Estimating Marginal Costs for the Infrastructure of Iranian Railway Network using an Econometric Approach

The additional costs generated when an additional train uses the Railway infrastructure is defined as the marginal cost of usage of the network. This index can be divided into five main types: use-related infrastructure wear and tear costs, congestion costs, scarcity costs, external accident costs and environmental costs. Wear and tear of railway track is caused by a combination of usage-related and environmental-related damage. Use-related wear and tear costs are that proportion of the inspection, maintenance and renewal costs which result from trains using, and hence causing damage to, the track.The main goal for this research is estimating the marginal costs for utilizing the Infrastructure of Iranian Railway Network. As an important economical index in rail operations, the marginal cost can be applied to determine infrastructure access charge as well as the freight and passenger tariffs in Iranian railway transportation. In this research, we focus on use-related wear and tear costs for Railway infrastructure marginal cost. This research identifies the variables transported grass-ton, maximum track slope, and maximum line speed as the principal cost determinant and based on the five years averaging of track maintenance cost observations of the twelve Iranian rail sections during the years from 2000 to 2004 cost elasticity with respect to grass-tons is 0.161 and the marginal cost equals to 0.12 Euro per thousands grass-tons. In this research it is assumed that marginal cost doesn’t change with increase in length of lines. This paper is organized as follows: section 1 presents an introduction to marginal cost and its role on the privatization as well as access pricing of the networked infrastructures. Section 2 reviews models and approaches to estimate marginal cost. In this section, a definition for marginal cost of utilization of the railway infrastructure network is presented. Section 3 illustrates the data structure that is used for modeling the Iranian railway network. The identified model and causal variables contributing in the Marginal cost estimation of Iranian railway network is presented in section 4 of the paper. This section includes a comprehensive review of the cost functions adopted by Austria, Sweden, and Finland Railways. Pitfalls and strengths of the fun cost functions are investigated and results for Iranian Railway network is compared with those of the selected countries. Section 5 concludes the paper and consist of some suggestion for further researches.