A Balanced Funding Model Is Needed for Ukrainian Railways
Dmytro Kosterny, deputy director of the company Vertikal, stressed the urgent need for a balanced funding model for Ukrainian Railways (Ukrzaliznytsia). With freight tariff increases planned for 2026, industrial associations and agricultural firms—including Nibulon, Kernel, and Vitagro—have voiced serious concerns. They warn that rising transport costs will hurt logistics and exports, potentially dealing a heavy blow to the national economy.
Forecast Impact of the Tariff Increase
According to projections, a 30% tariff hike in 2026 could lead to:
- a loss of UAH 96 billion in annual GDP;
- a reduction in Ukrainian Railways' freight base by 27 million tons;
- a drop in export revenues of $2.4 billion;
- a decrease in budget revenues by UAH 36 billion.
Agricultural enterprises have called on the government to hold off on raising freight tariffs, warning that such a move could push shippers to switch to truck transport.
Kosterny noted that any increase in freight tariffs must reflect Ukrainian Railways' real needs but cannot be the sole tool for the company's financial recovery.
To keep Ukrainian businesses competitive, a balanced funding model for railway infrastructure is essential—one that involves the state, international partners, and the carrier itself. Operating under wartime conditions, Ukrainian Railways functions as critical infrastructure, and tariff policy must consider not only the carrier's financial health but also its broader economic impact.
It is worth noting that raising tariffs does not create new added value; it simply shifts the financial burden from producers to the carrier. In most European countries, railway infrastructure is treated as a strategic state asset, with development funded not solely by freight owners. However, increasing freight tariffs could drive a shift to road transport, which would not only shrink Ukrainian Railways' freight base but also accelerate the deterioration of the country's roads.
This situation underscores the need to balance Ukrainian Railways' financial requirements with the needs of the agricultural sector and the broader economy. As tariff policy may change, it is crucial that all stakeholders have a say in crafting compromise solutions—ones that ensure the carrier's financial stability without harming other economic sectors. The efficiency of railway infrastructure—and the overall development of Ukraine's economy amid current challenges—depends on getting this balance right.
The concerns surrounding the planned tariff increases for Ukrainian Railways are not isolated. Critics emphasize that a thorough audit of Ukrzaliznytsia should precede any hikes, as it may reveal underlying issues that need to be addressed before implementing significant financial changes. This approach could help ensure that any adjustments to freight tariffs are justified and beneficial for both the railway sector and the national economy.