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Business calls on the finalization of the draft law on National Commission on Transport Regulation

04/ 02/ 2020
  Contrary to the requirements of the legislation, there is currently no independent state body in Ukraine that should regulate the activity of natural monopoly entities in the markets of transport services. For the last five years, the experts of the EBA Logistics Committee have actively advocated the need to establish a National Commission on the Transport Regulation (NCTR) as an independent regulator, which should carry out an unbiased analysis of the tariff policy of natural monopoly entities (such as Ukrainian Sea Ports Authority (USPA), Ukrzaliznytsya), concerning their economic viability, transparency, proportionality and purpose. On December 28, 2019, the Draft Law No. 2699 “On the National Commission for State Regulation in the Field of Transport” was registered in the Verkhovna Rada. After a thorough analysis of the document, experts of the Association concluded that this document does not meet the expectations of the business. Firstly, according to the representatives of the business community, the NCTR model, proposed by the draft law, does not provide any guarantee of the independence of this body. The autonomy of the NCTR must be guaranteed by the actual availability of the special status of this body, the particular procedure for selecting, appointing and dismissing the Chairman and members of the NCTR (namely, by the competition commission, which should be formed based on a quota principle from different authorities), the particular procedure for financing the body and making decisions. Secondly, the concept proposed by the draft law envisages the granting of too broad powers to the NCTR. In particular, setting prices and tariffs for business entities, operating in adjacent markets, and supervision of their compliance. Potential state regulation of the NCTR will state be extended to services for transportation of goods by sea and river mode of transport, loading/unloading of cargo, warehousing, agenting, freight forwarding, etc., prices for which are currently free. Therefore, in the opinion of the experts of the Committee, the proposed approach goes against the purpose of creating independent regulators, the activities of which are related to the regulation of monopolistic rather than competitive markets. Thirdly, the business community does not support the proposed model of financing the activities of the NCTR, which, according to the experts of Association, excludes the independence of the newly created regulator. Since the amount of funding for the NCTR depends directly on the level of net income of the natural monopoly entities, the NCTR may be interested in setting higher tariffs rather than reviewing their validity and proportionality. Besides, NCTR funding is envisaged at the expense of not only natural monopoly entities but also other market participants, whose circle will depend on the decisions of the NCTR. Therefore, according to the Committee members, the draft law foresees financing of the activities of the NCCR in a non-transparent way - through contributions to regulation, the rates of which are not regulated, and the method of their calculation will be determined, in fact, by the NCTR in an unspecified way. Due to this, the Association does not support the mentioned document in the proposed version and asks the initiators of the draft law to facilitate its return for revision. Logistics Committee experts are ready to provide expert support in finalizing the draft law.  

Contrary to the requirements of the legislation, there is currently no independent state body in Ukraine that should regulate the activity of natural monopoly entities in the markets of transport services.

For the last five years, the experts of the EBA Logistics Committee have actively advocated the need to establish a National Commission on the Transport Regulation (NCTR) as an independent regulator, which should carry out an unbiased analysis of the tariff policy of natural monopoly entities (such as Ukrainian Sea Ports Authority (USPA), Ukrzaliznytsya), concerning their economic viability, transparency, proportionality and purpose.

On December 28, 2019, the Draft Law No. 2699 “On the National Commission for State Regulation in the Field of Transport” was registered in the Verkhovna Rada. After a thorough analysis of the document, experts of the Association concluded that this document does not meet the expectations of the business.

Firstly, according to the representatives of the business community, the NCTR model, proposed by the draft law, does not provide any guarantee of the independence of this body. The autonomy of the NCTR must be guaranteed by the actual availability of the special status of this body, the particular procedure for selecting, appointing and dismissing the Chairman and members of the NCTR (namely, by the competition commission, which should be formed based on a quota principle from different authorities), the particular procedure for financing the body and making decisions.

Secondly, the concept proposed by the draft law envisages the granting of too broad powers to the NCTR. In particular, setting prices and tariffs for business entities, operating in adjacent markets, and supervision of their compliance. Potential state regulation of the NCTR will state be extended to services for transportation of goods by sea and river mode of transport, loading/unloading of cargo, warehousing, agenting, freight forwarding, etc., prices for which are currently free. Therefore, in the opinion of the experts of the Committee, the proposed approach goes against the purpose of creating independent regulators, the activities of which are related to the regulation of monopolistic rather than competitive markets.

Thirdly, the business community does not support the proposed model of financing the activities of the NCTR, which, according to the experts of Association, excludes the independence of the newly created regulator. Since the amount of funding for the NCTR depends directly on the level of net income of the natural monopoly entities, the NCTR may be interested in setting higher tariffs rather than reviewing their validity and proportionality. Besides, NCTR funding is envisaged at the expense of not only natural monopoly entities but also other market participants, whose circle will depend on the decisions of the NCTR.

Therefore, according to the Committee members, the draft law foresees financing of the activities of the NCCR in a non-transparent way – through contributions to regulation, the rates of which are not regulated, and the method of their calculation will be determined, in fact, by the NCTR in an unspecified way.

Due to this, the Association does not support the mentioned document in the proposed version and asks the initiators of the draft law to facilitate its return for revision. Logistics Committee experts are ready to provide expert support in finalizing the draft law.

 

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