UKRAINE: A roadmap for gradually opening the rail freight and passenger markets to competition has been approved, setting out the next steps in the long-running reform of national railway Ukrzaliznytsia and the wider railway sector. Ukraine’s cabinet approved the new railway reform roadmap on September 23, putting dates on changes that have been discussed for years. Under the Cabinet-approved roadmap and action plan, state railway company Ukrzaliznytsia is to separate infrastructure management from train operations organisationally and in its accounts by the end of 2027, before implementing a new corporate model by 2029. The EU-linked programme includes organisational separation within UZ and the eventual introduction of competition, although the government says Ukraine’s main 1 520 mm gauge network will not be opened up before martial law ends. Ukraine’s emerging 1 435 mm gauge network is due to open to competition in 2031, while the much larger broad gauge network would be liberalised only after transition periods agreed during EU accession negotiations. The September decision replaces the previous railway reform action plan adopted in 2019, which the Cabinet formally declared void. It also fulfils a commitment under the Ukraine Plan, which underpins financing through the EU’s Ukraine Facility, making rail liberalisation part of the country’s wider accession-linked reform programme ahead of negotiations under Chapter 14 on Transport Policy. Deputy Infrastructure Minister Volodymyr Shemaiev, who joined the ministry in September after previously heading Ukrzaliznytsia’s International Projects Office, wrote on LinkedIn that Ukraine’s railway reform now had ‘a timeline, not just a direction’. However, he stressed that ‘throughout the reform, the railway must keep running reliably under wartime conditions’. The roadmap itself acknowledges that balance. It says Ukraine’s vertically integrated railway model ‘ensures the continuity of the sector’s operations’, but also ‘creates constraints’ on competition, non-discriminatory infrastructure access and transparent tariff-setting. It therefore envisages a ‘controlled transition to a competitive model’ while preserving the stability and manageability of the railway under military conflict conditions. UZ separation starts before market opening The 2027 deadline does not necessarily mean Ukrzaliznytsia will be broken up into completely independent companies. The roadmap requires the organisational and accounting separation of infrastructure management from train operations within UZ, while a target corporate model is to be approved by the end of 2027 and implemented two years later. UZ has already begun much of that restructuring internally. CEO Oleksandr Pertsovskyi told Ukrainian press in July that the company had ‘practically completed’ the separation of its main business verticals and was in the final stages of creating infrastructure operator UZ Infra, which would combine infrastructure activities currently spread across its six regional railways. Passenger, suburban and locomotive operations already have separate internal balance sheets. Pertsovskyi also stressed that unbundling did not necessarily require the different businesses to leave the same corporate group, pointing to Germany’s Deutsche Bahn as an example. He has also argued that Ukraine would need to retain strong operational coordination during the war, when railway capacity may have to be prioritised for evacuation and other critical movements. The institutional changes will continue through to the end of the decade, according to the Cabinet-approved plan. A framework Law on the Rail Services Market is due by the end of 2028, followed by the creation of an independent National Transport Regulatory Commission in 2029. Infrastructure charging and capacity-allocation procedures are also to be established before the market opens. Freight cross-subsidies to go Another major element of the reform is the planned dismantling of Ukrzaliznytsia’s longstanding system of cross-subsidy, under which freight revenues have been used to cover losses from passenger services. According to the roadmap and its accompanying action plan, socially important passenger trains are to move towards the EU’s Public Service Obligation model, with the state commissioning and compensating services through contracts. The first PSO contract is targeted for December 2027, subject to the necessary legislation being adopted, while longer contracts of up to 15 years would become possible once the relevant rail market has opened. The war remains an immediate obstacle to bringing private operators onto the network. Government officials have cited security risks and the difficulty of securing long-term financing under wartime conditions as major barriers to market entry, including on the standard gauge routes. However, the roadmap still sets out a step-by-step timetable for opening the market. Pressure for reform has also come from businesses operating in Ukraine. In the European Business Association’s latest Infrastructure Index, 59% of respondents identified opening the rail market to private operations as a priority, while 56% backed ending passenger cross-subsidy and 53% identified UZ unbundling and infrastructure rationalisation as priorities. However, the approach to liberalisation is not uncontested. There are currently insufficient votes in parliament for full market opening, while concerns have also been raised over how far liberalisation should proceed during the war. During a parliamentary debate over summer, Maksym Zaremskyi, an MP in President Volodymyr Zelenskyy’s Servant of the People parliamentary faction, argued that railway traction provision should remain in state ownership on national security grounds, describing potential de-nationalisation under current conditions as ‘premature’. A version of this article first appeared in Railway Gazette International’s sister publication RailFreight.com. Ukrzaliznytsia CEO warns rail leaders to ‘invest in resilience’
UKRAINE: A roadmap for gradually opening the rail freight and passenger markets to competition has been approved, setting out the next steps in the long-running reform of national railway Ukrzaliznytsia and the wider railway sector.
