A “hole” of 24 billion: The Cabinet of Ministers should demand a report and reassessment of Ukrzaliznytsia management
30 October 11:50
OPINION
President of Ukrmetallurgprom Alexander Kalenkov in a commentary
According to him, the Cabinet of Ministers has all the powers to restore order in the company.
“The main shareholder of Ukrzaliznytsia is the state, and it is managed by the Cabinet of Ministers, including the minister in charge. The Cabinet of Ministers makes personnel decisions, major financial decisions, approving the financial plan, for example. That is why the Cabinet of Ministers has all the powers to put things in order at the company,” Kalenkov said.
He emphasizes that UZ’s problems are systemic and long-standing.
“This situation did not appear today… Ukrzaliznytsia is a legendary corrupt company where a lot of money is burned. After 2014, everyone had hopes that it would be reformed, but in more than 10 years, almost nothing has changed. “Ukrzaliznytsia has remained a non-transparent structure that burns money through its inefficiency,” Kalenkov said.
Unprofitable passenger transportation is “dragging to the bottom”
Kalenkov cites shocking figures for the imbalance: passenger transportation brings in about UAH 7 billion in revenue, while its costs exceed UAH 30 billion.
In his opinion, in wartime, the state should subsidize passenger transportation directly, as the EU countries do, instead of shifting these costs to the freight business.
“Another area of Ukrzaliznytsia’s business is freight transportation. They are super profitable because Ukrzaliznytsia can send tens of billions of hryvnias to compensate for the costs of passenger transportation, its inefficiency, and so on. But what has this led to? It violates a fair approach to tariffs and affects the entire business,” the expert says.
Tariffs are higher than in Eastern Europe
Instead of cutting costs, UZ management is systematically raising prices, emphasizes Kalenkov.
“Tariffs have been raised since 2022 – first on January 1, then in the summer by 70%. Already, Ukrzaliznytsia’s tariffs are higher than in Eastern Europe, where our companies also transport their products,” he notes.
Moreover, the company is planning another increase of more than 40% – 26% this year and 11% next year.
“The management has chosen the most understandable option. Why increase efficiency, why steal less – we will simply go to the market and collect one and a half times more from the business,” the expert comments emotionally.
“Ukrzaliznytsia is losing cargo
According to Kalenkov, 80-75% of the company’s expenses are conditionally constant, i.e. independent of the volume of transportation.
“Whether Ukrzaliznytsia transports 300 million tons of cargo, as it did before the war, or 160 million tons, as it is expected to do this year, it will incur most of the costs either way. The less it transports, the less it earns, and the costs remain,” he explains, adding that this is why the tariff increase only deepens the crisis, as businesses cut back on transportation or switch to road transport
Ukrzaliznytsia is running out of money
“The situation is not just difficult now, it is critical. Ukrzaliznytsia is running out of money. They (the company’s management – ed.) are not able to significantly improve the efficiency of their operations. If Ukrzaliznytsia is in a country at war, it will undermine not only the economic but also the physical security of the state. And we will have to ask how the management got to this situation,” the expert adds.
What the government should do
Kalenkov calls on the government to take immediate action:
“The first thing the state can do is to finance the hole in passenger transportation. This year it is about 23-24 billion, next year – 26 billion UAH.”
He also demands that the company’s financial plan and strategy be made public, and most importantly, that the effectiveness of the current management and Supervisory Board be assessed.
“We need to be critical of the current management. There are many opportunities to improve efficiency. There is a 26 billion hole in the financing of passenger transportation, and inefficient infrastructure leaches another 14 billion. These costs can be reduced significantly, but we need to do this, not come to Ukrzaliznytsia to live comfortably for a while,” Kalenkov adds.
“The Supervisory Board has been without results for years”
Kalenkov emphasizes that the Supervisory Board of UZ has remained almost unchanged for years, but has not shown any improvements.
“The main indicator of the company is turnover. It is falling: this year – by 15%, last year it also decreased. We need to figure out why this is happening. The responsibility lies with the operational management, but the Supervisory Board is also involved in appointments and approval of financial plans,” the expert explains.
He also criticized the chairman of the board, Cheetah Hafer (re-elected for a second term – ed.) and its current members.
“For me, it was so stupid and unprofessional when Cheetah Hafer spoke and criticized the business that he probably should have turned a blind eye to the money. Instead of talking about attracting customers and reducing costs, he is saying that the business does not want to be charged more money,” Kalenkov said, adding that he has not seen any reports on the work of the management or the Supervisory Board of UZ.
“If they had any successes, they would have reported, but I don’t remember any such reports in recent years. And now, instead of mobilizing during the war, officials simply blame their inefficiency on the war, withhold information and hide behind the rhetoric of force majeure,” Kalenkov concluded.
Finally, the expert emphasizes that without the intervention of the state, the Cabinet of Ministers, and the Prime Minister (Yulia Svyrydenko – ed.) in this situation, there is a risk of losing “not only a large part of the business that uses Ukrzaliznytsia, but also the company itself.”
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Who runs UZ today
Chairman of the Board: Alexander Pertsovsky.
Board members:
- Mykola Ivaninov (finance)
- Lidia Hrytsenko (personnel)
- Józef Tuley (infrastructure)
- Yevhen Shramko (repairs and production)
The Supervisory Board of UZ is represented by the following members:
- Elżbieta Ewa Bieńkowska (Poland) – former Minister of Infrastructure of Poland and European Commissioner;
- Gepard Hafer (Germany), a logistics expert who worked at Deutsche Bahn, was elected Chairman of the SB for the second time in a row.
- Maksym Mokliak – former acting head of the State Fiscal Service in 2015;
- Anatoliy Amelin – entrepreneur, co-founder of the Ukrainian Institute for the Future.
- David Lomdzharia (Georgia) – Chairman of the Supervisory Board of Ukroboronprom;
- Serhiy Leshchenko – former MP, former journalist, elected Deputy Speaker of the Verkhovna Rada.
- Oleksandr Kamyshin – former chairman of the board of Ukrzaliznytsia, former minister of strategic industries (in general, he has been a member of the top management of UZ for 4 years in a row).
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