate to their respective
supervisory authorities the outcome of their cost allocation to categories of
operations .   The communication of this data to the Commission would
provide a further element in the comparative analysis of the railways .
 ---pagebreak---                                     - 6 -
                                 Section Tv
                              Final provisions
18 .    The provisions of the proposal const itute the beginning of a long
process in a difficult field , "but they are an essential element in im­
plementing the Decision of 20 May 1975 and advancing cooperation between
the railways .  In this light it is essential to study further developments
of the principles defined and the possible extension of their scope of
application .  Consequently , it has been deemed necessary to establish an
Advisory Committee to assists the Commission in its tasks of monitoring
the application of the principles embodied in the Regulation and of stu­
dying ways of improving the measures proposed in this first stage .
                                        Ο
                                  ο          ο
       In putting forward these thoughts the Commission has of course
drawn extensively on the experience of the International Union of Rail­
ways (UIC ). Moreover , during the preparatory stage of this proposal ,
the Commission took the opportunity provided by several meetings with
representatives of the UIC 's Group of Nine to make a detailed study of
the most urgent problems and the lines along which action would be needed
in order to resolve them .   This proposal results largely from that study .
                                                                     /.
 ---pagebreak---                                     - 7 -
                     Proposal for a Council Regulation
                     laying down uniform costing principles
                           for railway undertakings
THE COUNCIL OP THE EUROPEAN COMMUNITIES ,
having regard to the Treaty establishing the European Economic Community ,
and in particular Article 75 thereof ,
 having regard to Council Decision 75/327/EEC       of 20 May 1975 on "the
 improvement of the situation of railway undertakings and the harmonization
 of rules governing financial relations "between such undertakings and States ( l ),
 and in particular Article 8 thereoff
 having regard to the proposal from the Commission ,
.having regard to the opinion of the European Parliament ,
 having regard to the opinion of the Economic and Social Committee ,
 whereas the improvement of the situation of railway undertakings requires
 the introduction of rules on financing and accounting based as far as pos­
 sible on the principles applicable to industrial and commercial under­
 takings whilst at the same time taking account of the special nature of
 railways and in part iculair their cost and revenue structure ,
 whereas any such improvement retires the laying down of uniform costing
 principles for railway undertakings !
 whereas the establishment of uniform costing principles for railway under­
 takings should lead to closer cooperation between the railways , and whereas
 it should provide a useful tool for any form of integration of these under­
 takings .
 ( 1) O.J. n# L 152 of 12 June 1975, p.3
                                                                         ./
 ---pagebreak---                                     - 8 -
whereas specific goods traffic in full "train loads constitutes a large and
growing proportion of total goods traffic carried "by the railways , and whercc...
it is appropriate to establish uniform costing principles for such traffic ;
whereas the particular costs of a specific traffic may be used by the rail­
ways as a factor in price-setting and in deciding whether to accept the
traffic under consideration and whereas in international traffic these costs
may provide an element for apportioning revenues between the undertakings
involved in a given traffic ;
whereas in international traffic it is appropriate that the railways involved
in a     given specific traffic should be able to compare the results of
their costing by exchanging details of these costings ;
whereas greater transparency of the financial operations of railway under­
takings is required if the rules governing financial relations between them
and the States are to be harmonized ;
whereas for the purpose of keeping the States informed the necessary information
for assessing financial performance by category of operations must be commu­
nicated to the States by the railway undert akings ;
whereas communication of such information to the Commission would facilitate
comparison of the operations of the railways at Community level ;
whereas^in order to assist the Commission in its tasks of ensuring the
application of uniform costing principles and of proposing measures to ex­
tend their scope after this first stage , an Advisory Committee should be
set up ;
HAS ADOPTED THIS REGULATION :
 ---pagebreak---                                     - 9 -
                                  Section I
                             General Provisions
                                   Article 1
       The uniform costing principles for railway undertakings set out in
this Regulation shall "be applied for purposes of ( i ) determining the costs
of specific goods traffic in full train loads and ( ii ) allocating costs "by-
category of operations#
                                   Article 2
       This Regulation shall apply to the following railway undertakings s
- Société Nationale des chemins de fer beiges ( STICB)/lTationale Maatschappij
   der Belgische Spoorvcgen (NMBS)
– Danske Statsbaner (DSB)
– Deutsche Bundesbahn (DB )
- Société Nationale des chemins de fer français ( SftCF)
- Coras Iompair Eireann ( CIE)
-  Azienda autonoma delle ferrovie dello Stato (FS)
-  Société Nationale des chemins de fer luxembourgeois    ( CFL)
–  Naamloze Vennootschap Nederlandse Spoorwegen (NS)
-  British Railways Board ( ERB)
- Northern Ireland Railways Company Ltd . (NTH) .
