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Business will incur the costs increased by UAH 4-5 billion/year due to the unification of tariffs on empty runs

28/ 08/ 2020
  On August 5, 2020, the Ministry of Infrastructure of Ukraine published a draft Order proposing the unification of tariffs for empty runs, namely by the establishment of a single tariff rate for running empty railway cars of all classes. Unification of tariffs for different classes of cars is proposed to be carried out in two stages - from September 1, 2020, and January 1, 2021. The first stage involves the equalization and establishment of a single tariff of the empty run for all classes of cars, and the second involves the indexation of the tariff for all types of cargo. According to the members of the EBA Logistics Committee, the tariffs will increase by 69% in total for the business starting from 2021.   If this document is adopted, at the first stage the business will incur the additional costs of UAH 1.2 billion / year, and at the second stage, this sum will reach UAH 4-5 billion / year, which may bring Ukrzaliznytsia extra freight revenue at the level of 8-10% per year. The EBA experts categorically do not support the proposed changes, which will create additional financial pressure on the business.  Undoubtedly, the tariff system of Ukrzaliznytsia needs a comprehensive revision. However, first, it is necessary to create an independent regulator, the National Commission for Transport Regulation. It is impractical to unify the current obsolete tariffs while the entire pricing system needs modernization.  Besides, according to the EBA experts, the unification of tariffs for empty runs will not lead to the expected increase in revenues of Ukrzaliznytsia. Such a decision could lead to a potential reduction in freight traffic by 3% or 9 million tons/year, particularly due to the reduction of bulk cargo transportation, which offsets the expected additional revenues of Ukrzaliznytsia.  Daria Sichkar. Logistics Committee Railway Infrastructure Working Group Coordinator. According to the EBA business community, the only way to establish fair tariffs with all factors included is to implement the systematic reform of tariffs for transportation after the demonopolization of Ukrzaliznytsia and the creation NCTR as an independent regulator in the field. Given this, the EBA does not support the draft Order in question and calls for a moratorium on any increase in tariffs for rail freight (including through unification) until the end of 2020. Instead, we should focus on developing and increasing the profitability of Ukrzaliznytsia in alternative ways that will not create an additional financial burden on the business: the abolition of land tax for JSC Ukrzaliznytsia, as well as subsidizing passenger traffic at the expense of freight and revision of fuel and electricity prices for the overstated business.   Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.  

On August 5, 2020, the Ministry of Infrastructure of Ukraine published a draft Order proposing the unification of tariffs for empty runs, namely by the establishment of a single tariff rate for running empty railway cars of all classes.

Unification of tariffs for different classes of cars is proposed to be carried out in two stages – from September 1, 2020, and January 1, 2021. The first stage involves the equalization and establishment of a single tariff of the empty run for all classes of cars, and the second involves the indexation of the tariff for all types of cargo. According to the members of the EBA Logistics Committee, the tariffs will increase by 69% in total for the business starting from 2021.  

If this document is adopted, at the first stage the business will incur the additional costs of UAH 1.2 billion / year, and at the second stage, this sum will reach UAH 4-5 billion / year, which may bring Ukrzaliznytsia extra freight revenue at the level of 8-10% per year. The EBA experts categorically do not support the proposed changes, which will create additional financial pressure on the business. 

Undoubtedly, the tariff system of Ukrzaliznytsia needs a comprehensive revision. However, first, it is necessary to create an independent regulator, the National Commission for Transport Regulation. It is impractical to unify the current obsolete tariffs while the entire pricing system needs modernization. 

Besides, according to the EBA experts, the unification of tariffs for empty runs will not lead to the expected increase in revenues of Ukrzaliznytsia. Such a decision could lead to a potential reduction in freight traffic by 3% or 9 million tons/year, particularly due to the reduction of bulk cargo transportation, which offsets the expected additional revenues of Ukrzaliznytsia. 

Daria Sichkar Logistics Committee Railway Infrastructure Working Group Coordinator

According to the EBA business community, the only way to establish fair tariffs with all factors included is to implement the systematic reform of tariffs for transportation after the demonopolization of Ukrzaliznytsia and the creation NCTR as an independent regulator in the field.

Given this, the EBA does not support the draft Order in question and calls for a moratorium on any increase in tariffs for rail freight (including through unification) until the end of 2020. Instead, we should focus on developing and increasing the profitability of Ukrzaliznytsia in alternative ways that will not create an additional financial burden on the business: the abolition of land tax for JSC “Ukrzaliznytsia”, as well as subsidizing passenger traffic at the expense of freight and revision of fuel and electricity prices for the overstated business.

 

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

 

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