Ukrainian passenger cars for budgetary funds

Ukrainian passenger cars for budgetary funds - entire Ukraine will benefit

Vladimir I. Prikhodko, Chairman of the Supervisory Board of PJSC “KRCBW”, Member of the Presidium of the Federation of Employers of Ukraine



The Ministry of Economic Development, together with the Ministry of Infrastructure, are developing a Program for the Cardinal Renewal of the Railway Industry. The program mainly concerns the renewal of  passenger and freight car fleet, purchase of new diesel trains. The initiative should result in additional GDP growth of 2.7% per year.

This year on September 14, Finance Minister Sergei Marchenko also announced plans to support the program for Ukrzaliznytsia’s passenger fleet updating within the presentation of the draft state budget for 2021. He stressed that the state for the first time intends to finance purchasing of rolling stock in amount of 100 passenger coaches.

Yes indeed. For the first time in the draft state budget, they plan to provide money for such a necessary item of expenditure. Although the Law of Ukraine “On Railway Transport”, adopted back in 1996, states that the acquisition of railway rolling stock for passengers transportation on long-distance and local trains is carried out in accordance with the established procedure at the expense of the State Budget of Ukraine within the limits of state capital investments, funds of JSC “Ukrzaliznytsia”, borrowed funds, as well as funds from local budgets.

The news about possible purchase of 100 passenger coaches in 2021 was published by many media resources. They also write that the Kryukovsky Railway Car Building Works is the main manufacturer of railway rolling stock in Ukraine and talk about how PJSC “KRCBW” will fulfill this state order.

Yes it is. The KRCBW is the main manufacturer of rail rolling stock in Ukraine, named as the leading enterprise for passenger coaches back in 1996: freight cars, locomotive-hauled passenger coaches, inter-regional locomotive-hauled trains, interregional two-system high-speed electric trains, suburban and regional diesel trains, metro trains.

But in recent years we have seen examples when open tenders for supply of rolling stock were announced in Ukraine, in which anyone could take part. Moreover, the tender terms were prescribed for Polish and Korean trains.

It is not for nothing that MP Dmytro Kisilevsky, in his article “What is included in the budget for the Ukrainian industry” (NV Business, 6.10.2020), analyzing the draft budget, writes: “Positive: they have allocated UAH 4.5 billion for new passenger coaches and passenger infrastructure. I hope they will be smart enough to buy them in Ukraine. “

Let’s add: and leave budget money to work within the country. And save, and create new jobs, and receive taxes. For this, there is a procurement according to the negotiation procedure provided for by the Law of Ukraine “On Public Procurement”, and it must be applied specifically to the domestic manufacturer.

The KRCBW is ready to supply passenger main-line coaches in the specified quantity in 2021 in case of timely conclusion of the relevant contract, its unconditional fulfillment by the customer in terms of financing and acceptance of finished products. The enterprise has created production facilities for this, the technology has been worked out, contacts have been established with components suppliers, and we have personnel of appropriate qualifications.

KRCBW and Ukrzaliznytsia have experience of cooperation, when more than 100 passenger coaches were delivered per year. For example, 107 units were delivered in 2008. 95 units of coaches for social transport were delivered in 2014. We have experience in delivering to other CIS countries – Belarus, Kazakhstan, Tajikistan. Warranty and service maintenance of products is organized.

And the supply, frankly, of small number of domestically produced cars for UZ in 2015-2020 is not the fault of the enterprise, but a consequence of number of objective and subjective reasons.

Among the objective ones are: the UZ supervisory board “uncontrolled” by the Cabinet of Ministers of Ukraine, the chronic absence of a long-term state program for development of the railway, the suspension of passenger railway traffic due to the coronavirus and introduction of quarantine. Among the subjective ones are: the frequent change of the UZ management, the lack of political will in renewal of the rolling stock from the previous heads of the transport department. And even the systematic organization of negotiations on the purchase of rolling stock from foreign suppliers behind the back of domestic manufacturers and without a hint of production localization in Ukraine until 2020 inclusive.

We had to go through many difficult moments in the process of fulfilling the contracts of 2018 for supply of passenger coaches and diesel trains. And still not all issues have been fully resolved. As for 6 diesel trains, UZ purchased only one. The fate of five more has not yet been resolved, although there is a clear order from the President of Ukraine as per the purchase of 3 diesel trains in 2020, made by him during his visit to the KRCBW on March 6 this year. And two more trains – in 2021. But it is not being fulfilled.

We have already talked more than once about the pricing of domestic passenger and freight railcars. Special commissions were created to consider this issue. No violations were found, prices are at the market level for similar products. Moreover, the domestic passenger coach has a number of advantages.

For example, KRCBW coaches have one more passenger compartment than other manufacturers, i.e. not 9, but 10 compartments. There are not traditional 36, but 40 seats in a compartment coach. Therefore, when comparing the prices of, for example, KRCBW and Tver Carriage Works for a compartment car, the coefficient 1.11 should be used. The operation of KRCBW cars allows you to get additional profit from transportation with constant operating costs.

And for more complete and objective analysis of prices for passenger coaches, it is necessary to take into account the prices for similar products from a number of manufacturers. For example, according to the latest procurement data from European railway administrations, the price for one passenger coach ranges from 960,000 to 2,300,000 euros, depending on passenger capacity, model and equipment.

But it is profitable for someone to associate the production of domestic passenger coaches by the PJSC “KRCBW” with their imaginary “high cost”, and we still see groundless, illiterate, pseudo-economic remarks on this topic in publications.

The KRCBW is constantly working to increase the localization percentage of passenger coaches so that as many components as possible are of domestic origin. This allows us to fulfill orders quickly, less dependent on the dollar fluctuations.

Domestic suppliers of c0aches and components for them (which are 160 partner enterprises) would like to believe that the supply of rolling stock at the state budget expense will become a reality in 2021 and will be a constant practice in subsequent years. This will have a tangible multiplier effect both for 160 machine-building enterprises and other industries, and for the Ukrainian economy as a whole.

Stability and guarantee of orders is important for ensuring a continuous production flow, improving production processes, which ultimately will reduce the cost of products. Batch and mass production products are always cheaper.

In our opinion, the practice of ordering rolling stock for budget money from domestic manufacturers will have a positive effect not only in the economic component. Social component is not less important. People will feel cared for. Passengers – will travel in decent coaches, machine-builders and workers in related industries – will have a guaranteed order and job. And the budget money will pay off a hundredfold, returning to the state treasury in the form of taxes and fees.

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