                                   Artide 3
1*     With effect from 1 January 1979t railway undertakings shall , for the
two purposes specified in Article 1 , apply the principle of particular costing*
2.     Particular costing means costing by reference to :
 ---pagebreak---                                        - 10 -
 2.1 . in the rase of gccds traffic :
       a ) for a new traffic , "those variable and fixed         or      direct
           and common costs   attributable to such traffic ;
       b ) for an existing traffic    the termination of which on current terms
           is being considered , those costs which would no longer be incurred
           if such traffic were discontinued ;
 2.2 . in the case of railway operations as a whole :
       for each category of operations , those variable and fixed           or
       direct and common costs     attributable to that category of operations .
                                       Section II
                      Principles for costing a specific goods traffic
                                     Article 4
         Railway undertakings shall apply the principle of particular costing
 to specific goods traffic in full train loads .      Specific traffic shall be
 taken to mean new traffic or traffic the termination of which on current
 terms is being considered .      Railway undertakings shall apply such principle
"by reference to the relevant characteristics set out in Annex I *
                                      Article 5
 1.      Railway undertakings shall calculate the particular costs referred to
 in Article 4 in accordance with the further principles set out below :
 - costs shall be calculated for the same period as the expected duration of
    the traffic being costed ;
 - the costing shall take account of foreseeable developments .
 2.      For the purpose of calculating particular costs the railway tinder-
 takings may use the methodB of their own choice .
                                                                         ./
 ---pagebreak---                                    Article 6
1 . Railway undertakings participating in a given specific international goods
-traffic in full train loads shall communicate their particular costs for
this traffic to each «ther on request .       'International goods traffic" means
the carriage of goods <u.t of or into the territory of a Member State or across
the territory of one or mere Member States ,
2.        Railway undertakings shall present their costings on the basis of the
 standard list shown in Annex II .
                                      Section III
                       Principles governing the allocation of
                         costs "by category   of operations
                                       Article 7
 1.       Railway undertakings shall apply the principle of particular costing for
the purpose of allocating costs among the various categories of operations
 set out in paragraph 2 .     Costs shall "be taken to mean the costs by type of the
 Profit and Loss Account of the Accounting Plan , as shown in Annex III to Council
 Regulation on the necessary measures to achieve comparability between the
 accounting systems and annual accounts of railway undertakings ( l ), less any
 compensation : or aids received from the State which reduce costs .      Railway
 undertakings shall use the table in Annex III to break       down the compensations
 and aids received tinder Regulations ffos 1191/69 (2 ), 1192/69 ( 3) and     1107/70
 ( 4 ) into items constituting a reduction in costs or an increase in revenue .
 2.       The categories of traffio shall be as follows :
 a) for the carriage of passengers and baggage :
      – rail transport ( subdivided in accordance with the needs of each under­
         taking)
      – road transport
      – carriage hy other modes .
 ( 1 } Doc . OOM(77)76
 ( 2 ) ( 3) O.J. n® L 156 of 28 June 1969, p.l
 ( 3) O.J. No L 156, 28.6.1969 , p.8
 ( 4) O.J. Uo L 130 of 15 June 1970 . p.l
                                                                        ./.
 ---pagebreak---                                       - 12 -
 b ) for goods traffic :
     j- full "train loads
     - full wagon loads and sets of wagons
     - packages and parcels
     - road transport
     - carriage by other modes .
                                      Article 8
 1.      For the purpose of allocating costs by category     of operations ,
 railway undertakings shall apply the principle of particular costing to each
 category .    In so doing and in order to achieve maximum allocation of such
 costs , railway undertakings shall use one of the two following principles
 at their choice :
 Utilization principle :
        Allocation of costs in proportion to the use of       resources made
        by each category of operations .
Causality principle :
        Allocation of costs between categories of operations in proportions
        showing that certain costs could be avoided in the absence of certain cate­
        gories ,  In applying this principle railway undertakings may not regard
        one category of operations as the main cause of such particular costs
        but shall apply the causality principle to all the categories of oper­
        ations concerned ,
2,      Costs which it    is . not possible to allocate to any one category of
operations shall be taken into account when the results of the undertaking
as a whole sire examined .
