The Ukrainian government has approved a new experimental mechanism for funding long-distance passenger transport services. This initiative marks a shift towards a European-style Public Service Obligation (PSO) model, where the state will systematically compensate transport providers for the difference between actual costs and socially accessible fares.
According to reports, this new model aims to establish predictable funding rules for passenger transport, alleviating financial pressure on the state railway company, Ukrzaliznytsia. Historically, funding for passenger services has relied on cross-subsidization from freight transport revenues, a practice the government intends to gradually phase out.
The Ministry of Development has emphasized that this experimental mechanism is a step toward fully integrating Ukraine’s passenger transport funding system with the European PSO model, which is widely used across EU countries. Deputy Prime Minister Oleksii Kuleba stated, “We have developed a mechanism that brings the Ukrainian system closer to the European model for ordering socially important transport services.”
For the year 2026, the state has allocated a budget of 16 billion UAH for passenger transport services. These funds will cover key long-distance routes, ensuring continued connectivity across the country. The government will not only order these services but will also oversee their execution.
The State Audit Office of Ukraine will be involved from the outset to ensure that every budget hryvnia is used efficiently. Payments will be made quarterly in advance, and funding will also cover transport services performed in January and February 2026.
Previously, lawmakers urged the government to allocate 26 billion UAH to Ukrzaliznytsia, highlighting that this amount was necessary for the company to maintain passenger services and financial stability. According to Oleksii Movchan, deputy head of the transport committee, the railway plays a critical social role, and the government should compensate for its losses incurred due to the war and declining freight volumes. However, the government has only approved 16 billion UAH thus far.
In a related development, Ukrzaliznytsia had sought to raise freight tariffs by 40% to offset losses from passenger services, which have reached 22 billion UAH. However, the Ministry of Economy opposed this increase, stressing that any tariff hikes should follow a comprehensive review of the tariff schedule, which has not been updated since 2009. Minister Oleksii Sobolev noted that a blanket increase in tariffs would not yield the desired results, as some freight might shift to road transport or disappear altogether due to business closures.
The Ukrainian government has launched an experimental funding mechanism for long-distance passenger transport, transitioning towards a European-style Public Service Obligation model. This initiative aims to stabilize the financial situation of Ukrzaliznytsia while ensuring continued connectivity across the country.