Why port dues were not reduced in Ukraine 

The opinion of Tatyana Titarenko, LeGran.TT director, for the business portal Uaprom.

A radical port dues reduction promised yet in the winter by the Minister of Infrastructure, Vladimir Omelyan, began to stall in late March. Thus, USPA unexpectedly stated that only in the third quarter of 2017 it plans to develop a methodology for the formation of tariffs in sea harbors jointly with the World Bank. Before this, there is no question of any cut in rates.

In mid-April, the newsmaker Omelyan reported that the port dues reduction, perhaps, would not occur until the fourth quarter of 2017. Last week, an antagonist of USPA Head, first deputy minister Yevgeny Kravtsov, poured oil on the fire. During a discussion with the business about the need to increase railway tariffs during the conference “Railways of Ukraine. Development and investment” he noticed sarcastically that, they say, someone wanted to reduce rates in ports, but such a turn in Ukraine is not so easy.

The head of the strategic development department of USPA, Vladimir Shemaev, helped to shed a little light on the situation with port dues. During the II Ukrainian Infrastructure Forum, he said that USPA is negotiating with the Ministry of Finance and the Ministry of Infrastructure to reduce the rate of deduction of profits to the state budget from 75% to 50%.

“There is a discussion with the Ministry of Finance and the Ministry of Infrastructure regarding the revision of the dividend rate on the profits of USPA, at least from 75% to 50%, as prescribed for public joint stock companies,” he said, adding that the reduction of this rate will bring an additional 800 million UAH. Of investments to port workers.

Rates Location

According to the Law “On the Seaports of Ukraine”, the port dues rates for each harbor are established by the National Commission, which carries out state regulation in the field of transport, in accordance with the methodology approved by it. As reported to the Business Portal of Uaprom in the AMPU, the procedure for charging, recording and using of funds from port dues (other than the use of funds from administrative due) is determined by the Ministry of Infrastructure.

“At the same time, until the creation of such a Commission, its functions and powers are performed by the profile ministry (MIU). The corresponding order, which approved the “Procedure for charging and the port dues rates,” issued by the Ministry of Infrastructure. It details the rates of all port dues subject to state regulation, “- noted in USPA.

In addition, USPA recalled that the list of special services that are subject to state regulation is approved by the CMU. “There are only four such services: providing of pilotage, regulating of the movement of vessels, providing of icebreaker operations and ensuring of the access of the port operator to the pier, that is in charge of the USPA (except for the berth used by the port operator on the basis of a lease agreement, concession, joint activity)” , – USPA representatives added. All other services in the seaport are carried out according to the so-called free tariffs, that is, they are not regulated by the state.

Simply put, in general in Ukraine there are seven types of port dues: tonnage, sanitary, canal, berthing, light, administrative and anchorage dues. In addition, the ports have many services that do not fall under the category of dues. For example, bunkering, reception of bilge waters, agency fees, provision of supplies, etc. Such services are provided at free rates.

The highest in the world

At the same time, business has long complained about inflated tariffs in Ukrainian ports. For example, last year the general director of the Metinvest group, Yuri Ryzhenkov, said that port dues in Ukraine are the highest not only in the Black Sea region, but also in the world. Denis Morozov, director of economics and finance of the Ukrainian industrial company Interpipe, in an interview with the Business Portal of the UAprom stated: “We did the analysis, and it turned out that Ukraine is the world leader in terms of tariffs of monopolies … Port dues are the most expensive in the world , not even with what to compare. ”

However, Andrey Isayev, the consultant of the CTS-Consulting, explains that this statement is partly true. “Port dues in Ukraine are 30-40% higher than in the neighboring countries of the Black Sea basin. However, compared to the Australian or Brazilian harbors, the cost of the call is actually higher at times. Why do we have such high port dues is a question to those who adopted them, “he says.

Sergei Savinkov, director of the State Enterprise “UkrNIIMF”, confirms this, he was engaged in the calculation of tariffs. He noted that it is not correct to draw conclusions about the competitiveness of the port based on comparing the absolute values ​​of the accrued port dues by various port authorities in the world. In addition, it’s not right to compare the rate of port dues in different ports.

“In order to conduct benchmarking of port dues, it is necessary to analyze the comparability of the economic model of ports in other countries with Ukrainian realities. In most countries, the costs associated with global infrastructure projects in the marine complex (dredging, construction of canals, creation of a new port territory, etc.) are financed by various funds or the state budget and are paid off due to the synergetic effect that arises from the production activities of market participants. For example, in the port of Hamburg, the canal belongs to the state and is provided free of charge. In the ports of Antwerp and Rotterdam, the main source of income of the port administration is rent of territories, “S. Savinkov believes.

Although the expert agrees that if you compare the absolute figures of port dues, they will not be in favor of Ukraine. “The matter is that the port dues are the only legitimate source of development and maintenance of the port infrastructure (from dredging of ports to seafaring safety). The state does not invest in the maritime industry and does not regulate the issues of attracting external investment, “he stated.

