After the government’s decision to return control over state railroad operator Ukrzaliznytsia to the Ministry of Infrastructure, crucial and sweeping reform must be accomplished in the next 100 days.
These measures were included in the association agreement between Ukraine and the European Union, which outlines seven directives and four EU regulations in the field of rail transport, envisages ensuring transparency and non-discriminatory access to railway infrastructure in all railway undertakings, improving rail passenger service and facilitating the integration of the Ukrainian railway into the EU rail system.
During the transition period (currently, one year), a new regulatory framework for the industry will be developed and adopted, including access rules and procedures such as licensing, security certification and access.
On June 12, 2019, the Cabinet of Ministers of Ukraine approved Ukrzaliznytsia’s 2019-2023 strategy for the joint stock company Ukrainian Railways, which includes transforming from a regional structure into business segments: freight and logistics, production and service, passenger transportation and infrastructure.
The strategy spells out the concept of reorganization and the process of selling off non-core assets, the introduction of new transportation and safety management systems, improvements in the level of labor protection, a new approach to tariff formation and a long-term investment program.
Our goal is for passengers and cargo carriers to have access to quality and safe transportation services because Ukrzaliznytsia is the locomotive of Ukraine’s economy! Below are seven steps to achieve outlined reforms:
- Renew the Supervisory Board and the Management Board
This will optimize Ukrzaliznytsia’s personnel.
- Implement European Bank of Reconstruction and Development and European Investment Bank loan projects
These include the electrification of the Dolynska – Mykolaiv direction (360 million euros), the purchase of freight wagons (150 million euros) and the modernization of infrastructure (100 million euros).
- Invest in the joint production of electric locomotives
This should be done through a tender between international manufacturers Alstom and the CRRC Corporation ($500 million).
- Adopt the draft law on railway transport
The aim of this law is to improve market management mechanisms for railway transport to build a new structure of relations between participants in the transport process.
The draft law stipulates clear and equal rules for conducting business activities in the railway transportation market and establishes equal access to infrastructure services that apply to all persons interested in obtaining such services.
- Adopt railway station concessions and privatize non-core assets
The acquisition of modern rolling stock; the modernization of signaling and communication systems and security; the implementation of modern IT systems and other innovations will open opportunities for increased efficiency.
The investment program should focus on key assets (infrastructure and rolling stock), and investments should meet the following goals:
– eliminating accumulated underinvestment in the railway infrastructure
– increasing the quality and productivity of rolling stock, especially traction
– the effective distribution and management of rolling stock to meet consumer needs in a timely and cost-effective manner.
- Conduct pilot projects on the admission of private carriers to freight and passenger services
Pilot projects are an essential step to calculate tariffs for access to infrastructure and the amount of subsidies that will be required from state and local budgets.
- Prepare for the division of the company into three operators within one holding and the organization of a 2020-2021 IPO
Restructuring the company by type of business will ensure the transparency of financial flows, improve the quality of management and allow Ukrzaliznytsia to prepare for the emergence of private competitors in the rail transportation market. The reforms will also create a competitive market and ensure equitable access to infrastructure.
Viktor Dovhan is an adviser to the Minister of Infrastructure.
