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Business suggests 6 priorities for the new head of Ukrzaliznytsia

26/ 08/ 2020
  Today, August 26, at the Government meeting, a decision was made to appoint Volodymyr Zhmak as a Chairman of the Board of JSC Ukrzaliznytsia. The business community congratulates Mr. Zhmak on his appointment and looks forward to the implementation of structural reforms in the field of freight and passenger rail transport. Rail transport is an important component of Ukraines infrastructure and economic system, which has accumulated a significant list of problems and imbalances over the past twenty years. The main problematic issues in the railway sector, which require decisive action, remain unchanged for a long time. The European Business Association would like to outline once again a list of six initiatives that, in our opinion, should become a priority for the new head of Ukrzaliznytsia. Ceasing the subsidization of passenger traffic at the expense of freight. Traditionally in Ukraine, passenger traffic is unprofitable and its costs are covered by Ukrzaliznytsia with the cross-subsidization of profitable freight, which negatively affects the financial condition of the railway industry and its development, and, in fact, exert an indirect additional financial burden on businesses to cover losses of Ukrzaliznytsia. Reforming the structure of Ukrzaliznytsia. To ensure effective reforms in the railway transportation market, there should be an organizational separation of different verticals of Ukrzaliznytsia: freight transportation and logistics, passenger transportation, infrastructure, production, and service. It is also expected to open the private traction market, which is due to the likely adoption of the Law of Ukraine On Railway Transport. Creating a transparent tariff mechanism. Currently, there is no clear national model of tariff formation for rail freight. The current tariff system is opaque and economically unreasonable, in addition, there is no reference to the type of costs which makes it impossible to clearly target the use of tariffs: traction, car, infrastructure, investment. All this leads to the subsidization of passenger traffic at the expense of freight, along with a constant increase in tariffs for the latter. It is necessary to divide the railway tariff into the locomotive, infrastructure, and wagon components (the latter is already deregulated), as well as to completely revise the tariff system. Fighting the theft of car parts and locomotives. As a result of those criminal actions, the company suffers large losses. Thus, according to the estimates of the EBA Logistics Committee member-companies, in 2018 and according to the results of the first quarter of 2019, there were 3859 cases of dismantling worth more than UAH 24 million. The business supports the idea of ​​creating the transport police, which will work to prevent the dismantling of freight cars and will patrol the railway infrastructure. It is also important to strengthen the responsibility for dismantling elements of railway rolling stock and infrastructure as well as to promulgate the most critical points where the dismantling of cars is detected and to place such information on the official resources of Ukrzaliznytsia. Ensuring the safety and security of goods during transportation. The situation on the railways of Ukraine remains quite unfavorable, as business representatives constantly suffer from the theft of goods of all kinds (grain, cargo of the mining and metallurgical complex) during their transportation and suffer significant financial losses. An important step to solve this problem is, in case the railroad cars are damaged, to oblige the employees of Ukrzaliznytsia to ensure the prompt fixation of acts on damage to cars of the VU-25 form and other necessary documents. Optimizing the redundant infrastructure. It is necessary to work out a balanced decision on the operation of inactive grain stations. The business conceptually does not support the decision to close such stations, as this leads to the elimination of jobs and the shutdown of the freight infrastructure at these facilities. We hope for dialogue and the development of compromise solutions on this issue. We hope that the renewed team of Ukrzaliznytsia will be able to fulfill these ambitious tasks for the development of railway infrastructure and stimulating the economy. We also wish Mr. Zhmak much inspiration and success in his new position!   Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.  

Today, August 26, at the Government meeting, a decision was made to appoint Volodymyr Zhmak as a Chairman of the Board of JSC Ukrzaliznytsia. The business community congratulates Mr. Zhmak on his appointment and looks forward to the implementation of structural reforms in the field of freight and passenger rail transport.

Rail transport is an important component of Ukraine’s infrastructure and economic system, which has accumulated a significant list of problems and imbalances over the past twenty years. The main problematic issues in the railway sector, which require decisive action, remain unchanged for a long time. The European Business Association would like to outline once again a list of six initiatives that, in our opinion, should become a priority for the new head of Ukrzaliznytsia.

Ceasing the subsidization of passenger traffic at the expense of freight. Traditionally in Ukraine, passenger traffic is unprofitable and its costs are covered by Ukrzaliznytsia with the cross-subsidization of profitable freight, which negatively affects the financial condition of the railway industry and its development, and, in fact, exert an indirect additional financial burden on businesses to cover losses of Ukrzaliznytsia.

Reforming the structure of Ukrzaliznytsia. To ensure effective reforms in the railway transportation market, there should be an organizational separation of different verticals of Ukrzaliznytsia: freight transportation and logistics, passenger transportation, infrastructure, production, and service. It is also expected to open the private traction market, which is due to the likely adoption of the Law of Ukraine “On Railway Transport”.

Creating a transparent tariff mechanism. Currently, there is no clear national model of tariff formation for rail freight. The current tariff system is opaque and economically unreasonable, in addition, there is no reference to the type of costs which makes it impossible to clearly target the use of tariffs: traction, car, infrastructure, investment. All this leads to the subsidization of passenger traffic at the expense of freight, along with a constant increase in tariffs for the latter. It is necessary to divide the railway tariff into the locomotive, infrastructure, and wagon components (the latter is already deregulated), as well as to completely revise the tariff system.

Fighting the theft of car parts and locomotives. As a result of those criminal actions, the company suffers large losses. Thus, according to the estimates of the EBA Logistics Committee member-companies, in 2018 and according to the results of the first quarter of 2019, there were 3859 cases of dismantling worth more than UAH 24 million. The business supports the idea of ​​creating the transport police, which will work to prevent the dismantling of freight cars and will patrol the railway infrastructure. It is also important to strengthen the responsibility for dismantling elements of railway rolling stock and infrastructure as well as to promulgate the most critical points where the dismantling of cars is detected and to place such information on the official resources of Ukrzaliznytsia.

Ensuring the safety and security of goods during transportation. The situation on the railways of Ukraine remains quite unfavorable, as business representatives constantly suffer from the theft of goods of all kinds (grain, cargo of the mining and metallurgical complex) during their transportation and suffer significant financial losses. An important step to solve this problem is, in case the railroad cars are damaged, to oblige the employees of Ukrzaliznytsia to ensure the prompt fixation of acts on damage to cars of the VU-25 form and other necessary documents.

Optimizing the redundant infrastructure. It is necessary to work out a balanced decision on the operation of inactive grain stations. The business conceptually does not support the decision to close such stations, as this leads to the elimination of jobs and the shutdown of the freight infrastructure at these facilities. We hope for dialogue and the development of compromise solutions on this issue.

We hope that the renewed team of Ukrzaliznytsia will be able to fulfill these ambitious tasks for the development of railway infrastructure and stimulating the economy. We also wish Mr. Zhmak much inspiration and success in his new position!

 

Be the first to learn about the latest EBA news with our Telegram-channel EBAUkraine.

 

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