In addition, as S.Savinkov noted, the value of port dues in the total cost of transportation of goods is a very small percentage, and significantly changing them will not affect the final cost of the goods. “If we talk about the reduction of port dues, then it is necessary to be specific. If the state, as the owner of assets in the port industry, reduces port dues by a certain percentage, then in return it should entail an increase in the export freight turnover, which in turn will lead to an increase, or at least the preservation of the proceeds of foreign exchange earnings to the state and, filling the state budget, “the expert said.

Where is the money?

It is worth noting that the arguments of the port workers in favor of maintaining the current level of port dues very much resemble the arguments of the railway workers, who, with an annual increase in freight tariffs, refer to the harsh need to invest in fixed assets. At the same time, the business is at a loss why, at high rates of port dues, the agency does not have the money to maintain its facilities operationally.

“It turns out that in USPA no one knows how much it costs … The question arises how an enterprise that annually claims profits of 3.5-4 billion UAH, does not have money to maintain its facilities operationally, and, even more so, for investments “, – the representative of the enterprise of iron ore industry complained in the commentary to the Business Portal of UAprom.

It is appropriate to recall that AMPU in 2016 increased its net profit compared to 2015 by 1%, to 3.854 billion UAH. At the same time, the port situation with the deterioration of objects is called, if not critical, then very difficult: fixed assets are worn out at 80-90%.

Why does this happen? The thing is, that there is a rate of deduction of 75% of profits to the state budget, which leads to a deficit of USPA for capital investments. “The law of Ukraine on seaports stipulates that port dues are services, therefore they are subject to VAT under tax legislation. Port dues are accumulated in USPA, therefore it is impossible to say that USPA is a loss-making enterprise. This is the most profitable enterprise in the industry by the results of 2016. At the same time, the Authority gives 75% of its income to the state, since according to Government Decree No. 1156 dd. December 30, 2015, the rate of deductions of the share of profits of state unitary enterprises to the state budget has been increased from 30% to 75%, “Tatyana Titarenko, director of the law company LeGran.TT says.

She notes, to correct the situation, it is necessary to reformat the revenue part of USPA so that tariffs are not a profitable part of AMPU. “After all, port dues are special fees that must go to the intended purpose. They should not be taxable; they should only be with a designated purpose and not form a profitable part. Then there will not be 75% that will not go to the state, there will be no VAT and profit tax, which is paid monthly, “the expert stressed.

A saving methodology?

At the same time, USPA reported, the methodology of calculating port dues will be a basic document, which describes the algorithm for calculating rates. In the future, both the methodology and the tariffs themselves should be approved by the Ministry of Infrastructure in agreement with the Cabinet.

At the same time, a number of questions appear at the current stage. In particular, Tatyana Titarenko said that in the MIU in preparing the methodology, they try to justify the rate of port dues because of expenses, which is included in it. “I also warn that the future methodology will not repeat the mistakes of the previous document, when instead of developing a qualitatively new approach to pricing, to show the cost of services, we tried simply to economically justify the current high rates of port dues,” she told to the UAprom Business Portal.

She noted, the methodology of rates need to be calculated in such a way that it is clear what services are provided for dues charging, and then calculate the cost of these services by expenditure. “Thus, the port due should be justified from the point of view of the vessel owner, who is not interested in what for Ukraine will spend money received from port dues. He is interested in what services and for what cost he will get, “she stated.

In turn, Vasily Zubkov, ex-head of the Nikolayev seaport has noted that, the peculiarity of port dues is that in other countries, they are much lower, but the state subsidizes the development of ports and infrastructure.

“There are two approaches to the formation of the methodology. First: there are costs for maintaining the infrastructure, they should be paid off, and the purpose of port dues is the maintenance and development of the port and infrastructure. However, this approach is impossible, since the fixed assets are considerably worn out. It is impossible to restore everything that has worn out for many years. Another option is to set port dues below the cost, but then the state should subsidize the industry, but this will not happen, “he said.

What discount is thrown?

By the middle of spring, it became obvious that the process of dues reducing would be delayed. At the same time, the size of the decline itself is even more shrouded in a fog of mystery. The only sounded figure was voiced by V. Omelyan in the European Business Association meeting – at the first stage rates may drop by 40%.

At the same time, several versions of the market are circulating concerning the question why the Ministry of Infrastructure plans to reduce port rates in the near future. The first and official – the involvement of cargo in ports or the growth of freight traffic in general. Viktor Dovgan, Deputy Minister for European Integration and Electronic Government noted, that the reduction of tariffs would help Ukrainian ports become more competitive, and stimulate the port business to increase cargo flows.

In addition, it is not excluded that MIU, by reducing port dues, seeks to load ferry transportation on the line of Chernomorsk-Poti / Batumi. V. Dovgan noted that after reducing of tariffs, the ministry expects mirror measures from Georgian ports. “We understand that these are private ports, we have been repeatedly explained that the tariff is negotiated at the level of a private operator, but in order to make this route competitive, it is necessary to reduce the cost of sea freight,” he stated.

Another version is the balancing of tariffs between the railway and the sea. Recall that in Ukrzaliznytsia the rise in the cost of freight in 2017 by at least 25% is actively lobbying. Clear plans for the period does not yet exist, but E. Kravtsov said the benchmark would be June-July. Market participants also talk about the increase, as inevitable and detrimental to business.

Published on the portal Uaprom.