A possible increase in tariffs for freight rail transportation will have extremely negative consequences for the mining industry and, in general, for Ukraine’s defense capability. Therefore, instead of another tariff increase, Ukrzaliznytsia should take urgent measures to reduce and optimize costs.
This is stated in the letter of the Association of Extractive Enterprises (NADPU) to Prime Minister Denys Shmyhal, which is at the disposal of the “Apostrophe” editorial office.
“Miners and industrialists suffered almost the biggest losses due to the war: a huge number of mining facilities, GZK, MMC were, if not under occupation, then under regular shelling. About 40% of mining enterprises stopped their work as a result of hostilities. The metallurgical industry in general irreversibly lost at least 40% of its capacity,” the Association reminded.
They noted that in such a situation, any additional financial burden on enterprises, especially in terms of additional logistics costs, can have catastrophic consequences.
“At the same time, with the opening of sea ports, there is a noticeable revival in railway freight transportation. In the first half of 2024, Ukrzaliznytsia received revenues from freight transportation at the level of UAH 43 billion (+17% compared to the previous year), and +3.1 billion UAH profit. Instead of increasing the efficiency of the railway monopoly, it is unacceptable to expand the cost base without control, systematically driving the enterprise into losses,” the NADPU emphasized.
The Association emphasized that the profitability of freight transportation in 2023 was +27%, and a loss of UAH 20 billion is expected from passenger transportation. But the company still has no concrete plans to optimize costs, increase the company’s labor productivity, and further develop the freight base.
“Cargo is escaping from the railways due to high road tariffs, and the management has a single plan of action in this case – to raise tariffs for those cargoes that are still left. But the increase in railway tariffs will nullify the record transportation of raw materials and leave Ukrzaliznytsia without additional revenues”, – say the NADPU.
Now Ukrzaliznytsia tariffs in US dollars are on average 1.5 times higher than in pre-war times. Individual enterprises can no longer operate at a break-even rate, and because of this, production indicators decrease, and therefore “Ukrzaliznytsia” does not receive revenues from transportation, the Association noted. Meanwhile, EU countries are implementing tariff incentives aimed at supporting rail transportation.
“In Ukraine, the introduction of similar incentives could also become an effective tool for supporting domestic business and strengthening the economy. This will benefit the state budget and the stability of the national currency. Therefore, we urge you to instruct JSC “Ukrzaliznytsia” to take measures aimed at reducing costs and lowering tariffs on cargo transportation due to the increase in the volume of cargo transportation. We are sure that this step will contribute to the restoration of the country’s economic potential and strengthening of its defense capability,” the NADPU summarized.
We will remind you that the head of UZ Yevhen Lyashchenko said that the company is planning another tariff increase, although the company is currently recording a profit of UAH 3.1 billion.
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