Indexing tariffs for rail freight transport has become one of the most sensitive issues for Ukrainian Railways (Ukrzaliznytsia), as the national operator is forced to operate under the simultaneous pressure of the war and rising operating costs.
Rates have remained at the level set in 2022, while expenses for energy, fuel, maintenance, and materials have risen steadily, creating a structural imbalance between revenue and costs. Without an adjustment, freight revenue can no longer sustain the infrastructure, and the company risks becoming trapped in a “survival” model that cannot be sustained indefinitely.
The European Bank for Reconstruction and Development (EBRD) raised the issue in very direct terms at the Conference on the Reconstruction of Ukraine in Gdańsk. Ukrzaliznytsia has demonstrated that it can maintain train service under extreme conditions, but operational performance cannot indefinitely compensate for the weakness of its financial foundation.
“Special attention must be paid to the financial sustainability of Ukrzaliznytsia. The business model on which the company has operated for the past thirty years appears to have exhausted its potential. Both Ukrzaliznytsia and the government must rethink the company’s operations and create a new business model. “Revising freight rates, which have not been adjusted since 2022, is a difficult, painful, but necessary decision,” said Mark Magaletskyi, EBRD Deputy Director for Ukraine, at the Ukraine Reconstruction Conference in Gdańsk.
In this context, the indexation of rail tariffs in Ukraine no longer refers merely to a percentage increase, but to a new direction. The EBRD has provided Ukrzaliznytsia with over EUR 700 million since the start of the war, including EUR 54 million in grants, but the message is clear: a solid financial framework is needed for additional funding. “We are ready to do more, but to do so we must focus on the company’s financial sustainability,” Magaletskyi emphasized, sending a direct message to the operator and the government.
PSO and the Separation of Freight and Passenger Services
The reform called for by financial institutions is not limited to readjusting fare coefficients; it also involves a reconfiguration of how the business segments are managed. A central pillar is the strengthening of compensation mechanisms for public passenger transport services (Public Service Obligation—PSO) contracts. These allow passenger trains serving a social function—regional and commuter trains—to be subsidized with public funds when they are not profitable. Thus, the freight segment is no longer required to permanently cover losses in the passenger sector, and freight rates can be set based on actual costs and investment needs.
The clear separation between freight and passenger services, combined with well-defined PSOs, creates a more transparent business model for Ukrzaliznytsia, in which financial flows are visible and risks are easier to manage. For investors, this means an operator that understands its costs, takes responsibility for its commercial segment, and manages its social services within a contractual framework, rather than through permanent cross-subsidization. From the European Commission’s perspective, these changes are part of the strategy to integrate the Ukrainian railway sector into the European market.
“Ukrainian Railways must undergo a profound transformation as part of the European integration process. At the same time, these changes are difficult but necessary and are already laying the foundation for the long-term development of the railway sector and its integration into the European Union’s transport system,” said Magda Kopczyńska, Director-General for Mobility and Transport at the European Commission. In other words, the indexation of tariffs is not an isolated measure, but part of a far-reaching reform.
Tariff Consultations, Figures Under Debate, and the Absence of a Final Decision
In June, Ukraine’s Ministry of Community and Territorial Development officially launched the consultation process on the indexation of Ukrzaliznytsia’s rail freight tariffs. The published draft outlines three main elements: a 30% increase in rail freight tariffs; an increase of approximately 60% in tariffs for the transport of empty railcars in tariff classes 1 and 2, achieved by adjusting the coefficients; and a proposal for the new tariffs to take effect on August 1, 2026, following the completion of administrative procedures. Tariff classes 1 and 2 correspond to specific categories of freight—typically large and heavy volumes or certain types of industrial or agricultural products—for which a specific set of tariff coefficients applies.
From the operator’s perspective, these percentages represent a compromise. According to Ukrzaliznytsia’s general director, Oleksandr Pertsovskyi, a 45% increase would be necessary to cover a significant portion of the financial deficit, but the 30% increase discussed with the ministry is considered a balance between the company’s needs and the industry’s concerns. On the other hand, farmers and steelmakers have warned that raising tariffs could increase logistics costs, reduce the competitiveness of exports, and lead to a shift of some volumes to road transport in search of cheaper short-term solutions.
At the same time, the Ministry of Development notes that the tariff policy must be analyzed in relation to the operator’s actual expenses and the need to maintain the operational capacity of the rail infrastructure.
Freight rates are regulated by officially published methodologies and coefficients, and their adjustment is presented as a necessary measure to offset rising costs, finance maintenance and rehabilitation work, and ensure service continuity amid a crisis.
Consequently, the process of indexing rates is not viewed merely as a price adjustment, but rather as a crucial test that will show whether Ukrzaliznytsia can transition from the role of an operator weathering the crisis to that of a railway operator capable of financing its own reconstruction and sustainable integration into the European space.
U.S. Chamber of Commerce Warns Against Indexing Rail Fares in Ukraine
While authorities justify the indexing by citing the need for financial stability, the business community is calling for the change to be treated as a reform, not merely a price increase.
Experts from member companies of the American Chamber of Commerce in Ukraine acknowledge that Ukrzaliznytsia needs a robust financial framework under wartime conditions, but warn that a 30% increase in freight rates and a 60% increase for certain categories of empty railcars risks driving up logistics costs, eroding the competitiveness of exports, and placing additional strain on strategic sectors.
Furthermore, they emphasize that any revision must be economically justified, compatible with the tariff methodology, and anchored in a validated financial stabilization plan—one that includes reform of the tariff mechanisms, a reduction in cross-subsidization of passenger services, increased operational efficiency, and a predictable tariff policy agreed upon transparently with the business community and relevant industry associations.
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