Businesses are warning of potential export reductions following Ukrzaliznytsia’s decision

02/ 10/ 2023

Listen to online Stop   According to information from member companies of the Logistics Committee of the European Business Association, Ukrainian exports may be at risk starting from October 1. The issue arises from the fact that when transporting goods by rail at the western border, railcars need to be switched from the wide Ukrainian gauge (1520 mm) to the narrow European gauge (1435 mm). Special bogies are used for this purpose, which are provided to carriers by Ukrzaliznytsia. Despite the fact that these bogies are already in short supply, Ukrzaliznytsia intends to restrict their use for private railcar owners who have already been denied approval for transportation plans in October. However, Ukrzaliznytsia has imposed a requirement to use only railcars owned by them, with fees regulated by state tariffs (part of the fleet of the Center for Transport Logistics branch), for transportation in the export direction. This decision was made without warning market participants and prior consultations. As reported by members of the EBA, this decision is sudden and significantly impacts the ability to fulfill the export plan, which plays a crucial role in ensuring the stability of the national economy through a consistent inflow of foreign currency. In the current circumstances, with maritime ports blocked and restrictions on the import of agricultural products from neighboring European states, businesses are severely limited in choosing routes for exporting their own products. The existing routes have limited capacity, and their use increases the cost of production. Therefore, the production cost hovers on the brink of unprofitability, and sometimes production is already unviable for businesses. Any restrictions introduced within the country create additional challenges for companies in the context of the existing external constraints, comments Daria Sichkar, Manager of the Logistics Committee at the European Business Association. The change in conditions for switching railcars to the European gauge could soon lead to a significant reduction in export volumes and, consequently, a decrease in currency inflows into the countrys economy. Considering this, the EBA has reached out to the Deputy Prime Minister for Restoration of Ukraine - Minister for Communities, Territories and Infrastructure Development of Ukraine, and the Chairman of JSC Ukrzaliznytsia Board, requesting the cancellation of the decision to prohibit the use of bogies for railcar gauge conversion to the European gauge for private railcar owners. We hope that the business communitys perspective will be taken into account in this important matter that concerns all exporters!

According to information from member companies of the Logistics Committee of the European Business Association, Ukrainian exports may be at risk starting from October 1. The issue arises from the fact that when transporting goods by rail at the western border, railcars need to be switched from the wide Ukrainian gauge (1520 mm) to the narrow European gauge (1435 mm). Special bogies are used for this purpose, which are provided to carriers by Ukrzaliznytsia. Despite the fact that these bogies are already in short supply, Ukrzaliznytsia intends to restrict their use for private railcar owners who have already been denied approval for transportation plans in October.

However, Ukrzaliznytsia has imposed a requirement to use only railcars owned by them, with fees regulated by state tariffs (part of the fleet of the “Center for Transport Logistics” branch), for transportation in the export direction. This decision was made without warning market participants and prior consultations. As reported by members of the EBA, this decision is sudden and significantly impacts the ability to fulfill the export plan, which plays a crucial role in ensuring the stability of the national economy through a consistent inflow of foreign currency.

“In the current circumstances, with maritime ports blocked and restrictions on the import of agricultural products from neighboring European states, businesses are severely limited in choosing routes for exporting their own products. The existing routes have limited capacity, and their use increases the cost of production. Therefore, the production cost hovers on the brink of unprofitability, and sometimes production is already unviable for businesses. Any restrictions introduced within the country create additional challenges for companies in the context of the existing external constraints,” comments Daria Sichkar, Manager of the Logistics Committee at the European Business Association.

The change in conditions for switching railcars to the European gauge could soon lead to a significant reduction in export volumes and, consequently, a decrease in currency inflows into the country’s economy. Considering this, the EBA has reached out to the Deputy Prime Minister for Restoration of Ukraine – Minister for Communities, Territories and Infrastructure Development of Ukraine, and the Chairman of JSC Ukrzaliznytsia Board, requesting the cancellation of the decision to prohibit the use of bogies for railcar gauge conversion to the European gauge for private railcar owners.

We hope that the business community’s perspective will be taken into account in this important matter that concerns all exporters!