The industrial lobby managed to block an increase in freight rail tariffs.
The Ukrainian industrial lobby, led by the country's wealthiest businessmen, Rinat Akhmetov and Ihor Kolomoisky, can breathe a sigh of relief—the increase in freight rail tariffs has been postponed indefinitely. As it became known this week, the oligarchs received a gift from the State Regulatory Service of Ukraine. Its deputy head, Oleh Miroshnichenko, in his capacity as acting head of the agency, signed a decision denying approval of the draft order of the Ministry of Infrastructure of Ukraine "On Amendments to Certain Regulatory Legal Acts of the Ministry of Transport and Communications."
In this draft, Andrey Pivovarsky's ministry proposed indexing freight rates by rail, raising them by 15% from the date of official publication (the Ministry of Infrastructure hoped this would happen as early as January of this year). An exception was planned for coal, the cost of which was to increase by 5% in January and by another 9,5% in April. Furthermore, a second wave of freight rate increases by rail was to begin on July 1, 2016. Rates for the most common first-class freight (which includes raw materials such as coal, iron ore, crushed stone, etc.) would increase by 20%, while for third-class freight (with high added value), they would increase by only 5%. Thus, according to Pivovarsky's ministry's plan, the difference between freight rates for different classes would be equalized.
Not only the State Regulatory Service, which decided that Andrey Pivovarsky's department had developed its draft order "in violation of the principles of adequacy, balance, and predictability," but also the Ministry of Finance sided with the industrial lobby.
Nearly all of the country's largest industrial groups have spoken out against this—last year, as DS reported, they launched a large-scale campaign against rising freight prices. As part of this campaign, the heads of industry associations and Ukraine's largest industrial enterprises signed a petition to the authorities asking them to prevent an increase in rail freight tariffs, which were estimated to cost industrialists an additional UAH 8,5 billion in 2015. "Since July 2014, tariffs have already been increased by 12,5%, and by another 30% since February 2015. Despite the deep crisis in the real sector of the domestic economy, the overall increase in rail freight costs will amount to 82,9%, which is significantly higher than the government's pessimistic forecasts for industrial producer prices at the end of 2015," the petition stated. The signatories included representatives of most of the country's largest business groups: Igor Kolomoisky and Gennady Bogolyubov's Privat (Zaporizhzhia Ferroalloy Plant), Viktor Pinchuk's Interpipe (Novomoskovsk Pipe Plant), Konstantin Zhevago's Finance and Credit (Poltava Mining and Processing Plant), and Lakshmi Mittal's ArcelorMittal Kryvyi Rih. The associations Metallurgprom and Ukrcement, the Union of Chemists, the All-Ukrainian Union of Construction Materials Manufacturers, and other organizations also signed the agreement.
Rinat Akhmetov played a leading role among them, with representatives of five of his companies signing the appeal (the Ilyich Iron and Steel Works of Mariupol, Zaporozhogneupor, DTEK-Energo, Metinvest-Shipping, and the Avdiivka Coke and Chemical Plant). Throughout the year, media outlets owned by Akhmetov, Pinchuk, and Kolomoisky published articles arguing that tariff increases under the current economic conditions were unjustified and detrimental to the economy, potentially leading to a decline in the competitiveness of domestic producers in global markets and a decline in export revenues. This work, coupled with efforts to find common ground in several agencies, led to success. Moreover, not only the State Regulatory Service, which determined that Andriy Pivovarsky's agency had drafted its order "in violation of the principles of adequacy, balance, and predictability," but also the Ministry of Finance, sided with the industrial lobby. In January, Oksana Markarova, the deputy head of this agency, concluded that "the rise in the industrial producer price index, due to the increase in the transport component in product prices, will lead to an increase in the production costs of businesses that use rail transport services." On behalf of the Ministry of Finance, she recommended that the Ministry of Infrastructure justify its proposed tariff changes.
Business Capital (the material was at the link: https://www.dsnews.ua/economics/ahmetov-i-kolomoyskiy-pobedili-zheleznodorozhnikov-14012016143700)
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