The supervisory board of Ukrainian Railways (UZ) approved a new indexation of its freight tariffs, which might rise by 37 per cent. The proposal will now be evaluated by the Ukrainian Tariff Council under the Ministry of Community and Territorial Development. If approved, it would be first tariff increase since the summer of 2022.
The company said it has to raise tariffs due to higher expenses. “Prices for electricity have increased by 166 per cent, diesel by 110 per cent, spare parts for diesel locomotives by 217 per cent, spare parts for electric locomotives by 22 per cent, bearings by 37 per cent, solid- rolled wheels by 20 per cent, etc…,” UZ specified.
Because of these cost increases, the company claims it was unable to sufficiently carry out repairs to the infrastructure and rolling stock or adapt the salaries of rail workers. “Indexation will allow for the financing of rolling stock and infrastructure repairs at the minimum necessary level. Otherwise, there will be significant risks to the continued safe operation of the state’s critical infrastructure”, UZ continued.
How will the industry react?
As mentioned, the last tariff increase implemented by Ukrainian Railways dates back to June 2022, when they were shot up by 70 per cent. In theory, they should be indexed annually, but the Russian invasion, as it is easily imaginable, has changed the country’s priorities. The company said that the 37 per cent proposed increase compared to June 2022 would translate into a 13 per cent rise year-on-year.
UZ had already proposed a 20 per cent increase at the end of 2023 which was, however, never introduced. More recently, the company tried to raise the tariffs for specific types of goods in September, causing an adverse reaction from sector associations. It now remains to be seen whether or not the new indexation brought forward by the company will be approved and how the industry will respond.