Head of Bulgaria’s Road Agency: Daily Vignettes to Subsidize Transit Traffic

Business | May 30, 2016, Monday // 19:23
Bulgaria: Head of Bulgaria’s Road Agency: Daily Vignettes to Subsidize Transit Traffic Lazar Lazarov, Board Chairman of Bulgaria’s Road Infrastructure Agency (RIA). Photo by BGNES

Lazar Lazarov, Board Chairman of Bulgaria’s Road Infrastructure Agency (RIA), speaks to Novinite.bg about recently introduced and planned changes to payment tariffs for traffic on motorways and major roads in the country.

Q: The proposal to ??introduce one-day and three-month vignettes is now awaiting debate on first reading in Parliament. What is your opinion about the the introduction of these types of vignettes?

A: I think it will be a mistake that will inflict a blow to state budget funding for road repairs. I say this as an official representing the Road Infrastructure Agency (RIA), which is in charge of taking care of the repair of national roads, and they repaired through budget financing that comes mainly from proceeds from the sale of vignette stickers. The introduction of one-day vignette stickers will lead to much greater direct costs of printing and distribution. In addition, practice has shown that the largest number of short-term vignette stickers is being sold at border crossings. The introduction of one-day vignette stickers will automatically reduce the number of one-week vignette stickers sold, i.e. instead buying a one-week sticker for 15 levs, which is its price at present, the drivers of motor vehicles transiting Bulgaria will buy one-day stickers that will be cheaper. This will automatically inflict a blow to the state budget for road maintenance. The introduction of one-day vignette stickers will also reduce the potential for investment and repairs, which will result in a further deterioration of our road network, which is underfunded at present. Moreover, control of daily vignette stickers is more complicated, they will be hard to recognize, traffic police will be unable to localize offenders among passing cars, which they are doing now using their routine expertise. The result will be that police will either have to request drivers to pull over for inspection, which will cause delays and disturb the comfort of travel, or offenders will slip away, which again will dent the revenues of the road agency.

Q: The one-year vignette sticker for passenger cars now costs 97 levs after the price was increased by 30 levs only, which immediately sparked sharp reactions. According to people and organizations unhappy with the price hike the increase was big. What is the point of view of RIA, which is the main investor in the construction and maintenance of the country’s road infrastructure.

A: I’ll immediately give as an example the jump of 30 levs in the price of annual vignettes, for the shorter periods the increase is lower. Since the new price entered into force from the beginning of this year, expected revenues were not included in the state budget. Our analysis shows that we have collected revenue from vignettes so far this year that is nearly 70 million levs higher compared with same time last year. The Ministry of Finance and the government immediately allocated 68 million levs to the recovery of the road network in Northern Bulgaria. The money was allocated as target financing from the state budget for road sections in the regions of Vidin, Montana, Vratsa, Lovech, Razgrad, Targovishte, around Isperih. These are roads in very poor condition and the money was immediately invested in improving their operational status.

Q: Will the Bulgarian consumer gain anything from the introduction of daily vignette stickers which will be much more expensive compared to the average price per day of travel achieved in one-week week and one-year vignettes?

A: The one-day vignette will be the most expensive one relative to the daily charge for travel on national roads offered by longer-term vignettes. The annual vignette remains the cheapest one calculated by the number of days for which it is valid. When you divide 97 levs by 365 days, you get 26 stotinki per day. There is no way for a daily vignette to achieve such a price. Printing costs alone will be higher than its value; then you must add the distribution fees, which generally are about 5% of the price of the existing vignette stickers. The cost of daily vignette stickers will be correlated to the price of existing vignettes: a monthly vignette costs 30 levs, weekly vignettes cost 15 levs, the cost of a daily vignette is likely to be around 10 levs, which will automatically make it irrelevant. And the difference of 5 levs between the prices of weekly and daily vignettes will come as a blow to the state budget because transit traffic will choose, of course, the lower price. If 1 million cars choose this option, this makes 5 million levs. This is the cost of the rehabilitation of 10-15 kilometers of a road which is in tragic condition somewhere.

