Ukrzaliznytsia (Ukrainian Railways), a state-owned monopolistic enterprise of rail transport, proposes to raise tariffs for cargo transportation by 14.2%. The company has already raised its tariffs several times; however, no significant changes in improving the infrastructure, increasing the speed or safety of the roads have been observed. The next increase in tariffs, without further real steps aimed at resolving problem issues, would not give tangible results. Experts assure that as a result, the economic situation in Ukraine would continue to deteriorate due to the inhibition of export potential and poor railway logistics.
Due to the lack of real steps aimed at improving Ukrzaliznytsia’s railway infrastructure, the situation on the roads continues to deteriorate. The number of accidents in Ukraine is growing due to the unsatisfactory maintenance of the tracks.
According to Ukraine’s State Service for Transport Safety, in 2017, 89 cases were recorded, including 21 on the railways, in 2018, there were 140 such cases, 17 of which occurred on the railways. There were five cases of convergence of railway rolling stock on public roads in 2017 and six in 2018. Almost 90% of traffic accidents were due to unsatisfactory current maintenance of the tracks.
One of the biggest accidents occurred on July 4, 2018, when the convergence of 14 cars of a freight train on the railway section between Odesa and Kyiv (on the Ivanivka-Vesely Kut route) took place. Special Ukrtrans Security Commission was created for the technical investigation of the circumstances and causes of this incident.
In general, the trend is disappointing: Ukrzaliznytsia is significantly under-fulfilling the amount of work needed to repair the tracks, saving on the most expensive jobs – modernization and major repairs of the railway tracks. The volume of reconstruction was significantly reduced compared with the last decade: in 2017, 141 km of the roadway was reconstructed, 280 km in 2018, and according to the plan for 2019 – 260 km would be repaired. At the same time, the volume of renovations in 2007 was 5 times higher than in 2018-2019 and amounted to 1,446 km.
Due to the lack of funds, Ukrzaliznytsia’s policy regarding infrastructure renewal mainly consists of local "patching up" of the railway bed. There is a need to repair more than 6 thousand km of the railways annually, but the actual repair indicators do not even reach half of the need.
According to the experts, the length of Ukraine’s railways is about 20,000 km, repairs of 8,000 km of the roads are overdue.
The key problem of the Ukrainian rail transport is the unfeasibility to fully meet the needs in the public-transportation ridership and all-cargo service. The reasons are poor technical conditions of the infrastructure, speed limits, the presence of traffic bottlenecks, and lack of traction. At the same time, Ukrzaliznytsia is not taking any active steps towards improving the infrastructure. The situation with the infrastructure, of course, is better than with the locomotives, but still in areas with heavy traffic the speed is very low.
If the approaches of UZ to the repair of railways do not change, the volume of transportation of such important goods as coal, iron ore, grain products, building materials, chemical fertilizers, will continue to decline; this will become a significant limitation of economic growth in Ukraine. For ordinary Ukrainians, this will affect the prospects for growth in wages and pensions, experts assure.
Due to the poor conditions of the tracks of Ukrzaliznytsia, today, the speed limits of trains on tracks with a total length of 1,086 km are operating, and 1,746 km of tracks are closed.
At the same time, Ukrzaliznytsia’s project included reconstruction of 260 km of railways (75 million USD) and a major overhaul of 240 km (39 million USD) into the financial plan for 2019, which is more than two times less than the minimum required level. At the same time, the monopolist prefers to direct state funds for other purposes, for example, to increase administrative costs (+28 million USD) or other operating expenses (+32 million USD). For example, last summer, the Ukrzaliznytsia Service Support Center hired an SMM box for 26,000 USD to run the UZ Facebook page.
Ukrzaliznytsia is known for its ineffective manager of the state funds. Experts and market participants note that despite the fact that the company constantly increases the cost of the logistics components, increasing its cash receipts, it does not have time to use these funds. Along with the deterioration of infrastructure, Ukrzaliznytsia has another, equally serious problem, which hampers cargo turnover and the development of exports from Ukraine. So, today, the rolling stock requires a significant upgrade.
In this situation, Ukrzaliznytsia’s proposal to raise tariffs for freight transportation, this time by 14.2%, cause reasonable doubts that this might help in solving key problems of infrastructure and traction.
If the tariffs go up, but nothing is done about the state of the infrastructure, the situation will not change, experts note. According to them, activation of railway infrastructure repairs, mainly an increase in the reconstruction and overhaul of railways to at least 1000 km per year during 2019-2021, is needed.