Ukraine’s cabinet approved the new railway reform roadmap on September 23, putting dates on changes that have been discussed for years. Under the Cabinet-approved roadmap and action plan, state railway company Ukrzaliznytsia is to separate infrastructure management from train operations organisationally and in its accounts by the end of 2027, before implementing a new corporate model by 2029.
The EU-linked programme includes organisational separation within UZ and the eventual introduction of competition, although the government says Ukraine’s main 1 520 mm gauge network will not be opened up before martial law ends.
Ukraine’s emerging 1 435 mm gauge network is due to open to competition in 2031, while the much larger broad gauge network would be liberalised only after transition periods agreed during EU accession negotiations.
The September decision replaces the previous railway reform action plan adopted in 2019, which the Cabinet formally declared void. It also fulfils a commitment under the Ukraine Plan, which underpins financing through the EU’s Ukraine Facility, making rail liberalisation part of the country’s wider accession-linked reform programme ahead of negotiations under Chapter 14 on Transport Policy.
Deputy Infrastructure Minister Volodymyr Shemaiev, who joined the ministry in September after previously heading Ukrzaliznytsia’s International Projects Office, wrote on LinkedIn that Ukraine’s railway reform now had ‘a timeline, not just a direction’. However, he stressed that ‘throughout the reform, the railway must keep running reliably under wartime conditions’.
The roadmap itself acknowledges that balance. It says Ukraine’s vertically integrated railway model ‘ensures the continuity of the sector’s operations’, but also ‘creates constraints’ on competition, non-discriminatory infrastructure access and transparent tariff-setting. It therefore envisages a ‘controlled transition to a competitive model’ while preserving the stability and manageability of the railway under military conflict conditions.
UZ separation starts before market opening
The 2027 deadline does not necessarily mean Ukrzaliznytsia will be broken up into completely independent companies. The roadmap requires the organisational and accounting separation of infrastructure management from train operations within UZ, while a target corporate model is to be approved by the end of 2027 and implemented two years later.
UZ has already begun much of that restructuring internally. CEO Oleksandr Pertsovskyi told Ukrainian press in July that the company had ‘practically completed’ the separation of its main business verticals and was in the final stages of creating infrastructure operator UZ Infra, which would combine infrastructure activities currently spread across its six regional railways. Passenger, suburban and locomotive operations already have separate internal balance sheets.
Pertsovskyi also stressed that unbundling did not necessarily require the different businesses to leave the same corporate group, pointing to Germany’s Deutsche Bahn as an example. He has also argued that Ukraine would need to retain strong operational coordination during the war, when railway capacity may have to be prioritised for evacuation and other critical movements.
The institutional changes will continue through to the end of the decade, according to the Cabinet-approved plan. A framework Law on the Rail Services Market is due by the end of 2028, followed by the creation of an independent National Transport Regulatory Commission in 2029. Infrastructure charging and capacity-allocation procedures are also to be established before the market opens.
Freight cross-subsidies to go
Another major element of the reform is the planned dismantling of Ukrzaliznytsia’s longstanding system of cross-subsidy, under which freight revenues have been used to cover losses from passenger services.
According to the roadmap and its accompanying action plan, socially important passenger trains are to move towards the EU’s Public Service Obligation model, with the state commissioning and compensating services through contracts. The first PSO contract is targeted for December 2027, subject to the necessary legislation being adopted, while longer contracts of up to 15 years would become possible once the relevant rail market has opened.
The war remains an immediate obstacle to bringing private operators onto the network. Government officials have cited security risks and the difficulty of securing long-term financing under wartime conditions as major barriers to market entry, including on the standard gauge routes. However, the roadmap still sets out a step-by-step timetable for opening the market.
Pressure for reform has also come from businesses operating in Ukraine. In the European Business Association’s latest Infrastructure Index, 59% of respondents identified opening the rail market to private operations as a priority, while 56% backed ending passenger cross-subsidy and 53% identified UZ unbundling and infrastructure rationalisation as priorities.
However, the approach to liberalisation is not uncontested. There are currently insufficient votes in parliament for full market opening, while concerns have also been raised over how far liberalisation should proceed during the war. During a parliamentary debate over summer, Maksym Zaremskyi, an MP in President Volodymyr Zelenskyy’s Servant of the People parliamentary faction, argued that railway traction provision should remain in state ownership on national security grounds, describing potential de-nationalisation under current conditions as ‘premature’.
A version of this article first appeared in Railway Gazette International’s sister publication RailFreight.com.
Ukrzaliznytsia CEO warns rail leaders to ‘invest in resilience’
Source: Railway Gazette
