Raising Tariffs for Railroad Cargo Transportation May Lead to Another Inflation Upsurge.

Wednesday, 11 Oct 2017

Raising Tariffs for Railroad Cargo Transportation May Lead to Another Inflation Upsurge.

Raising Tariffs for Railroad Cargo Transportation May Lead to Another Inflation Upsurge.

Ukrainian Oil & Gas Association does not support the increase in rail cargo transportation tariffs, initiated by the Ministry of Infrastructure.

The proposed indexation of tariffs will be passed on to consumers in the form of an increased cost of the final product—motor fuel. In 2017, the domestic petroleum products market has experienced difficult times. The growth of world oil quotes and autumn devaluation of the national currency have pushed petrol and diesel fuel prices up. Presently, it is important for Ukraine to create a basis for sustainable economic growth, and the increase in tariffs is not a panacea.

Being a monopolist, PJSC Ukrainian Railways keeps driving up cargo transportation costs with each passing year, albeit failing to improve the quality of services provided. As recently as in August, LPG market operators attributed price hikes to the inability of Ukrainian Railways to provide the market with sufficient rolling stock, as well as corruption in the wagon distribution issue. Shebelinsky Gas Processing Plant announced in October this year a possible decline in the production of petroleum products and processing of raw materials, being unable to ship cargoes timely and in full.

Any tariff hikes should be preceded by a detailed analysis of the previous increase. Only in this case can we talk about an effective roadmap for the future improvement.

Oil and gas industry businesses are ready to discuss the creation of a transparent and understandable tariff system. But we believe that the proposed strategy for improving the PJSC Ukrainian Railways financial stability is not well considered, economically unjustified, not yet effective.

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