EBA asks Ukrainian govt to avert hike in Ukrainian Railways' freight tariffs in 2025

MOSCOW. Jan 15 (Interfax) - The European Business Association (EBA) has called on Ukrainian Prime Minister Denis Shmygal to help prevent an increase in the freight tariffs of JSC Ukrainian Railways (Ukrzaliznytsia) this year.

"The European Business Association has urged the prime minister of Ukraine to prevent tariff increases, considering the realities of the industrial sector and export markets. Additionally, EBA asks the relevant ministries and Ukrzaliznytsia to implement measures to optimize costs and improve the company's operational efficiency. This approach would maintain the competitiveness of Ukrainian goods, enhance the attractiveness of railway transport, and ensure the sustainable development of both businesses and transport infrastructure," Ukrainian media quoted the association as saying in its statement.

Member companies of the EBA Logistics Committee are concerned about the impact of tariff hikes on businesses, it said. Logistics expenses have significantly risen because of the crisis, reaching up to 40% of production costs in certain industries, according to the association's experts.

"Combined with challenges in the energy sector, staff shortages, and increased logistics costs, these factors substantially raise expenses for Ukrainian businesses and weaken the competitiveness of Ukrainian goods on international markets," EBA said.

Even current tariffs are higher than market players can afford, causing companies to reduce production or switch to road transport, it said.

Ukrainian Railways keeps losing its profit as the competitive edge of rail logistics shrinks, EBA experts said. According to the company's financial statements cited by EBA, it posted profit of UAH 1.6 billion in January-September 2024 versus UAH 8.2 billion in the same period of 2023. The company's management projected losses up to UAH 2.5 billion by the end of 2024, it said.

The main financial problems facing Ukrainian Railways have nothing to do with cargo shipping services, EBA said. The association's member companies estimate the profitability of cargo transportation by Ukrainian Railways at 27% in 2023. Its problem were due mainly to its passenger transport business, where losses could reach UAH 20 billion in 2024, they said.

"In crisis conditions, covering these expenses from the state budget is unrealistic, but they can be mitigated through cost optimization and improvements to the suburban transport payment system," EBA said.

Steps to optimize costs, enhance operational efficiency and boost Ukrainian Railways' appeal to clients through a competitive tariff policy may considerably improve the company's financial situation, whereas tariff hikes will increase financial pressure on its business, reducing freight transport volumes, it said.

As previously reported, the Supervisory Board of Ukrainian Railways approved a proposal to increase freight tariffs by 37%. The company believes that after the raise, the transport component in the overall price of grain cargoes could grow by around 1.4%, by 2.7% for iron ore, and by up to 1% for coal and ferrous metals.

Ukrainian Railways CEO Alexander Pertsovsky, for his part, said in an interview with Ukrainian media that the new tariffs could enter into force from February 1, 2025. At the same time, the company is not considering raising the price of tickets for passenger trains on domestic routes, he said.

Pertsovsky presented the company's tariff hike plan at a meeting with EBA members on December 17, 2024.