Ukrainian Railways (UZ) CEO Oleksandr Pertsovskyi believes that the operator needs to increase its freight tariffs by 45%. The many Russian attacks on its infrastructure necessitate this. Once again, Ukraine is debating the dreadful prospect of higher freight pricing, with associations speaking out against the measure.
The tariff increase is necessary to conclude debt restructuring and help UZ restore its finances, Pertsovskyi told Reuters. The Ukrainian rail operator is spending more money on infrastructure maintenance as a consequence of intensified Russian attacks, aggravating the financial challenges at UZ.
UZ has not yet reached an agreement with creditors on restructuring over one billion US dollars of its bonds. The operator has a 587 million US dollar financial gap. A 45% freight tariff increase could cover about half of that.
“45% is not enough, because we have a significant gap, but we understand this is a compromise solution that allows us at least to hold out”, CEO Pertsovskyi is quoted as saying by Reuters.
Many oppose the plan
The debate on UZ’s freight tariff has flared up periodically since 2022, when its last indexation took place. In recent days, the All-Ukrainian Association of Communities (which supports rural sustainable development through self-government in territorial communities) and the Ukrainian Agrarian Business Club have spoken out against the 45% hike plan. The agricultural lobby points to rising fertiliser and energy costs, which are already pressuring their sector.
“In conditions of war, global economic instability, rapid growth in production costs, and loss of part of the export potential, such decisions pose a direct threat to the competitiveness of the Ukrainian economy and the agricultural sector, which remains one of the few sources of foreign exchange earnings and economic stability of the state”, it writes on Facebook.
The All-Ukrainian Association of Communities emphasises the risk of a reverse modal shift to the road. This could put additional stress on the already underfunded road network. Moreover, the group argues that the cause for UZ’s difficult financial situation is the chronically unprofitable passenger business. By contrast, the freight department remains profitable.
Alongside the agricultural sector, Ukraine’s steel sector is also a prominent critic of freight tariff increases at UZ.
An escalation in Russian attacks
Russia has recently sought to target UZ with higher intensity. The attacks have caused much of the financial difficulties experienced by the Ukrainian rail operator. “The jump [in attacks] is just crazy,” Pertsovskyi told Reuters. “This wave has an important feature — strikes on locomotives. We have more than 100 locomotives, diesel locomotives, electric locomotives, AC and DC, that have been attacked.”
Beyond rolling stock, Russia has also concentrated its attacks on routes to the Odesa Black Sea ports. “[Russia’s aim is] to sever our most critical export corridors, particularly those linking our metallurgical regions, such as Kryvyi Rih and Zaporizhzhia, and our industrial east to the ports of Odesa and to western border crossings”, the UZ CEO added.