Q: RIA’s revenue from the sale of vignette stickers has been in the area of 210-215 million levs a year. With the price of vignettes now increased, what proceeds do you expect to receive this year?

A: I guess the sum will be about 270 million levs.

Q: How much will RIA’s budget revenue lose if this legislative amendment passes through parliament?

A: We expect a drop in revenue somewhere between 15 and 20 million levs, if daily vignette stickers were introduced. Half of what has been achieved by increasing the price of vignette stickers will be lost.

Q: What are the costs of road repairs?

A: The agency needs around 700-800 million levs per year for road repairs to keep them in good shape. Otherwise, we’ll continue to see in the media footage of roads with potholes, interviews with people who have broken their cars.

Q: It’s big difference between 270 million levs and 700 million levs. Is financing from the central government budget an option, i.e. all taxpayers contribute, regardless of whether they travel or not?

A: The Finance Minister is right to limit funding from the state budget. Money from the state budget is being allocated to specific targets following a decision of the Council of Ministers. The Finance Ministry has already told us to spend as much money as we collect. So, we can spend within the limits of the budget. From this point of view, the agency needs 700-800 million levs a year for road maintenance only in order to bring Bulgarian roads to normal operational status.

Separately, we need funds for emergency repairs, winter maintenance, new construction. To collect those funds, we want to introduce a road toll system, to be able to collect funds from trucks using roads in Bulgaria.

Q: Had the Regional Policy Committee in Parliament sought your opinion before this change was approved?

A: Yes, we presented our arguments and there was some hesitation during the debates in the Regional Policy Committee but the change passed through the committee and now is awaing debate on first reading in the plenary hall. But I think that the adoption of this amendment to the law will be a blow to Bulgarian roads. While seeking a positive effect for Bulgarian drivers, we will actually make things easier for other drivers who have nothing to do with the Bulgarian economy. Analyses show that daily and weekly vignettes will be bought at border crossings because motor vehicles transiting Bulgaria predominantly use those vignettes

Q: Who will actually gain from the introduction of daily vignettes?

A: Currently, the lowest charge, 10 euro, is paid by trucks which travel almost 450 km in Bulgaria from Kapitan Andreevo crossing on the border with Turkey to Danube Bridge 2 in Vidin. With the proposed introduction of daily vignette, we’ll subsidize travel by transiting foreign-registered vehicles as well, including light vehicles, at the expense of Bulgarian drivers.

Q: You disagree mostly to the introduction of daily vignettes. What about quarterly vignettes?

A: We have assigned an independent team of financial experts from the Bulgarian Academy of Sciences to draft  an analysis and their first results are close to our own calculations. And those findings show that people travelling on summer holidays (which is the reason for buying a quarterly vignette, according to its proponents) buy a monthly vignette sticker or three weekly vignettes. That is why buying a quarterly vignette will in no way make life easier for citizens. There is no quarterly vignette sticker in Europe. It is a fact that if you enter Switzerland for a single day, you still must buy an annual vignette. That is why Swiss roads are examplary. The only comparison in favour of quarterly vignettes is Romania. But we want to compare ourselves not with Romania but with those who are ahead of us.

In Romania they have big traffic jams - their roads are two-lane, with low transit capacity, they have few completed motorways and travel on weekends and busy weekdays is very difficult. Not that I criticise Romanians, it’s their decision. But this option is unsuitable for our country where transit travel is the main type of road traffic. It’s irrelevant to claim that quarterly vignettes will positively influence the tourist flow.

Q: To what do you attribute the activity of politicians to advance this change in the law?

