Defense capability threat: industrialists called on the president to prevent an increase in UZ freight rates

photo by UNIANThe policy of “Ukrzaliznytsia”, which foresees another increase in tariffs for cargo transportation, creates serious threats both to the economy and to the country’s defense capability. This is stated in an open letter to President Volodymyr Zelensky from OP “Ukrmetalurgprom”, the Association of UkrFA, as well as Associations of chemists, manufacturers of building materials and miners.

“In Ukraine, the railway is the main means of freight transportation both inside and outside of Ukraine. Railway transport provides almost 82% of freight and 36% of passenger transportation. And, obviously, understanding its monopoly position, JSC “Ukrzaliznytsia” throughout its existence tries to solve own financial problems at the expense of shippers,” the letter says.

After a series of increases in freight rates in 2021 and 2022, tariffs for the transportation of coal, ore and limestone increased by 140%, metal – by 70%, fertilizers – by 70%, grain – by 96%, and empty wagons from under coal – by 158%, industrialists indicate. Meanwhile, the UZ initiates another increase in tariffs, without having sufficient justification for this.

“Ukrzaliznytsia puts forward its own unprofitability as the main argument for the need to increase freight tariffs. This is manipulation, because the company has every opportunity to remain profitable: even in the extremely difficult year for the Ukrainian economy in 2023, Ukrzaliznytsia made a profit of UAH 5 billion”, – it is emphasized in leaves

High logistics costs due to the rapid growth of freight tariffs of “Ukrzaliznytsia” make Ukrainian products uncompetitive on the international market. And this is at a time when iron ore enterprises are loaded at 55% of the pre-war level, and metallurgical enterprises at 65%. Ferroalloy enterprises are currently operating almost at a loss. In the chemical industry, in fact, all the main sectors in exports decreased or “zeroed out”, industrialists say.

“In the conditions of the war, Ukrzaliznytsia, instead of holding cargo and increasing the cargo base, uncontrollably and rapidly expands its cost base, inflates the cost price and shows no interest in additional income. After all, since September 2023, Ukrzaliznytsia has not sold a single lot of scrap metal – although the sale of scrap metal is billions of hryvnias of additional income.Uz’s financial result in the first half of 2023 was 4.8 billion hryvnias, but UZ plans to inflate its expenses to the extent of 2.7 billion hryvnias tariffs under the term “unification” and “harmonization”, which actually eliminates all incentives for optimization of logistics processes, rhythmic shipment and consolidation of cargo lots”, industrialists emphasized.

The signatories emphasized: the UZ proposal to establish a single average tariff for all carriers will lead to the destruction of the economic potential of industries that are budget-generating for “Ukrzaliznytsia” and basic for the entire economy of Ukraine (agriculture, mining and construction, construction). On the other hand, it will make UZ chronically uncompetitive compared to road transport and other types of transportation.

“The short-sighted tariff policy of Ukrzaliznytsia will have a critical impact on the entire economy of Ukraine and, accordingly, on its defense capability and national security. Therefore, we are already asking you to initiate measures to improve the financial condition of Ukrzaliznytsia, to establish work on the support and development of the company’s freight base, to ensure cost optimization , and to ensure the introduction of a moratorium on the increase of freight railway tariffs until the martial law is lifted and for a period of at least two years after the end of hostilities,” industrialists say.