Business community expects further reform of rail transport market – EBA

The European Business Association (EBA) says the business community is closely monitoring the situation around Ukraine's railway giant JSC Ukrzaliznytsia (Ukrainian Railways) and notes the critical importance of further reform of the country's rail transport market.

"Successful corporate management reform at Ukrzaliznytsia requires a clear and consistent vision and strategy, as well as effective governance. Therefore, we hope that the government won't delay the selection of a new head of Ukrzaliznytsia, and there will be no pause in the ongoing reform," the EBA's press service said on its website on March 29.

Read alsoEU report: Ukrainian Railways unreformed, in critical financial situationMajor expectations of the industry community as for Ukrzaliznytsia's reform are as follows: more efficient transportation by rail, investment in the development of rail transport of all forms of ownership with the assistance of the government, and the soonest launch of transportation by private locomotives.

In addition, Ukraine's obligations under the Association Agreement with the European Union include the implementation of a number of directives on transport sector reform, which should also be accelerated, it said.

One of the main actions that need to be taken in the near future is to reform Ukrzaliznytsia's structure.

"For the effective reforming of the railway transportation market, the initiated structural reform at Ukrzaliznytsia must continue, namely the separation of the UZ Cargo and UZ Infra verticals. The opening of the private traction market, which is due to the prospect of adopting the Law of Ukraine on railway transport, is also expected," the press service said.

The business community also calls to stop subsidizing passenger transportation at the expense of freight services and asks to develop a transparent tariff formation mechanism, dividing the railway tariff into locomotive, infrastructure and car components, as well as completely revising the tariff formation system. Also, it encourages to strengthen the fight against theft of parts for cars and locomotives and to guarantee security and safety of cargo during transportation.

In addition, the community hopes that overhauls and reconstruction of the railway system will be provided for the next five years, up to 1,000 kilometers per year, and a railway fund will be created, which will be filled with excise duty on diesel fuel.

Background

• In March, Ukrainian Infrastructure Minister Vladyslav Kryklii said that Ukrzaliznytsia should complete the allocation of verticals necessary for unbundling (division of the company) in 2021 and make appropriate organizational changes.
• Earlier in January, the Infrastructure Ministry announced the creation of two new branches as part of the Ukrzaliznytsia (UZ) structural reform, namely UZ Cargo (cargo transportation) and UZ Infra (an infrastructure operator).
• In October 2020, the then head of the company's board Volodymyr Zhmak said that Ukrzaliznytsia planned to complete the subordination of divisions and allocate four verticals by the end of 2021. The transformation of JSC Ukrzaliznytsia into a holding company through the division into four companies (freight, passenger, production, and infrastructure ones) will boost freight traffic, as well as make passenger transportation a self-supporting business.