Ukrzaliznytsia expects about US$262 mln from rise in freight rates

Ukraine`s state-owned JSC Ukrzaliznytsia railways operator hopes to reach a compromise with businesses and regulators over an increase in freight rates and expects to receive extra UAH 7 billion, or US$261.6 million if the rates grow by 22-25% from June this year.

”We need to have our financial plan approved. We`ve been tasked to finalize it again, and next week, our board will consider an updated financial plan foreseeing an increase in the rates from June 1. Of course, we would like this increase to be about 22-25% … We expect [to earn] about UAH 7 billion if [the freight rates are raised] from June 1. And we will adjust our investment plans correspondingly,” Ukrzaliznytsia board member Ireneusz Wasilewski said at the second Ukrainian Infrastructure Forum in Kyiv on April 20.

Ukrzaliznytsia plans to spend all the funds to be received from the increased tariffs on buying new rolling stock, which the company has repeatedly notified players in the railway market of.

”Not all [representatives of businesses] seem to be against the tariff increase. All the money to be received from this will be spent on the replenishment of the rolling stock. We have been talking about it for a couple of months, but unfortunately there has not been any support, but we are counting on it,” he added.

Wasilewski also said that Ukrzaliznytsia`s spending on new rolling stock and modernization of the existing equipment its in 2017 would exceed UAH 12.5 billion, or about $467 million.

Earlier, First Deputy Infrastructure Minister and head of Ukrzaliznytsia`s supervisory board Yevhen Kravtsov said on April 18 that the current tariffs on freight transportation by rail would be revised upwards no earlier than June-July this year after a compromise over this matter is reached with businesses and regulators.

Ukrainian Infrastructure Minister Volodymyr Omelyan repeatedly emphasized that it is advisable to talk about the increase in freight rates only when Ukrzaliznytsia becomes a transparent and open structure and spends funds it gets from increased rates on modernization and replenishment of its rolling stock.

Ukrzaliznytsia plans to raise freight rates by 25% in 2017. At the same time, market participants oppose the increase and propose that the government create an independent agency that would set rates on transportation.

Seeking a compromise, the State Regulatory Service in early February initiated the creation of an ad hoc group, including business representatives.

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