Ukrainian Railways (UZ) is planning to raise its prices for rail freight transportation. With the ongoing war and the subsequent rise in costs for the operator in mind, it seemed only to be expected that the operator would start charging more for its services. However, Ukrainian businesses disagree and object to the measure.
UZ’s planned price indexation would lead to a tariff increase of 37 per cent for customers of the rail operator. “Such steps will seriously hit the industry, which, in addition to expensive logistics, is currently facing other significant problems caused by the war, such as the cost of electricity prices, power outages, et cetera”, writes Ukrainian consulting company GMK Center in an appeal to reconsider the indexation.
GMK Center adds that the measure “will affect the cargo of the mining and metals industry, the economy of steel mills and the competitiveness of the domestic industrial sector.”
UZ Break-up
Yuriy Ryzhenkov, CEO of the international steel and mining enterprise group Metinvest, earlier spoke out against UZ’s supposedly far-reaching tariff authority. In order to keep the tariffs in check, he proposed restructuring the company entirely.
“A full-fledged reform of Ukrzaliznytsia is needed, that is, its division into several independent companies – infrastructure, traction, passenger. Each of these companies should set its own transparent tariffs for its services”, Ryzhenkov said in an interview with Forbes.
“An independent regulator should also be created, just as in the energy market, so that this regulator can be an arbitrator between business and UZ in terms of tariffs for monopoly services. Because now there is a railway monopolist that can offer any tariffs, and no one can check how justified they are”, he added.
Keeping up with expenditures
On the other hand, UZ argues that it needs to charge more for its services to keep up with expenditures. “In particular, prices for electricity 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, et cetera”, the rail operator writes.
“All this deprived the company of the ability to adequately perform repairs and maintenance of infrastructure and rolling stock, and index salaries for railway workers, of whom more than 10,000 defend Ukraine in the ranks of the Armed Forces of Ukraine, as well as fulfill social obligations to them”, the company adds.