Ukrzaliznytsia has changed the methodology for calculating the railcar component in the cost of transportation

Thus, the railway operator intends to achieve generally accepted transparent market standards

Since August 1, 2022, Ukrzaliznytsia has changed the methodology for calculating the railcar component in the cost of freight transportation in its own railcars across the territory of Ukraine. This was reported by press office of railway operator.

Thus, UZ plans to achieve generally accepted transparent market standards in this methodology.

Previously, to calculate the railcar component in the cost of transportation, UZ used a method according to which the period of railcar’s use was determined by dividing the transportation distance by the standard speed of cargo delivery. The specified standard speed is 200 km/day for railcars shipments and 320 km/day for route shipments.

At the same time, over the past 10 years, the actual speed of railcars has been much less than the standard speed due to the deterioration of the railway infrastructure, rolling stock and an increase in the number of railcar fleet operators in the network.

“So, using the standard speed in calculating the time of using the railcars, the number of calculated days of using the railcar did not correspond to reality at all. For example, in the market for the use of freight railcars, at the same time, a different methodology is in effect, which is tied to the actual speed of the railcars on different routes,” the report says.

The difference in methods for calculating the cost of private operators and Ukrzaliznytsia allowed some market participants to manipulate the cost of railcars and raise rates for using their own wagons.

“That is why the company decided to switch to a market mechanism for calculating the railcar component of the cost of freight transportation, taking into account the actual speed of railcars. As a result, this unifies the process and removes the field for manipulation and unfair struggle,” the railway operator notes.

UZ reports that in August, shippers will feel an increase in the railcar component in the cost of transportation by UZ railcars. In fact, calculating the number of days of railcars’ use will increase sharply, while the rates of payment will remain at the current level.

In the future, with an increase in the cost of using Ukrzaliznytsia’s railcars, a decrease in demand for railcars in the current month is expected, and due to a decrease in the utilization rate of wagons, a decrease in payment rates to the market level is expected.

From July 1, 2022, Ministry of Infrastructure of Ukraine, at the suggestion of Ukrzaliznytsia raised shipping rates of all cargo types by rail at once by 70%. The railway operator plans to receive over UAH 11 billion due to the increase in tariffs by the end of this year.

As GMK Center reported earlier, since the beginning of 2022, the MIU has increased by 9% tariffs for the transportation of a group of the 1st tariff class goods by rail. This preceded the decision to increase tariffs from August 17, 2021 for cargo transportation of a group of the 1st and 2nd tariff classes goods by 8%, and from January 2022 – by 20.4% and 6.5%, respectively.