The FEU (Federation of Employers of Ukraine) is concerned about the threat of destruction of the car-building industry, which is strategic for the country. The Federation of Employers addressed the Prime Minister of Ukraine Oleksii Honcharuk with concern about the threat of destruction of the car-building industry, which is strategic for the country, and of the production capacities of its components.

As far as is known, the freight railway rolling stock registered in Ukraine amounts to about 190 thousand freight cars of private and state ownership, within the structure of this figure there are 42 thousand units of non-working fleet, 148 thousand cars belong to a working fleet, which daily runs by rail of the country, 64 thousand of which with an expired statutory service life.

In Ukraine, there has been an upward trend in imports from the Russian Federation (hereinafter referred to as the RF) of used freight cars with an extended service life that were prohibited from running in the Russian Federation back in 2016. The cost of excess cars is about 25% of the average cost of a new one, which creates unequal competitive conditions for owners of cars built in Ukraine. Therefore, the total value of such imports has reached 302.3 million dollars for 5 years.

Import expansion of Russian railcars leads not only to negative economic consequences but also creates a technology-related risk for the functioning of the Ukrainian railway sector. Besides, annually about 20 thousand decommissioned and obsolete cars, including almost 3 thousand imported from the Russian Federation, owing to the procedure for extending the service life, instead of recycling and replacing with new cars of domestic production, run by the Ukrainian railway.

All these cars carry risks for rail transportation, including:

– the devastating effect on rail tracks increases, the restoration of which occurs at public expense;

– the current operating costs of the extended car use increase almost by 3 times compared with the standard, which in the case of the inventory fleet of UZ leads to inefficient management of state property;

– the number of unscheduled repairs and downtime of the fleet increases by three times compared with the norm;

– the competitiveness of rail transportation across Ukraine is declining. During 2018, road transportation through the territory of Ukraine increased by 6.3%, and railway – on the contrary, decreased by 5.06%.

The joint position of the Federation of Employers of Ukraine, the National Committee for Industrial Development and PJSC “Kriukivskyi Railway Car Building Works”, PJSC “Dniprovahonmash”, Industrial and Investment Group “Aurum Group”, Experimental-Mechanical Plant “Karpaty”, “Azovmash” LLC consists in the inadmissibility of extending the deadline for the import of freight cars from Russia that were in use (code according to UCTZED 8606300000, 8606918000, 8606920000) into the customs territory of Ukraine by March 1, 2020, in accordance with the resolution of the Cabinet of Ministers of Ukraine dated 30.12.2015 No. 1147 “On the Prohibition of Importation into the customs territory of Ukraine of goods originating from the Russian Federation”, which will lead to a sharp increase in their imports over this period and may result in the shutdown of domestic railway car building plants.

We want to emphasize that the localization of production of freight railway cars in Ukraine is 97%, that is, today Ukrainian railcar building enterprises are able to fully satisfy the demand for high-quality and modern freight cars, which will contribute to the additional tax revenue to the state budget and provide work for enterprises of related industries.

The continuation of the situation with the uncontrolled import of obsolete rolling stock into Ukraine has already deprived our manufacturers of orders. For example, since the beginning of 2019, the Paniutynskyi Railcar Repair Plant has not built a single railcar.

If tenders are not announced for the purchase of rolling stock at the expense of the EBRD, which is announced by JSC “Ukrzaliznytsia” in the near future, the car-building enterprises will continue to stop and thousands of workers will be left without work.

The losses of car-building plants of Ukraine and enterprises of related industries – metallurgical, mining, coke-chemical and ferroalloy, can reach UAH 15 billion in this case. Along with this, the trade restrictions, which were introduced by the referred resolution, do not fully solve the topical issue of the industry.

Also, a major issue, in the opinion of the FEU and its members, is the extended service life of a freight car beyond the statutory, which, depending on the type of car and according to the technical documentation, is from 15 to 35 years, and can be extended by one and a half to two times, as a result, gondola cars, for example, run by rail until the age of 44.

Only a set of measures, aimed at support of national manufacturing enterprises involved in the construction of cars will allow us to achieve positive results. In connection with the foregoing, the Federation turned to the Prime Minister with a request to give a task:

  1. To the Ministry of Economic Development, together with the Ministry of Infrastructure, to make amendments to the resolution adopted by the Cabinet of Ministers of Ukraine dated 30.12.2015 No. 1147 “On the Prohibition of Importation into the customs territory of Ukraine of goods originating from the Russian Federation” with regard to the introduction of a ban on the import into the customs territory of Ukraine of freight cars that were in use (code according to UCTZED 8606300000, 8606918000, 8606920000) from October 1, 2019.
  2. To the Ministry of Infrastructure, together with interested government bodies to work out amendments to the current legislation regarding section:

– prevention of re-registration of own cars purchased by import in the Automated data bank of the fleet of cars if the service life of such cars is more than 10 (ten) years from the moment they are put into circulation;

– introduction of a ban on the inclusion of loaded freight cars (excluding scarce) and own freight cars in trains running the infrastructure of public railway transport in all types of communications, whose service life has been extended or which have been modernized after January 1, 2020;

– introduction of amendments to the technical regulations for the repair of rolling stock, aimed at improving quality control and frequency (at least once a year), carrying out regularly (scheduled) repair works for cars with an extended service life due to high wear of the units and assemblies of such cars. This, in turn, will improve the technical condition of such a fleet, encourage the flow of investments in new rolling stock and keep the car repair shed of JSC “Ukrzaliznytsia” busy.

  1. The introduction of a car recycling tax for the import into the customs territory of Ukraine of freight cars that were in use, depending on the period of their operation and type. The funds received from the payment of the car recycling tax should be used to form a fund for investing in the modernization of the railway industry. In turn, the Federation of Employers of Ukraine together with the National Committee for the Development of Industry and domestic railcar manufacturers are ready to ensure participation in the formation and development of the necessary draft regulatory legal acts.

 

The Federation of Employers of Ukraine