The government has launched a test model of the Public Service Obligation (PSO) in the railway sector, which provides public funding for passenger transportation. This is due to the increase in losses of Ukrzaliznytsia and obligations to the EU under the Association Agreement. Now 16 billion hryvnia have been allocated - but in order to ensure the financial stability of Ukrzaliznytsia, the amount should be at the level of 20-40 billion.

This is stated in the analytics on the CFTS website.

The volume of the state order for long-distance domestic passenger transportation, adopted by the government in February, in 2026 will amount to 41.76 million train-kilometers with a planned cost of UAH 12.92 billion. Expected transportation revenues will amount to UAH 7.37 billion. Taking into account investment costs of UAH 10.44 billion, the total financing requirement is estimated at about UAH 16 billion.

But the Ministry of Development notes that compensation for the difference between the economically justified cost and tariffs will be “a transitional step towards the implementation of the future PSO system”.

The need for changes is explained by the exhaustion of the cross-subsidization model. As a result of the reduction in the cargo base, transportation volumes decreased by approximately half. If freight rates increase, traffic volumes will fall even further. At the same time, losses in the passenger segment continue to grow: more than UAH 18 billion in 2024, more than UAH 22 billion in 2025 and a projected UAH 25 billion in 2026.

The PSO model is standard practice in the European Union, where it has been in force since 2009 under Regulation 1370/2007/EC. It provides that the state or local authorities act as the customer of transportation and compensate carriers for the costs of socially important routes, because revenues from ticket sales almost never cover the costs of providing passenger transportation services,” says the study of NGO Vision Zero.

In EU countries, compensation under the PSO model on average covers about 60% of expenses. For comparison, in Ukraine, costs per passenger kilometer are about 0.138 euros, while revenues are only 0.041 euros. And this difference has not yet been compensated by the state.

According to estimates, to achieve financial stability of passenger transportation, state support in Ukraine should increase to UAH 20–40 billion per year. At the same time, the implementation of a full-fledged PSO model is still complicated by the lack of a competitive market for carriers, which is a typical practice in the EU.

Previously, the Verkhovna Rada Committee on Economic Development recommended that the Cabinet of Ministers keep tariffs for freight transportation of Ukrzaliznytsia unchanged in 2026, because since 2021, tariffs for the transportation of ore, coal and limestone have already increased by 2.4 times, and for empty cars - by 2.6 times. Meanwhile, an increase in tariffs by 37% could cost the economy about UAH 100 billion of GDP, reduce foreign exchange earnings by UAH 98 billion and reduce budget revenues by more than UAH 36 billion.