Discussion: New legislation on passenger transport is progressive, but some aspects need broader discussion


The Ministry of Infrastructure of Ukraine developed a legislation package meant to regulate the market of passenger transport. It offers significant deregulation and liberalization of the market. Representatives of the industry have their comments and proposals for the new legislation, which they ask to consider. Representatives of related government bodies, the State Regulatory Service and the State Service for Transport Safety, emphasize the importance of introducing changes comprehensively and at the legislation level, and seeing to it that after deregulation there are enough control mechanisms. These were positions of the parts to an expert discussion held at Ukraine Crisis Media Center.

Viktor Sasin, Adviser to the Minister of Infrastructure of Ukraine, believes that changes will be beneficial for both carriers and consumers: the former will be able to compete freely, while the latter will benefit because carriers will care more about the quality of the vehicles and try to reduce prices. He said the gradual increase in transportation tariffs in recent years was due not only to inflation but also the carriers’ monopoly on their routes. “Our main objective is to enable businesses to compete, and licensed carriers to come out of the shadows. […] There are minimum requirements. If the carrier meets licensing requirements and is admitted to the market, he has the right to participate in the provision of regular bus transportation services,” he noted. Viktor Sasin added that Draft Law 4683 had been almost finalized and soon it would be presented for public discussion; and to Parliament within the next 2 months. It provides for the implementation of about 90% of European recommendations in this field, including the licensing regulations.

Ksenia Liapina, Head of the State Regulatory Service of Ukraine, and Mykhailo Noniak, Chairman of the State Service of Ukraine for Transport Safety, stressed that the reform of this sector requires thoughtful, progressive systemic changes to all the related legislation. Only under such conditions the new model can work congruously. “Trying to introduce this model in all directions simultaneously will lead to further conflict in the market. Unfortunately, the current model is spelled out very deeply in the laws. […] it is impossible to conduct half a reform at the level of the Cabinet’s resolution. The level of resolution may be enough only to liberalize interregional transportation,” emphasized Ksenia Liapina.

One of the problems to be solved is a huge number of persons entitled to benefits. According to Orest Klympush, Head of the Federation of Employers in Transport, Transport Minister in 1992-1994, the state can currently compensate the carriers no more than 10% for carrying these passengers; the procedure to obtain compensation is extremely bureaucratic. “It is absolute nonsense, that a person is entitled to preferential intercity and interregional transportation, but money for the compensation have not been laid,” he stressed. As a result, the ticket price must cover the losses, as well as the costs of administrative obstacles which carriers have to overcome to get permission. “The end consumer always pays for all, including their protection. The more we try to protect them, the more expensive it is for them. We should always look for balance,” said Ksenia Liapina.

The most logical solution is to monetize these benefits. The real passenger traffic can be monitored through the mechanism of electronic tickets. Another option is to refer the matter to the local level for a community to decide how much money they can allocate to it and choose an appropriate mechanism, offers Orest Klympush. Viktor Sasin added that the projects provide a mechanism by which the carrier receives a request from the organizer of transportation (village council, district administration) and is paid for the actual implementation of the service (regular traffic between certain points). Then it does not matter for the carrier if there are concessionary travelers and how many passengers travel.

As to competitions for a route, it is proposed to cancel them but set stricter conditions for licensing in accordance with European standards. Requests for certain categories of transportation can be given at the discretion of local authorities.

Most carriers are concerned that those who prepared to enter the market by the old rules will face difficulties now. However, the advisor to the Minister of Infrastructure says there will be a long transition period, so carriers will not be affected.