                                                                            ./
 ---pagebreak---                                     - 13 -
                                  Article 9
      Within ten months of the end of the financial year tinder consideration ,
all railway undertakings shall communicate to their supervisory authority
and to the Commission     iiculars of the allocation of costs "by category of
operations carried out in accordance with the provisions of Article 8 .
                                   Section IV
                              Final provisions
                                   Article 10
1*    There is hereby attached to the Commission an Advisory Committee to
assist the latter in studying the application of the principles set out in
this Regulation *
2.    The Committee shell give its opinion on any question relating to the
implementation of this Regulation and shall study measures designed to
improve its provisions .
3*    The Committee shall have as its Chairman a representative of the Commission
and shall consist of two representatives designated by each Member State#
The Members of the Committee may obtain the assistance of experts desig­
nated by them* The Committee shall be convened by the Commission which
shall provide the necessary secretarial services .
                                  Article 11
      Annexes I to III form integral parts of this Regulation*
      This Regulation shall be binding in its entirety and directly
applicable in all Member States *
Done at Brussels                                          Por the Council
                                                          The President
 ---pagebreak---                                    ANNEX I
                     Analysis of transport operations
Relevant characteristics :
- nature and volume of traffic conveyed ;    regular or of seasonal or
  exceptional nature ,
- route followed by the traffic end by any wagons returning empty,
- method of transport used ( full train loads ),
- class of service .
- weight of consignment and average load of wagon or wagons ,
- category, type and characteristics of wagon or wagons used ( railway or
  privately-owned ; covered, open, flat ; tare weight , length),
- turn-round time of wagons ,
- journey and returned empty coefficient of wagons ,
- shunting of loaded traffic and, where applicable , of empty return wagons ,
  ( on departure , on arrival , during journey),
- administration ,
- durât ion of traffic »
Characteristics of trains conveying traffic :
- numbers and categories of trains ,
- method of traction and class of traction unit used,
- running distance ,
- distances run by traction units ( including assisted journeys and dis­
  tances run light ),
- gross trailing tonnage of trains ( authorized and actual average),
- rostered hours of staff ( driving, accompanying) ,
- administration
for the various sections of line used *
 ---pagebreak---                                ANNEX I ( cont limed)
Characteristics of routes used t
- gradients .
- speed limits and average running speeds ,
- traffic mix and congestion , route capacity ,
- axle loadings *
 ---pagebreak---                                     ANNEX II
                  Standard list of factors to be taken into
      consideration in calculating particular costs for goods traffic
 1 . Administration
 2 . Other overheads
 3 , Social insurance
 4 . Taxes and dues
 5 « Miscellaneous expenditure and indemnities
 6 . Terminal services
 7 • Shunting
 8 . Other station expenditure
 9 . Train manning
10 • General depot services and preparation of tractive stock
11 . Driving
12 . Materials used "by tractive stock
13 • Maintenance of tractive stock
14 - Maintenance of goods wagons
15 • Maintenance of other rolling     stock
16 . Depreciation or   replacement and hire of rolling stock
17 * Maintenance and depreciation or    replacement of permanent way
18 . Maintenance and depreciation or replacement of engineering works
19 - Maintenance and depreciation or replacement of fixed installations for
     electric traction
20 . Maintenance and depreciation or replacement of safety and telecommunication
     installations
21 . Maintenance and depreciation or replacement of buildings
22 . Maintenance and depreciation or replacement of other installations
23 . Financial charges .
 ---pagebreak---                                        AÏWEX III
              Breakdown of compensation   and aids from the State under
             Regulations N°s 1191/69 ( l ), 1192/69 ( 2 ) and IIO7/7O ( 3 )
                   as reductions in costs or increases in revenue
  Compensation     and aids constituting         Compensation    and aids constituting
           a reduction in costs                         an increase in revenue
  Regulation n° 1192/69 on the normal­           Regulation n° 1191/69 concerning
  ization of accounts                            public service obligations
  Régulation n® IIO7/7O :                        Regulation n° 1107/70 :
  - expenditure on infrastructure in             - tariff obligations not covered
     respect of which other transport              by Regulation n* 1191/69
     undertakings incur no liabilities ;
  - expenditure incurred in the research
I     and development of transport systems
     and technologies more economic for
     the community in general .
  ( 1 ) and ( 2 ) O.J. n° L I56 of 28th June I969
  ( 3 ) O.J. n° L 130 of 15th June 1970 .