Ukrzaliznytsia freight transportation on the verge of becoming loss-making
Rail freight transportation in Ukraine may become loss-making for the first time this year.
This was stated by Oleh Yakovenko, Director of the Strategy and Transformation Department at JSC Ukrzaliznytsia, during an international conference, RAIL.insider reports.
«This year, freight transportation, which forms the basis of our cross-financing model, may become loss-making for the first time. This effectively makes the cross-financing model impossible,» Oleh Yakovenko emphasized.
Previously, Ukrzaliznytsia used a model in which the freight segment cross-financed passenger transportation. However, these opportunities have now effectively been exhausted. This will certainly also affect the company’s financial position, which is currently very difficult.
The recently introduced state order for passenger transportation reduces the gap, but does not eliminate it completely. Therefore, the issue of raising freight tariffs remains relevant.
Oleh Yakovenko recalled that the last increase in rail freight tariffs took place in 2022.
«The request for a significant tariff increase is a signal of the pressure that has accumulated over 3.5 years, primarily inflationary pressure, which we are experiencing on the ground. However, closing these gaps solely through tariffs would be a shock to the economy,» the department head stressed.
According to him, in addition to developing a tariff increase scheme with a predictable indexation formula, there is also a need to use other instruments. In particular, this involves the state’s participation in maintaining and developing railway infrastructure.
Structural reform of Ukrzaliznytsia itself is also necessary. Among the steps are the disposal of non-core assets and digitalization.
Another solution should be international support on a permanent basis.
«We need to develop, together with our international partners, a long-term instrument for 10-15 years that would support Ukraine’s railway sector during its transformation and development. This concerns our European integration, the construction of the 1,435 mm railway track, and the modernization of rolling stock,» Oleh Yakovenko explained.