The initiative by Ukrainian Railways (UZ) to standardize tariff distances for rail transport to the ports of Greater Odesa has elicited significant concerns from the mining and metallurgy sector, which warns of potential economic risks.
This proposal effectively introduces a uniform approach to tariff formation, disregarding the actual distance of transportation. Critics argue that this method contradicts fundamental principles of economically justified tariff setting in railway transport, where costs should correlate directly with distance and expenses.
According to the Ukrainian Metal Industry Association (UIMP), a substantial portion of the mining and metallurgy sector’s output is aimed at export, with maritime ports, particularly those in Greater Odesa, serving as crucial logistics hubs. The cost of rail transport to these ports constitutes a significant part of production costs and directly impacts competitiveness in international markets. However, the Ministry of Development is considering implementing a fixed tariff for transport, irrespective of the actual distance.
UIMP has emphasized that this model contradicts established tariff-setting principles in railway transport, where costs should depend on distance and transportation expenses. Furthermore, the initiative does not align with current legislation, including the Statute of Ukrainian Railways, which mandates that charges be calculated based on distance.
Notably, freight shippers, who are directly affected by these changes, were not included in discussions regarding the new initiative. This exclusion raises concerns about the potential market distortions that could arise from its implementation.
The association warns that the realization of this initiative could lead to systemic market distortions, effectively resulting in cross-subsidization. This would mean that shippers located closer to the ports would have to compensate for the costs incurred by those situated much farther away.
UIMP has also highlighted significant corruption risks associated with this approach, particularly given the manner in which it is being promoted. The lack of a transparent and economically justified methodology for calculating the standardized tariff distance, along with selective consideration of market participants’ interests and a limited number of stakeholders involved in discussions, creates conditions conducive to further manual influence on tariff parameters.
Industry representatives caution that the introduction of such a model could lead to increased logistics costs for many producers. In the context of ongoing conflict, this may result in reduced production, further declines in enterprise utilization, and a loss of market positions abroad. Consequently, this could adversely affect:
- foreign currency earnings
- tax revenues
- overall economic stability of the country.
Previously, the European Business Association urged the Ministry of Development to refrain from altering railway tariffs towards the ports, stating that UZ’s attempts to introduce coefficients to tariffs would only harm Ukrainian exporters and the economy as a whole.
This initiative also contradicts principles of equal access to infrastructure and poses risks of non-compliance with antitrust legislation. Therefore, the Ministry of Development is advised to reject UZ’s proposal to implement these coefficients.
The proposal by Ukrainian Railways to standardize tariff distances for rail transport to Odesa ports has raised alarms among industry stakeholders, who cite potential economic distortions and increased costs. Critics argue that the initiative contradicts established tariff principles and could harm Ukraine's export competitiveness.