26 December
2024
The 37% increase in freight rates proposed by Ukrzaliznytsia will have catastrophic consequences for the economy, as it will lead to the shutdown of strategic enterprises and a reduction in foreign exchange earnings. Taking into account the state of the domestic industry, the government should introduce a two-year moratorium on raising Ukrzaliznytsia tariffs and conduct an audit of the state-owned company, says the letter of the OP "Ukrmetalurgprom" (UMP) to Prime Minister Denys Shmyhal and Vice Prime Minister of restoration of Ukraine - to the Minister of Development of Communities and Territories of Ukraine Oleksiy Kuleba.
"According to the available information, on November 28, 2024, Oleksiy Kuleba met with the management of Ukrzaliznytsia, where it was decided to prepare a draft order on the indexation of freight railway tariffs with an increase of the latter by +37%. This decision caused great concern among miners and metallurgists of Ukraine , who categorically oppose such a step, because the consequences for Ukraine's economy will be catastrophic with the shutdown of strategic enterprises and important reduction of foreign exchange revenue," the letter states.
The UMP reminded that in Ukraine the railway is the main means of freight transportation: if in Germany the total share of freight transportation by rail does not exceed 20%, then in Ukraine railway transport provides almost 82% of freight and 36% of passenger transportation.
"The Ukrainian industrial business community has already felt significant financial pressure after a series of increases in freight rates in 2021 and 2022, which led to a record increase in costs for rail transportation - yes, tariffs for the transportation of coal, ore and limestone increased by 140% (!) , metal - by 70%, fertilizers - by 70%, grain - by 96%, and empty wagons from under coal - by 158% (!), - stressed the UMP.
The association added that the increase in tariffs will not allow solving the problems of UZ, unless the structure of UZ is reformed, and internal resources are not involved - because currently the expenses of "Ukrzaliznytsia" are growing faster than revenues, which requires an urgent revision of the spending policy.
"Due to the constant unjustified increase in freight rates, a significant number of domestic industries are gradually abandoning the services of UZ, preferring alternative methods of transportation, and in the worst case - significantly reducing production or stopping. And UZ, instead of keeping cargo on the railways and increasing the cargo base, is expanding its base After all, UZ has not sold a single lot of scrap metal since September 2023 - although the sale of scrap metal yields billions hryvnias of additional income," the UMP emphasized.
The association called on the government to initiate measures to improve the financial condition of Ukrzaliznytsia, in particular, to develop the cargo base and optimize costs, as well as to increase the efficiency of the state monopoly's assets. It is also necessary to introduce a moratorium on the increase of freight railway tariffs until the abolition of martial law and for a period of at least two years after the end of hostilities.