The Cabinet of Ministers stated that the Transport Ministry will assume long-term budgetary commitments of EUR 406.849 million, consisting of Connecting Europe Facility (CEF) funding of EUR 345.817 million and Latvian national co-funding of EUR 61.032 million.
At the same time, EUR 76.894 million will be allocated for the payment of value added tax (VAT). VAT is eventually returned to the national budget.
The government also noted that some activities were reduced or rejected, which requires an increase in the national budget co-funding for the Connecting Europe Facility (CEF) partially supported activities by EUR 33.792 million, which is needed for construction supervision and other construction-related activities, while EUR 6.387 million is needed for the payment of VAT.
The government also instructed the Transport Ministry to prepare proposals for financing the rejected activities and submit them to the Cabinet of Ministers together with the Rail Baltica project financing plan, as well as to review the costs of the Baltic joint venture RB Rail in cooperation with the Lithuanian and Estonian implementing authorities.
Kristine Malnača, Deputy State Secretary for Rail Baltica at the Transport Ministry, told the LETA newswire that the additional amount needed for the construction activities was still to be specified, but in principle the government supported the state co-funding of the activities for which the EC had allocated funding.
The Transport Ministry stated earlier that the 10th Connecting Europe Facility (CEF) call for proposals did not allocate EC funding for activities that have been supported so far, including land acquisition - for an amount of EUR 44.95 million needed to be able to apply for construction works on the Vangazi-Estonia border section in future calls, as well as activities implemented by the RB Rail joint venture (quality control, global project coordination), where the Latvian share amounts to EUR 23,307,545. In addition, EUR 4,405,126 are needed to cover VAT payments.
The EC's decision to support activities with reduced funding breaks the usual ratio (85/15) between the two sources of funding - the EC and the national budget, forcing an increase in the share of the national budget to finance construction-related activities not supported by the EC or supported at a reduced level.
The ministry explained that the funding is needed to carry out construction supervision, technical expertise required for the construction process, project implementation support activities, and the full construction of the Skulte construction materials storage base/infrastructure maintenance point. The EC has not provided funding for activities implemented by the RB Rail - project coordination, control and monitoring, digital asset management system.
The ministry underlined that Rail Baltica is a cross-border project and if Latvia is unable to secure national funding for the implementation of the project and refuses to enter into financing agreements because it is unable to co-finance the activities, this could pose a significant risk to the further implementation of the project in Lithuania and Estonia as well, as there is a possibility that CINEA will cancel the decision to grant funding for the Rail Baltica project due to the missing Latvian section.
In its statement, the ministry points out that the Rail Baltica project is on the eve of the full-scale construction phase and Latvia is ready to start construction works on the main line sections towards Lithuania.
At the same time, the ministry regrets that the EU has not co-financed essential Rail Baltica activities, including construction supervision and land acquisition. The ministry pointed out that such activities have always been co-financed by the EU in the past, and at a high intensity - up to 85 percent.
The ministry is aware that the total EU funding for cross-border transport projects is insufficient, but nevertheless considers that "this change of the rules of the game for previously eligible Rail Baltica activities is clearly ill-considered".
The Transport Ministry pointed out that the full financing of these activities from the national budget imposes an unforeseen burden on the budget.
It has also been reported that CINEA has approved funding of EUR 346.1 million for the implementation of the Rail Baltica project in Latvia under the third call of the EU financial period 2021-2027.
The ministry noted that this is an important EU support to continue the implementation of the Rail Baltica project in Latvia and to facilitate the construction of the main line.
The funding is earmarked for the implementation of priority Rail Baltica activities in Latvia. Of the total allocation for the implementation of the project in Latvia, EUR 252 million have been allocated for the construction of the southern section (Misa-Lithuanian border) of the main line and EUR 38 million for the Skulte construction site, which will serve as the construction logistics base for the northern section of the Latvian main line towards Estonia.
LETA also reported, there is currently no clarity on the model of operation and management of the Rail Baltica railway line, according to the report on the Rail Baltica project presented by the supreme audit institutions of the Baltic states.
According to the latest Rail Baltica cost-benefit analysis, the total cost of the line in the Baltics could reach EUR 23.8 billion, including EUR 15.3 billion for the first phase of the project in the Baltics and EUR 6.4 billion in Latvia. A previous cost-benefit analysis in 2017 estimated the total cost of the project at EUR 5.8 billion.
Latvia is to commence construction of Rail Baltica mainline in 2024.
Rail Baltica is a European standard 1,435 mm gauge electrified railway for passenger and freight transport to be built from Tallinn to the Lithuanian-Polish border. The overall length of the railway will be 870 kilometers.
