ERR recently ran an opinion piece by Ministry of Regional Affairs and Agriculture adviser Hannes Luts titled "The Funhouse Mirror of Rail Transport." It was an article in which an official who shapes the development of Estonia's passenger rail service and directs public spending manipulated the public by presenting claims based on distorted facts and by ignoring the rules of how the economy works.

The article claims that adding one more kilometer of rail service is cheaper than any other mode of public transportation. According to the adviser, it costs the state just €1.3 per kilometer, which is even less than for an additional kilometer of bus service. If the aim of the opinion piece was to dispel half-truths about rail transport, then this statement is at best a quarter-truth. It does not reflect reality, but rather shows the author's highly creative interpretation of how taxpayer money is spent.

From the perspective of operators of long-distance [bus] routes that function without state subsidies, even the message that adding an additional rail kilometer is very cost-effective for the state seems petty. Intercity long-distance bus lines operate without any state funding and, on the contrary, generate revenue for the state budget — through payroll taxes from bus drivers' wages, value-added tax and fuel excise duty.

When calculating the price tag of additional services from the state's perspective, it is therefore necessary to take into account what portion of revenue-producing services will end up being replaced by subsidized services. Looking at Elron's 2024 reports, it turns out that €1.3 per kilometer was the amount still missing in 2024 for every one of the 6.05 million rail kilometers served, even after the state subsidy had already covered both track access fees and lease payments on existing trains.

In other words, €1.3 is merely the sum that is still lacking — even after the state has paid for both the railway infrastructure and the trains running on it. And this holds true only on the assumption that ticket revenue for each additional kilometer would be at least the same as at the existing service level.

Against this backdrop, the claim that adding an additional rail kilometer is cheaper than adding a bus kilometer is highly arbitrary and misleading.

The per-kilometer cost of providing high-quality, comfortable intercity bus service is indeed currently around €1.4, but unlike passenger rail, this cost includes the entire service — from the bus driver's salary and fuel to capital costs for the bus and road use. And unlike rail transport, maintaining this system costs the taxpayer nothing at all.

It is false to claim, as Hannes Luts does, that buses do not pay for road use. They do — through fuel excise duty. For example, in 2024 the state collected €516 million in fuel excise, of which about €228 million went toward road construction and maintenance. While the majority of fuel excise revenue was originally intended for roads, much of it is now diverted to cover other state expenses. Nevertheless, it is clear that buses contribute to road upkeep. Lux Express alone paid €1.4 million in fuel excise in 2024.

Still, I do agree with Luts that funding for the construction and maintenance of railway infrastructure should not involve simply moving money from one state pocket to another. The era of maintaining railways through freight access charges is over, and inevitably the state must support rail upkeep in one form or another. At the same time, long-term investment decisions must be made in such a way that keeping up the railway remains affordable for future taxpayers.

Lux Express submitted its own proposal for defining a long-term funding model for passenger rail to the Ministry of Regional Affairs and the Ministry of Finance back in June. The proposal suggested that the state could directly cover passenger rail's track access fees, while also setting a funding framework for Elron in which all other operating costs — including capital costs for passenger trains — would be covered by ticket revenue.

It is encouraging to see that the discussion is gathering momentum. A decision now has to be made: should the goal be for rail operations, like intercity bus service, to be fully covered by ticket revenue? Or should we settle for a situation where, even if the state pays for track access fees and provides the necessary trains, there is still a shortfall for every kilometer of service provided?

Countering half-truths with new half-truths is a slippery slope. By claiming that every additional kilometer of rail service is extraordinarily cheap for the state, passengers are led to a logical question: why not, for the same €2 million needed to start up a rail connection between Tartu and Riga, add ten new services on the Tallinn–Narva line instead?

In the end, it must be clarified that this claim only holds if the railway and the trains are free for the state and if every additional departure could generate at least as much ticket revenue as existing ones.

By the same logic, intercity bus companies could also just double their services. One might ask: if existing routes can cover their costs with ticket sales, why not simply run twice as many? As the head of a company that operates intercity bus routes in Estonia, I can confirm that supply and demand in public transport, unfortunately, do not work that way.

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