Business is waiting for the railway market reform
The business community of the European Business Association is closely monitoring the situation with Ukrzaliznytsia and notes the critical importance of continuing to reform the railway transport market. Successful corporate governance reform of Ukrzaliznytsia requires a clear and consistent vision and strategy, as well as effective governance. Therefore, we hope that the Government will not delay the election of a new head of Ukrzaliznytsia and there will be no pause in the ongoing reform. Therefore, we were glad to hear such assurances from Vladyslav Kryklii, Minister of Infrastructure of Ukraine, during the meeting with the EBA, as well as confirmation of continuing the pilot project on private traction for another two years.
The industry community, in particular, EBA Logistics Committee representatives, have high expectations for the reform of Ukrzaliznytsia which include, inter alia, increasing the efficiency of railway transport, attracting investment in the development of railway transport of all forms of ownership with the assistance of the Government and the fastest launch of transportation by private locomotives. Besides, Ukraine’s commitments under the Association Agreement with the EU provide for the implementation of directives on transport sector reform, which should also be accelerated.
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. To effectively reform the railway market, the EBA Logistics Committee experts suggest the following steps be taken immediately:
Reform the structure of Ukrzaliznytsia. For an effective process of reforming the railway transportation market, the initiated structural reform of Ukrzaliznytsia must continue, namely the separation of the UZ Cargo and UZ Infra verticals. Another long-awaited step is the opening of the private traction market given the prospect of adopting the Law of Ukraine “On Railway Transport”.
Eliminate the subsidization of passenger transportation at the expense of cargo. Traditionally in Ukraine, passenger traffic is unprofitable, and the costs of their implementation are covered by Ukrzaliznytsia due to cross-subsidization at the expense of profitable freight, which negatively affects the financial condition of the railway industry and its development, and, is an indirect additional financial burden for businesses covering losses of Ukrzaliznytsia.
Create a transparent tariff mechanism. The current tariff system is opaque and economically unreasonable, besides, there is no link to the type of costs, which makes it impossible to target the use of tariffs for traction, car, infrastructure, investments. 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.
Strengthen the fight against theft of car parts and locomotives. As a result of the actions of malefactors, the company incurs severe losses. It is important to strengthen the responsibility for disassembly of railway rolling stock and infrastructure, to make public information on the most critical points where disassembly of cars is detected, and to place such information on the official resources of Ukrzaliznytsia.
Ensure the safety of cargo during transportation. The situation on the railways of Ukraine remains quite unfavorable, as business representatives constantly suffer from theft of goods of all kinds (grain, mining, and metallurgical complex cargo) during their transportation and suffer significant financial losses.
Provide overhaul and reconstruction of up to 1000 km of railways per for the next five years. To date, one-third of the entire length of railway tracks – about 8.5 thousand km in total, overdue scheduled repairs, while there are speed limits on 1.1 thousand km of railways.
Establish a railway fund, which will be replenished from the excise tax on diesel fuel. Ukrzaliznytsia uses about 330,000 tons of diesel fuel a year to transport goods and passengers, the price of which includes excise tax, which amounts to 1.5 billion UAH a year. The money from the railway fund should be directed to the maintenance of railway infrastructure, which will create healthy competition between different modes of transport and benefit both the consumer and the state.
The logistics community welcomes the beginning of the long-awaited structural reform of Ukrzaliznytsia, as well as recent changes in the company′s work, including reduced delivery times and increased velocity. We hope that there will be no delays in the continuation of the railway reform. Our experts are open to cooperation on the important reforms mentioned above.
We hope that the initiated reforms of Ukrzaliznytsia will continue and the effect of their implementation will be noticeable to business and the public shortly!
Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.