About Killing Tariffs for Railways and Ports
Business feels a significant decrease in the efficiency of Ukrzaliznytsia.
EBA met with Minister of Infrastructure Volodymyr Omelyan and head of the Sea Ports Administration (AMPU) Rayvys Vetskagans last week. And the most painful issues were the tariff policy for rail freight and port fees.
On the day of the meeting, the Tariff Committee of the Ministry of Infrastructure of Ukraine agreed to increase tariffs for domestic rail freight by 22.5% from October 1, 2017. The relevant draft order of the Ministry of Infrastructure was made public for public discussion.
The position of the minister is that only the market tariff will give the opportunity to update the rolling stock, buy new locomotives, modernize the company. But what do we actually have for today? The minister voiced a figure of 10-15 billion UAH in the year of damage to Ukrzaliznytsia from corruption. In the background of these significant figures, the lack of really high-profile corruption cases in Ukrzaliznytsia is highlighted.
The minister also stressed that he did not receive a response from Ukrzaliznytsya about UAH 4 billion, which was received at the expense of an increase of 15% of the freight transportation tariff last year, which, according to the Association, caused a significant decrease in cargo turnover.
Business also feels a significant decrease in the efficiency of Ukrzaliznytsya: regular fuel shortages, lack of cars, failure to implement capital investment plans, traction problems, corruption in the distribution system of cars and many other problems.
The Minister called for a compromise solution together with Ukrzaliznytsya, the Ministry of Infrastructure and the Government of Ukraine together with business. Business, in turn, hopes to solve the top-priority problems associated with corruption in Ukrzaliznytsia and the effective work of the company. After fulfilling these basic requirements for Ukrzaliznytsya, a dialogue can be argued before making decisions on raising tariffs for transportation.
One more painful issue is the port fees, which in 2-3 seasons in the ports of Ukraine exceed the charges in comparable seaports of other states. Taking into account the financial statements of AMP for 2016, one can conclude that the organization accumulates a rather high profit – UAH 3.85 billion. At the same time, 75% of the company’s profit goes to the budget.
During the meeting, Rivis Vezkagans stated that the logical step would be to reduce the amount of deductions to the budget, and then reduce port duties and eliminate their taxation. He added that by agreeing with the Ministry of Finance to reduce deductions to the budget from 75% to 50%, this will enable to reduce port charges only by 15%, but not at the level expected by the business.
Business supports the position to reduce the amount of deductions to the budget and calls for the revision of rates of port fees that do not allow the Ukrainian ports to be competitive.
However, it is important to accept documents that will provide a normative justification for the calculation of port dues rates – Methods for calculating port dues (Methodology) and the Procedure for the Collection and Port Dues Rates (Procedure).
The EBA hopes for a transparent discussion of the revised version of the Methodology, which is currently in the Ministry of Infrastructure and which will be presented in the near future. The Procedure will be adopted on the basis of the Methodology, which will determine the procedure itself and directly set the rates for port fees.
Reducing the amount of port duties and lowering rates to an economically justified level is a necessity not so much for shipowners as for the state. Since Ukrainian ports are losing their transit potential and competitiveness. Consequently, budget deductions, along with new technologies for upgrading port infrastructure, investments and jobs.
To date, raising railway tariffs in conditions of doubtful efficiency of Ukrzaliznytsia can have serious consequences for industrial branches and agro-industrial complex. It will significantly affect their competitiveness, which, in turn, will negatively affect Ukraine’s economic growth.
With regard to the tariff policy in the ports, the significantly overestimated rates of port duties cause that from year to year freight traffic is decreasing. At the same time, the infrastructure of the port does not develop, and the transit potential is lost. In this situation, significant improvement and qualitative changes are possible only when viewed and significantly reduced port duties.
Source: Novoe Vremia