“Ukrzaliznytsia” is trying to compensate for the uncontrolled increase in costs”: Volodymyr Husak

It is not the first time that the issue of raising tariffs for railway transportation has caused a wave of indignation among the public and business. This is not surprising, because “Ukrzaliznytsia” has long been the object of criticism due to the lack of transparency in decision-making, the deterioration of the quality of services and the lack of a clear development strategy. Even in times of war, when the state needs stability more than ever, the company shows instability in its financial policies and strange management decisions.

This time, the issue of raising tariffs was again on the agenda. As notes general director of the Federation of Transport Employers of Ukraine, Volodymyr Husak, “Ukrzaliznytsia” promotes the idea of ​​the so-called “convergence of classes”, justifying it by the need to improve the company’s financial condition. However, he draws attention to the fact that such statements are based on false data: “The company claims that at the end of July it received a negative financial result for the first time since the beginning of the year, and the main reason is the increase in the transportation of allegedly unprofitable cargoes – iron and manganese ore.”

What is the problem?

“If we speak in the language of numbers, the total volume of transportation of “Ukrzaliznytsia” for 7 months of this year increased by 25.6% compared to the same period last year. And this is a great victory for Ukraine and the Armed Forces of Ukraine, because it became possible thanks to the opening of the ports of Greater Odessa.

The recovery of exports made it possible to increase the volume of production of Ukrainian enterprises, in particular, the mining and industrial complex. And these are taxes, jobs, foreign exchange earnings, as well as the volume of railway transportation. This increase is also reflected in the revenues of Ukrzaliznytsia. In the first half of 2024, compared to the first half of 2023, they increased by UAH 8.5 billion. Or by almost 20%, which correlates with the volume of increases in transportation.” – Husak emphasizes.

But here a paradox arises: when revenues are growing, the company declares unprofitability, justifying it by the increase in ore transportation costs. As the expert notes, if the transportation of ore is really unprofitable, then with a decrease in the volume of transportation, the company should demonstrate an improvement in financial indicators. However, the opposite happened: the reduction in transportation led to losses. That is, either the management of “Ukrzaliznytsia” deliberately misleads the authorities and the public, or simply does not understand how to correctly analyze financial indicators.

Where to look for the truth?

Volodymyr Husak emphasizes that significant contradictions in Ukrzaliznytsia’s statements can be easily explained by analyzing the expenditure part:

“The simply insane growth of the so-called “other operating expenses” is particularly striking – by UAH 2.5 billion or 80%!

One gets the impression that the current management of “Ukrzaliznytsia” frankly does not want to control and reduce the company’s expenses. It may feel that this should not be a priority in wartime, or simply cannot manage spending effectively.

Of course, I really want to see the breakdown of the company’s expenses and hear the explanation of the management of “Ukrzaliznytsia” regarding their growth. Because one gets the impression that, at best, this growth in costs is simply uncontrollable. But the lack of control on the part of the management of “Ukrzaliznytsia” cannot be compensated at the expense of the rest of Ukraine’s economy. After all, we are talking about the economic stability of the state and the work of HMC enterprises and the agricultural sector, which are the main fillers of the budget and sources of foreign exchange earnings from exports.”

Bad signal for the economy

An increase in rail fares in the face of instability in many markets can be fatal for many businesses. The stoppage of production, reduction of jobs and foreign exchange earnings can endanger not only the economic stability of the state, but also the viability of the agricultural and mining and industrial sectors.

“In conditions where the situation in many markets is now very unfavorable, the increase in tariffs will mean the stoppage of production for some time, and some will be forced to close altogether. Accordingly, transportation will stop. Then the management of “Ukrzaliznytsia” will be able to verify in practice their extremely contradictory statements about the fact that an increase in transportation leads to losses, and a decrease – to profits.” – summarizes Volodymyr Husak.

Taking into account all the above-mentioned factors, it is obvious that Ukrzaliznytsia needs not just reform, but a complete change in the approach to management. It is necessary to focus on effective cost control, transparency in decision-making and finding new opportunities to increase profitability without harming business and the country’s economy. But is the company’s management ready for such changes? There is no unequivocal answer to this question yet.