Ukrainian Railways should focus on growing its cargo base, not tariffs – EBA

The European Business Association (EBA) believes that Ukrainian Railways (UZ) should focus on growing its cargo base rather than raising tariffs. This is reported by the CTS with reference to the EBA’s commentary on UZ’s plans to raise tariffs for rail transportation.

“Ukrainian Railways ended the year 2023 with a profit, while many companies cannot boast of such a result. The company should focus not on raising tariffs but on growing its cargo base and cutting costs (e.g., operating costs), which have increased significantly over the past period,” the EBA said.

The association also believes that changes are needed in the direction of cross-subsidizing passenger transportation at the expense of freight, as passenger transportation costs are increasing every year.

“And here again we run into the new law on rail transport and the lack of political will to adopt it,” the EBA added.

Commenting on the initiative of the UZ management to “harmonize” tariffs, which will lead to their increase, Serhiy Vovk, Director of the Center for Transportation Strategies, said that the railway operator should reduce freight tariffs to compete with road carriers amid increasing export cargo flows.

According to him, the 70% increase in tariffs (in July 2022) was a necessary measure that helped stabilize the financial condition of UZ amid a critical drop in cargo flows due to the war. Currently, export cargo flows are actually reaching pre-war levels.

As GMK Center reported earlier, in the first half of 2024, UZ transported over 90 million tons of cargo, up 28% year-on-year. The railroad transported 45 million tons of cargo for export (+59% y/y), 5 million tons for import (+62% y/y), and 40 million tons for domestic traffic (+3% y/y). The main cargoes handled in January-June included iron ore, grain, coal, and construction materials.