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Online system for northern supplies may appear by end of 2018 — expert

June 15, 2017, 9:35 UTC+3 MOSCOW
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MOSCOW, June 15. /TASS/. The system of northern supplies in Russia will change by end of 2018, when a new computerized system will make automatic the entire process of delivering goods and fuel to the Northern territories during short summer breaks. TASS spoke with head of the Northern Supply Development Office Yulia Zvorykina.

Across Russia, there are 25 regions, including eight in the Arctic, which use the northern-supply system, and three of those regions depend absolutely on the northern supplies. In 2016 only, almost 110 billion rubles ($1.7 billion) were allocated from different source for the Northern Supply campaign. With the new system, the cost of deliveries may drop by 30%, saving on intermediates, thus redirecting funds for development of the northern territories.

The so-called ‘Northern supplies" is the system that remains since the times of the Soviet Union, when the government bought and transported goods from Russia’s southern regions to the Extreme North regions prior to the winter season. Those are first of all food and oil products. Both in the Soviet times and now the northern supplies are financed from the federal and local budgets. The deliveries are mostly by the river and sea transport, including along the Northern Sea Route.

This project will be on agenda of a conference in Naryan-Mar due on June 19-20. The event will feature ministries of economic development, trade and industry, the agency for national reserves - Rosreserv, regional authorities, lawmakers, and major companies.

Main challenges

The biggest problem, the territories dependent on the northern supplies are facing, are not problems of transportation or big distances, but communications and the energy, the expert said. "In case of more developed local energy, and modern level of communication, in case of digital technologies, the transport will work much more effectively," she said.

Thus, nowadays the key task is to implement the strategy of areal development. "A clear information system tracing the cargo, the systems to monitor the northern supplies will thus exclude intermediates and consequently will cut expenses. There is no need for a corporation, an authority or personnel for the northern supplies, as everything may be solved by changes in the mechanisms. The northern supplies should be unified, it requires unified planning to organize unified shipment," she added. All these aspects will be solved by the new computerized system to manage the northern supplies.

GDS for northern supplies

The new system will use methods of the international booking system - the Global Distribution System (GDS), though not for passengers, but for the cargo.

"This is what happens in the world now - to make it so that all transport companies could place their cargoes on that system. We think, in the beginning, the system will be for the water transport, and then both the railway and the vehicles will follow suit. The system will be working so that not only to see how the cargo is moving, but also to pay and to insure the consignment without intermediates," she said.

As yet, there is no ready-to-use technology anywhere in the world, and many questions are still to be addressed - how to insure a container against a theft, how it would be reloaded without involvement of a logistics company, and so forth. But the system still offers the understanding to the market players about the delivery time, the cost and will offer tracing the shipment, the expert added.

The computerized system will also serve interests of the local residents: no matter who you are - whether you own a hundred containers or you are just a private client. The question is what the cost would be like and whether it would be acceptable for a client, or the client would otherwise prefer to wait for the winter road (of ice and snow) when cars deliver cargoes along frost-hardened routes. People will get used to the new system within two-three years, and then they will trust it.

Future of the new system

"We have a few companies, which may do the computer-related part for the north supplies, there are no problems here. Now, we consider which of the digital operators would provide guaranteed communication. Certain aspects should be agreed with the military, since this is communication, and the system means it is open, which may be not good for all. The project is at the stage of agreements now, she said.

As for investments, GDS would not require much expenses, the question is who will invest in communication. We are negotiating with Russian cell operators, with the T-Platform Company, which has made the hardware for the Lomonosov computer; we want to have Russian hardware, Russian software, we want to protect maximum the Russian product against foreign influence. "As yet, we do not have a client for the main system, nor we have an investor, Northern Supplies are working on that," the expert said. "Perhaps, the Ministry of Communications and the Defense Ministry, which lay own communication networks, could allow those networks to members of the commercial projects."

The new system could be international, since as yet it is unique. "Since we shall have experience in high-latitude transport, the understanding of the work in the extreme conditions, and besides, we could use drones. For example, you trace a vessel of the Arc7 ice class, and the drones could take designated cargoes to transport them to the destinations. There are many alternative kinds of transportation, which are not used now, take for example dirigibles," she said.

