Harmonization of railway tariffs in Belarus resulted in domestic freight market reformatting

On 30^th May, Belneftekhim Concern announced the launch of Euro 4 diesel fuel trial pumping through Navapolack-Ventspils pipeline.

Following the railway tariffs harmonization, the costs for local transportation of goods by rail have increased sharply in Belarus. Businesses started considering alternative routes and transportation means in order to minimize their transportation costs. Enterprises which were unable to shift to other transportation means might start working at a loss or go completely bankrupt.

Within the Common Economic Space agreement Belarus has undertook an obligation to unify tariffs for transportation of goods on domestic routes using various transport means. Since January 1^st, 2013, all rail way cargo tariffs were unified regardless of the cargo’s destination (Economy Ministry decision No 111 of December 17^th, 2012). As a result, domestic freight tariffs increased by 2.76 times since early 2013, and for some goods and destinations by more than 7 times, taking into account previous discounts.

As a result of railway tariffs rise, cargo transportation shifted from railway to road and pipeline transport. In April and May 2013 CJSC Belarusian Oil Company tested Navapolack-Ventspils pipeline for Euro 4 diesel. When problems linked with this pipeline are solved, its transportation capacity will be increased. Transportation of cement by road has increased as a result of higher railway tariffs and in generally the attractiveness of transportation by road has increased, while by railway decreased.

Higher railway tariffs had a significant impact on some businesses, first of all, on cement plants. Cement’s shelf life is short. Raw materials for the cement production are delivered by rail, which increases its costs significantly and, combined with cement sales problems in the domestic market, results in many cement plants working at a loss. Enterprises working on wooden pallets and chips also suffered from the higher tariffs. Wooden pallets and chips transportation costs now equal their price due to the sevenfold increase in tariffs.

Thus, after the railway tariffs’ harmonization, the country’s cargo transportation structure has changed. Businesses used railway transport due to its low costs and now they have to reconsider transport means or abandon production of the goods, which depended on low railway cargo tariffs.