The tariff increase may have the most tangible impact on the agricultural sector, which remains one of the largest consumers of freight transportation. In 2025, Ukrzaliznytsia transported 161 million tonnes of cargo. Of this, grain comprised almost 18%, or 29 million tonnes.
For agricultural producers – the industry is one of the few delivering export revenues for Ukraine’s economy amidst wartime – this means rising logistics costs, the need to review logistics routes, and adaptation of export strategies. And that is taking place on top of challenges caused by Russia blocking Ukraine’s Black Sea export corridor and targeting ships.
Ukraine’s agriculture giant Kernel told Kyiv Post they are unhappy with the tariff, saying it rose too rapidly, was not justified, and will increase logistics costs. It added that tariffs themselves are based on a post-Soviet playbook and should be completely reformed. Ukrzaliznytsia, however, argues that the increase is necessary to restore the railway’s financial sustainability after four years without tariff indexation.
Kyiv Post breaks down how the new tariffs may affect the agricultural sector.
Kyiv says four years of accumulated costs left no alternative to indexation
In response to an information request, the Ministry for Restoration, Infrastructure and Transport explained that the proposed indexation is linked to the growth of Ukrzaliznytsia’s costs, which had accumulated over four years. Freight tariffs were last revised in the summer of 2022. Since then, costs for electricity, fuel, materials, repair, and infrastructure maintenance have risen substantially. The rise in electricity prices alone costs Ukrzaliznytsia about Hr. 15 billion ($336 million) in additional expenses, while the producer price index grew more than 2.5 times.
“In fact, this proposal is a compromise that will help preserve the operation of critical infrastructure,” Oleksii Balesta, deputy minister of Development of Communities and Territories of Ukraine, is quoted as saying in the response to Kyiv Post’s request.
The Ministry also emphasizes that indexation was not the first response to the problem. Prior to this, the state used other support instruments. From the start of Russia’s full-scale invasion, Ukrzaliznytsia received funding from the state budget, and this year an experimental mechanism of state procurement of socially important passenger transportation, amounting to Hr. 16 billion ($358 million), was launched.
The Ministry notes that it aims to gradually eliminate the cross-subsidization of passenger transportation at the expense of freight. According to Balesta, the issue of indexation became critical only after other sources of support had been exhausted, and in the absence of additional measures and sources of funding, indexation would have been necessary at a level of no less than 110%.According to Ukrzaliznytsia, the tariff increase is expected to generate an additional Hr 8.6 billion ($192 million) in revenue in 2026.“This will allow us to partially cover the funding gap needed to ensure the stable operation of the railway and freight transportation,” the company said in a written response to Kyiv Post’s request.
Ukrzaliznytsia also said it is implementing a Hr. 10.2 billion ($228 million) cost-optimization program, including accelerated scrap metal sales, the disposal of non-core assets, and daily operational efficiency measures. The company estimates that postponing tariff indexation over recent years generated more than Hr. 100 billion ($2.2 billion) in economic benefits for freight customers. According to Kosse, in dollar terms, the tariff itself has barely changed since 2022; the increase feels sharper now only because the wagon component of the freight bill has fallen, making the infrastructure indexation more visible.
Kernel estimates rail logistics will rise 35%, adding $4-5 per tonne of grain
According to Kernel’s estimates, the average increase in the cost of rail logistics will be about 35% per tonne of cargo. For agricultural producers, this means additional costs of $4-5 per tonne of grain delivered to port, depending on the region of shipment.
“We recognize that tariff indexation may be necessary; however, it must be based on economically justified calculations. For profitable types of cargo, which include agricultural products, the increase should not exceed 10%,” Vadym Kotenko, head of the rail logistics service at Kernel, told Kyiv Post. Ukrzaliznytsia, however, estimates that transporting one tonne of grain over the average distance of 676 kilometers will cost Hr. 169 ($3.78) more after the tariff increase.
Kernel also emphasizes that agricultural cargo already carries some of the highest rates within Ukrzaliznytsia’s freight tariff structure, generating significant revenue for the railway. The company argues that the entire outdated tariff model, above all its unprofitable segments, needs comprehensive reform before any indexation, since raising rates without first correcting existing distortions would only deepen the unequal operating conditions of Ukrainian ports.
Even with higher tariffs, rail logistics is cheaper for businesses
A change in tariffs will not lead to a mass shift of business to road transportation, Iryna Kosse, leading research fellow at the Institute for Economic Research and Policy Consulting, told Kyiv Post.
After indexation, the cost of rail logistics of grain to ports will rise from the current $15-16 to $19-20 per tonne, that is, by approximately 25%. According to the expert, even after the tariff increase, rail ($19-20/t) will remain cheaper than road transportation to the ports of Odesa ($24-27 per tonne).Ukrzaliznytsia also argues that freight volumes depend primarily on wartime security conditions, port operations, the power system, and international trade rather than on tariff levels alone, the state-owned company told Kyiv Post.
Additional logistics costs may affect primarily the purchase price for farmers, rather than the end buyer, Kosse said. According to her, at current export prices, the additional $4 per tonne amounts to about 2% of the grain’s value. Since export prices are formed mainly on the global market, these costs will likely be reflected on producers. The most sensitive to such changes are mass low-margin crops and regions remote from ports.
“The real choice is not between an increase of 30% and 10%, but between the tariff as a standalone measure and the tariff in conjunction with reform,” Iryna Kosse said.
According to Kosse, under current conditions, a revision of tariffs is inevitable. The current increase is the first stage of phased indexation: 30% from Aug. 1, 2026, followed by a separate increase of around 15% in 2027. And this is already a compromise, since at the start of the year, options for a 37-45% increase were being discussed. Such reform, Kosse says, would require three things: separating profitable freight from unprofitable passenger segments, financing passenger transportation through state procurement, and setting tariffs transparently. Without this reform, the tariff increase may remain only a temporary solution to the problem.
Business won’t switch to trucks completely, but lock rates in advance
According to Kernel representatives, the increase in rail tariffs is forcing businesses to review their logistics models, and some cargo may re-orient toward road transport, primarily over short and medium distances, where it will become more competitive. Companies will also be forced to optimize routes, review logistics chains, and choose transshipment points and ports based on the new cost structure.
A mass shift to road transport over long distances is unlikely, Kosse said. However, a partial shift to road transport is possible on short- and medium-distance routes. And it is still unclear how fast the Armed Forces of Ukraine will deblock the Black Sea corridor – businesses will use vehicles to transport more exports until the sea becomes safer.
Farmers will try to optimize railcar use, consolidate cargo into block-train shipments, assess transportation costs, and accelerate railcar turnover to partially offset the price increase, she said. An additional factor is seasonality. Since the increase took effect on Aug. 1, some businesses have already contracted for railcars and locked in rates to partially mitigate the impact of the tariff increase.
The tariff increase represents a compromise between the need to strengthen Ukrzaliznytsia’s financial position and the additional costs businesses face. At the same time, all the parties surveyed (business representatives, the Ministry, and the independent expert) agree that a long-term solution to the problem depends not only on revising tariffs but also on a comprehensive reform of the tariff-setting system and the financing of rail transportation.