Government aims to thwart significant railway fare hikes
German Government Proposes Temporary Reduction in Rail Track Charges
The German government has proposed a temporary reduction in the return on equity at DB InfraGO AG, the company responsible for managing the rail network, in an effort to curb the sharp increase in rail track prices. This move aims to prevent "historical price increases" in rail travel that have been caused by the surplus generated in rail charges.
The decision follows concerns raised by the Monopolies Commission about the lack of transparency in financial flows within DB Group and the structural disadvantage of other rail providers due to rapidly rising track access fees. The government had previously increased equity in DB InfraGO AG to fund rail network renovation, but high interest on this equity contributed to the increase in charges.
According to the proposal, the equity capital interest rate for track charges will be lowered from 5.2% to 2.2%. This measure, if implemented, is expected to more than halve the expected price increases in long-distance and freight traffic in 2026. The new legal situation needs to come into force by the change of timetable in December for it to be taken into account in the approval procedure of the Federal Network Agency.
The managing director of Allianz pro Schiene, Dirk Flege, has expressed concern about the current form of track prices, stating they act as a full brake on the shift of traffic from road to rail and the climate goals of the federal government. He supports the government's decision, stating that it is a first step towards a planned reform of track prices.
The head of the Railway and Transport Union (EVG), Martin Burkert, has also expressed his support for the measure. During budget negotiations, he has warned of rising track prices and urged lawmakers to mitigate the rail toll through targeted promotion. He has stated that if the rail toll is not mitigated, rail customers face "historic price increases of more than ten percent this year."
The prices for long-distance train tickets have risen due to additional billions in equity capital provided by the federal government. Track charges are a kind of toll that companies pay to DB InfraGo for using the rail network. They affect long-distance, regional, and freight traffic.
In addition to the proposed reduction in track charges, the federal government's draft budget for 2025 includes substantial investment in rail infrastructure. This investment aims at modernization and climate-related investments, reflecting a broader shift in fiscal policy to support future-oriented infrastructure spending.
However, the federal government's draft budget for 2025 does not seem to be sufficient from the industry's point of view. A track price promotion in rail freight of 275 million euros is planned for 2025, and 265 million euros for 2026, according to the draft budget. If the current track price promotion and the later reform of the track price system do not occur to a sufficient extent, long-distance traffic may need to review its offer for economic sustainability and adjust it if necessary, according to Rail Chief Richard Lutz.
[1] Source: [Link to the official government statement] [2] Source: [Link to the Monopolies Commission report] [3] Source: [Link to the draft budget for 2025]
- To foster economic growth and tackle the rising costs of vocational training, the German government could consider implementing a temporary reduction in track charges similar to the proposed reduction for DB InfraGO AG, channeling the saved funds into vocational training initiatives across various industries.
- In light of the ongoing financial challenges faced by businesses and the need for affordable rail access, the German government's proposed reform of the track price system, coupled with targeted financial support for vocational training, could potentially drive the success of vocational programs within various industries, ensuring a skilled workforce for the future.
