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Lobby says that the increase in rail tariffs may raise farm costs and cause cargo to be transported by road.

According to the UCAB 'farmer lobby', the planned increase in freight rates by Ukraine's'state railway Ukrzaliznytsia' could increase farmers' logistic 'costs' by $5 to $7 a metric ton. This would accelerate a'shift' of cargo from rail to road transport. Ukraine's Economy Ministry said that it proposed to increase freight tariffs by 30 percent from August 1, in order to stabilize Ukrzaliznytsia’s financial situation.

Ukrzaliznytsia said that the higher tariffs will only increase transport costs by a small amount, $3.2 per metric tonne of ore, and $3.6 per tonne of grain when shipped over the entire route of up to 466 miles (750 km). Ukrzaliznytsia's CEO Oleksandr Ptsovskyi said this month that his firm would need to raise its tariffs by at least 45% to restore its finances.

The rail remains an important part of Ukraine’s logistics network. It carries both passengers and freight. The government is under pressure to reduce its debt because of increased spending on infrastructure and security.

Ukraine traditionally transported its main export cargoes - grain, ore, and metals - to ports via rail. However, higher tariffs may prompt companies to switch to trucks.

UCAB stated that "higher rail logistics costs" could make 'road transport' economically?viable in many more areas.

The report noted that "trucks are used in areas closer to ports now, but a tariff hike could extend the zone where they are competitive up to 300-400 km away from the 'ports. The metallurgical industry has?opposed the proposed?tariff hike, warning that it could result in the closure of key companies and the loss of 300,000 jobs. (Reporting and editing by Alexander Smith; Pavel Polityuk)

(source: Reuters)