The constant increase in tariffs for transportation drove UZ into a vicious circle of losses – analysts Economy

“Ukrzaliznytsia” uses only one method of work in the face of a constant drop in cargo transportation – an increase in tariffs, which in the long run leads to an even greater loss of cargo transportation by rail. Instead, it should conduct systematic work on errors and find ways to increase the volume of cargo transportation.

This is discussed in the MMC Center analyst.

“The last time Ukrzaliznytsia increased tariffs in 2022: from January 1 by 20.4% for first-class cargo and by 6.5% for second-class cargo, as well as from June 29 – by 70% for all types of cargo. The latest increase , despite its importance, passed without discussion with business,” the Center reminded.

Analysts point out: in the coming year, UZ plans to raise tariffs again, but this time they will call it “indexing”. However, methodologically, this cannot be done now, since there is no official information about the increase in the prices of producers.

“Indexation of tariffs for railway transportation is carried out at the level of the increase in the price index of industrial producers. But Gosstat has not announced the price indices of manufacturers of industrial products since February of last year. That is, there is no official “benchmark” for the increase. At the same time, tariffs for transportation are raised based on the level of growth of consumer prices (inflation) is methodologically incorrect,” the Center points out.

The strategy of UZ, a classic state monopoly, continues to cause surprise and misunderstanding among all shippers, the publication writes, because the company’s decisions are not considered logical.

“There are several steps that any business begins to take when there are problems in the market. It works on the quality of services to bring back customers, throws all efforts to increase operational efficiency to reduce losses and costs, and thinks about where to invest to obtain new opportunities and create new markets. Unfortunately, “Ukrzaliznytsia” uses only one method of operation in the face of a constant drop in cargo transportation – a constant increase in tariffs. In the long run, this will lead to an even greater loss of cargo transportation by rail,” the Center points out.

In pursuit of “simple” solutions, the UZ got itself into a vicious circle that does not solve systemic problems in the company. The scheme “Tariff increase – cargo transportation drop – UZ income drop – tariff increase again” does not work. And, according to many experts, it leads the country’s largest carrier to a “dead end”, summarized in the Center.