Money to work on the system could be earned from optimizing of the current work. "The way I suggest is the following: new mechanisms in the current means, which will give effects; for example, cutting insurance expenses by 30% since you will have the option of tracing the shipment. If we optimize the northern supplies by 30%, then from 100 billion ($1.7 billion) you get 30 billion ($521 million), and this money may be used for development of the local energy sector. Now, we need smart solutions and technologies, as the Arctic’s technology development potential is not used fully," she continued.

As for the time the information system may be ready - everything depends on bureaucracy. "Making the system is not a problem: to buy and install a server. Even attracting investors is not a big deal - everything depends on official authorizing procedures. We hoped for something positive for the next campaign already, but this requires much work, beginning from unified procedures, and common standards of work," she said.

The information-system project may in future ease the shortage of transport infrastructures in the distanced areas of the Far East and Siberia. And this work could be supervised by the Ministry of Economic Development, the expert said.

Yakutia and Kamchatka are first to begin

Yakutia and Kamchatka have confirmed they want to become the new system’s pilot regions. Yakutia’s 89.87% of the people depend on the northern supplies, and Kamchatka is absolutely dependent on them. The areas are very different, they are organized differently, the systems of shipment and organization of supplies are also different.

"Most importantly, we are structuring models now to receive support from the governors. The governors are also interested in having their regions involved, in their developments, so that they could have solutions to reduce expenses of their budgets, or at least to keep them at the current levels - the regions are different, their budgets are different. Every region requires own solutions, and we hope we shall offer a model," the expert said.

Priority budget financing is doubtful, she continued, though the project is very important. But anyway, there are many available mechanisms to be used with the current resources - money should be rather not re-directed, but should be spent more effectively. For example, if a region spends three billion rubles ($52 million) to subsidize some shipment, those three billion could be redirected for the region’s development.

"The idea of having one logistics operator has been at many discussions, but it did not give any effect, as the northern shipment is a problem, related not to transport, but to complex development. Solving it would mean development of the transport, the energy, the communication and the entire territory," she said.

Development of local energy

The money saved from using the computerized system may be used for development of the local energy. Local authorities now discuss many projects with big companies. Rosatom (the nuclear authority) has a very good program for local variants, including a wind hybrid with nuclear elements.

"All regions differ, their conditions are different, steam power plants fueled by wood pellets are best in the regions with wood processing, other regions should use different solutions - some of the regions spend up to one billion ($17.3 million) a year only to compensate for the energy expenses both for companies and for the households. If this money is used partially for local energy generations, the energy prices will go down, and the regions would not depend on diesel supplies. For example, the equipment for a wood pellets mill costs about 100,000 euro, then you make a steam boiler, greenhouses, and you do not have to import vegetables," the expert said.

The Nenets Autonomous District imports every year 80,000 tonnes of diesel, while the vessels bringing it use 20,000 tonnes. The districts spends every year about one billion rubles ($17.3 million) to compensate for high household tariffs. However, the district had attempts to develop alternative energy - Japan’s company made wind generators there, but they turned out to be ineffective. However, technologies and solutions have developed greatly over the recent 5-7 years, she said, expressing confidence in success of the local energy.

Businesses say 'Yes'

Businesses, she continued, support the idea of having a new platform for the northern supplies. Rosatom, Rosseti (grids), Sovcomflot (maritime shipping company), Gazprom, Novatek are interested, she added. Besides, much smaller companies produce steam equipment, turbines, boilers, and they will be happy to have big orders. The Norilsk Nickel Company is laying a fiber-optic communications line from Novy Urengoi to Norilsk.

Companies serve deliveries quite legally, but not all their transportation means could be used to avoid the "dead freight," she said. While some of the means go in a direction and return without cargo, others go to a different direction and also return without any load - they do not meet anywhere. Nor there is any control. Due to low water in some rivers, a part of the cargo, say coal, is dropped to go past the dangerous places.

The Northern Supplies Office insists on a common e-platform for trade, where all the parties could meet and bargain big consignments. An electronic system also means more trust, the expert said.

The work on the system would not make the northern supplies more expensive, right on the contrary, she said. "Nowadays, there are extremely many tiny companies, which are fighting to make money on the supplies, thus only forming inadequate prices. We should have a system, which would minimize human involvement. If in the Arctic we manage to test and show it is working, then a similar GDS system could be used for all kinds of transportation.".

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