A: To elections and populism, as well as economic interests. It has been clear to us and we have said that with the launch of the road toll system many interests will be affected. Interests mostly of those who have so far travelled almost for free on Bulgarian roads, especially when crossing from a border checkpoint at one end of Bulgaria, for example Svilengrad, at Kapitan Andreevo, to the other end of Bulgaria at Kalotina, or Danube Bridge 2 at Vidin. For trucks it costs 10 euro. Nowhere in Europe does such a low price exist. Even in Greece this is the price for a car to cross only the northern part of the country, not to mention European countries, where the price is many times higher, I would says ten times higher.

Q: A gradual increase in the price of vignettes over the years would have been more easily accepted?

A: It is absolutely true. Maybe its our fault – due to the same reasons. Vignette prices haven’t been changed for eight years, since 2007. The German company, which advised their introduction in 2004, had said that every year the cost of vignette stickers must be increased by 5%. If we have fulfilled this requirement, then perhaps we would have reached much higher levels of appreciation but consumers would not have felt the pain of increase so sharply.

Q: When will electronic vignettes and road tolls go into force and what will be their advantages for consumers?

A: We plan to introduce electronic vignettes from the beginmningt of next year. But, unfortunately, we expect that complaint after complaint will follow, because the introduction of a tolling system and electronic vignettes will affect economic interests of large carriers - both Bulgarian and European ones, as well as non-European ones, I mean Turkey , the Middle East, Ukraine.

Q: How does the price for using road infrastructure in Bulgaria compare to Europe’s average?

A: For trucks the difference is 12 times. In Germany, you pay almost 12 times more for transit travel of the same distance compared with Bulgaria. Motorways in Germany and Bulgaria are built from the same materials and costs are identical, except those for salaries, which are lower in Bulgaria

Q: What are the advantages of electronic vignettes? Shall we forget about putting stickers on windshields?

A: Attaching stickers creates problems, for example in traffic accidents, or when the windshield is broken, or has to be changed. Unfortunately, we have seen windshields deliberately broken to steal vignette stickers. All this will disappear with the introduction of electronic vignettes for cars, while trucks will pay a road toll. The e-vignette will have another advantage: it will be valid from the date of purchase to the date of expiry of the respective period for which it was purchased. For example, a monthly vignette purchased on the 15th this month, it will be valid until the 15th next month. Same for a yearly vignette.

Q: What are your expectations about RIA’s revenue once road tolls for heavy trucks are introduced?

A: Analysts’ forecasts of revenues vary widely - from 800 million levs to 1.5 billion levs. But even if we take the lowest level of 800 million levs, I think our road network will be rehabilitated. Allocating part of these funds to new construction has yet to be developed from  legislative point of view. Our procurement order currently comprises only the building of the tolling system. Specific charges, and which vehicles will be charged is a question yet to be discussed. What is clear is that the vignette system will be used for passenger cars and light commercial vehicles, while the tolling system will be used for heavy trucks. We don’t expect a rise in the price of vignettes. With the introduction of the road toll system we expect a rise in revenue, mainly from transit traffic. The idea is that with the introduction of  tolls, travel on 4,000 km of roads will remain free of charge; they will be mainly third-class roads not forming transit traffic.

Q: What percentage of the revenues from sale of vignettes go to repairs and what share is invested in new roads?

A: Rehabilitation, or preventive repairs, cost 400,000 levs per kilometer at the lowest price offers. Add VAT, and we are close to half a million levs. Multiply it by 20,000 km and we reach 10 billion levs. Then spread 10 billion levs over 10 years, which is the operational lifetime and we come at 1 billion levs a year. However, in Bulgaria a road is considered to be new 15 years after opening for traffic. So far, we have built new projects using European funding, mainly under Operational Programme Transport. But now we are in the last programming period, which ends in 2020. After that we should have secured our own revenue from road tolls, both for maintenance and new construction. So far, we have used government funding to complete the section of Maritsa motorway near Lyubimets and Svilengrad and a section of Hemus highway from Belokopitovo to Kaspichan.

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Tags: Bulgaria, RIA. Lazar Lazarov, road tolls, vignette, stickers, vignettes, transit, traffic, Germany, europe, Romania
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