Ukraine rail tariff rise may lift farm costs and shift cargo to road, lobby says

KYIV, June 23 (Reuters) - The planned increase in freight tariffs by Ukraine's state railway Ukrzaliznytsia could raise farmers' logistics costs by $5 to $7 per metric ton and accelerate a shift of cargo to road transport, the UCAB farmer lobby said on Tuesday.

Ukraine's economy ministry said it had proposed raising freight tariffs by 30% from August 1 to help stabilise Ukrzaliznytsia's financial position.

Ukrzaliznytsia has said the higher tariffs would only slightly increase transport costs, by $3.2 per metric ton of ore and by $3.6 per ton of grain, when shipped along the full route length of up to 750 km (466 miles).

Ukrzaliznytsia CEO Oleksandr Pertsovskyi told Reuters this month that the firm needed to increase its tariffs by at least 45% this year to help restore its finances.

Rail remains a vital part of Ukraine's logistics network, carrying both freight and passengers. But increased spending on security and infrastructure maintenance is pressuring the government's cash flow at a time when it is trying to restructure its debt.

Ukraine has traditionally moved its main export cargoes — grain, ore and metals — to ports by rail, but higher tariffs could prompt companies to switch to trucks.

"Higher rail logistics costs could make road transport economically viable for many more regions," UCAB said.

"While trucks are now used mainly in areas closer to ports, a tariff increase could expand the zone in which they are competitive to 300 to 400 km from the ports," it noted.

Metallurgical companies have also opposed the planned tariff increase, warning it could lead to the closure of many key enterprises and leave 300,000 people out of work. 

(Reporting by Pavel Polityuk; Editing by Alexander Smith)