Harmonization of railway tariffs in Belarus resulted in domestic freight market reformatting
On 30th 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 1st, 2013, all rail way cargo tariffs were unified regardless of the cargo’s destination (Economy Ministry decision No 111 of December 17th, 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.
According to Belstat, in August 7,600 people were dismissed, including 4,800 civil servants. Dismissals of civil servants were due to the optimisation in the public administration by up to 30%. Some civil servants would retain their job however would lose the status of a civil servant. Vacancies on the labour market are likely to reduce in number, thanks to the optimisation, the state administration would increase wages for public servants. The payroll fund for retained employees is likely to increase and some former state employees are likely to get jobs in affiliated organizations. The optimisation of the state apparatus should complete by January 1st, 2018, and some former civil servants are likely to join the ranks of the unemployed.