Reform objective
To demonopolize the sector of cargo rail transportation: repairing equipment in time, stimulating the industry, and providing quality transportation services.
Mechanism
The Ukrzaliznytsia’s unbundling, ie its division into separate cargo, passenger (suburban and long-distance traffic), and infrastructure operators to create market conditions and the opportunity to attract private investors.
Instruments
Law “On Railway Transport of Ukraine”, Resolution “On implementation of a
Pilot Project Regarding the Admission of Private Locomotives to Operation of Separate Routes on Public Railway Tracks”, Order “On Approval of the Action Plan to Reform Railway Transport”.
Proposals
First, it is necessary to create separate legal entities responsible for handling wagons, as such an opportunity is already provided for by law. Only the infrastructure will remain fully nationally owned. A draft law to regulate this aspect is already under consideration in parliament. Thus, it will be possible to demonopolize the sector and save the Ukrainian cargo market by repairing equipment in time, stimulating the industry, and, most importantly, providing quality transportation services.
Why is this essential for Ukraine?
Ukrzaliznytsia (UZ) suffers catastrophic losses. Its fixed assets are critically deteriorated and require major repairs. However, the UZ operating in its current model is not able to upgrade its infrastructure on its own, as the current KPI of its board is not aimed at this problem. Instead of repairing locomotives and tracks, it tries to buy wagons for the market share increase, while the UZ artificially reduces prices (provides discounts) for the use of its wagons for individual users.
Economic laws and, including the Association Agreement, provide for radically different approaches to building mechanisms for sustainable operation of different segments, in particular: Infrastructure — state control and financing through a regulated tariff (profitability coefficient is close to 0); locomotives — a potentially competitive sector, the state supports locomotive manufacturers (profitability coefficient allows ensuring the investment attractiveness), the provision of wagons for use — only the market sector, the UZ is obliged to establish separate legal entities for the wagon operators segment, so it will be impossible to finance them through insufficient funding for infrastructure and locomotives, as well as allow reducing violations of competition law (profitability coefficient is determined by the market).
This is currently not applied. By violating market laws, the UZ still will be an inefficient, unprofitable, and corrupt enterprise.