The cost of cargo transportation by inland waterways is low: its energy efficiency indicator is 10 times higher than the indicator for road transport and five times higher than the indicator for rail transport. At the same time, transportation by river is still not a priority of government policy. Despite strong statements by the Cabinet of Ministers and officials at all levels, transportation is only fifth on the list of water use priorities in the "Rules for Using the Water Reservoirs of the Dnieper Cascade of Hydroelectric Power Stations,” behind utilities, industry, hydropower, and agriculture.

Five years for revival The authorities are promising to improve the situation involving cargo transportation in the Ukrainian segment of River Dnieper, which currently accounts for less than 1% of cargo traffic (all carriers transported nearly 6 million tons of cargo via River Dnieper last year). After receiving the relevant order from President Viktor Yanukovych, Prime Minister Mykola Azarov has asked his subordinates to draft a national program for revival of shipping in the Dnieper basin. Azarov has given the ministries of infrastructure, agrarian policy, and industrial policy until the end of the year to draft the program, after which the government should consider it.

The Ministry of Infrastructure earlier prepared a draft State Program for Development of Inland Water Transport in the Period of 2014-2021. This draft document provided for improvement of the system for maintenance of waterways and navigational hydraulic structures. The department of state policy on sea and river transport has promised to review its tariff policy to ensure "free pricing in the competitive sectors of the market of transport services." However, there are no figures or dates so far. There was also a plan to transfer the function of managing the government infrastructure for internal water transport to local executive government agencies and develop a network of logistics centers, warehouses, and distribution terminals, although officials had nothing to do with this. However, this program for development of inland water transport did not receive support from the Ministry of Finance or the Cabinet of Ministers in terms of financing infrastructure, upgrading fleet, and modernizing navigational hydraulic structures.

A draft law on inland water transport in Ukraine will also be further refined and registered in the parliament in the near future. A working group made up of officials, representatives of businesses, and representatives of the world's leading consulting companies will be set up to draft it.

According to the "Rules for Using the Water Reservoirs of the Dnieper Cascade of Hydroelectric Power Stations," transportation is only fifth on the list of water use priorities, behind utilities, industry, hydropower, and agriculture

The agricultural sector is the most interested in creation of proper conditions for navigation on the Dnieper River. Railways and roads cannot meet the growing needs of grain exporters. The State Railway Administration (Ukrzaliznytsia) decommissions up to 1,000 grain cars every year and does not replace them in its fleet. This is obvious because their cost is not recouped as quickly as the cost of the railcars that are used for transporting industrial goods. Grain carriers idle for long periods and are fully loaded only when transporting goods to seaports. As for road transport, experts point out that it is cost-effective only when goods are being transported on distances of up to 300 kilometers and that road traffic regulations limit the load per axle on certain road segments.

The Ministry of Agrarian Policy and Food is forecasting that a record 58 million tons of grain will be harvested in 2013 (compared with 46.2 million tons in 2012 it was), increasing to 80 million tons in 2020. With domestic consumption of 28 million tons of grain every year, Ukraine will export about 50 million tons. Yanukovych is demanding care for transport and logistics infrastructure, but Azarov has responded by saying that revival of infrastructure and fleet will happen only after five years because "the river shipping fleet has virtually been eliminated and very little has been done to clear river channels, equipment at wharves and pontoon wharves."

Through the threshold The country's leadership is counting on investors that are willing to invest in clearing the Dnieper river channel. The Nibulon agricultural company has expressed such willingness. Nibulon’s General Director Oleksii Vadaturskyi has said that revival of shipping on River Dnieper requires EUR 5 million. Primarily, he wants to eliminate the granite rift in the Dnepropetrovsk and Dneprodzerzhinsk sections of River Dnieper. The volume of the work is estimated about UAH 22 million. Nibulon promises to deliver special equipment for this purpose to Ukraine.

However, Nibulon essentially wants to finance the dredging of River Dnieper not with its own funds. The company, which is one of the largest exporters of grain in Ukraine, expects to receive compensation from the government in the form of discounts on port charges for its vessels, for example. However, it would be logical to offer it compensation in the form of discounts on the charges paid by vessels with drafts of more than 3.2 meters when passing through the dredged segment of the river in the future.

"It will be financed by the government anyway because the government will have a shortfall in budget revenue," said Oleksandr Lysenko, an expert on inland transport logistics. According to him, dredging should be performed by a state entity. "This is work for the state waterways enterprise, Ukrvodshliakh, which performs all the work on public waterways and provides the appropriate conditions for safe navigation. It is the enterprise to which the government assigns the function of implementing transport, technical, and environmental policies involving the use of the waterways and shipping locks of Ukraine that are considered objects of strategic importance to the economy and security of the country,” he said.

"Private companies currently do not bear adequate responsibility for operations in the waterways because there is no law on inland water transport. This poses a real danger to navigation: uncontrolled extraction of sand and reclamation of new territories with the permission of incompetent local authorities lead to changesin the river channel,” said the expert. However, Ukrvodshliakh needs to be modernized and equipped with a modern technical fleet.

"Speaking of the depth of 365 centimeters that is necessary to maintain in accordance with international obligations, transportation at the maximum draft with the use of such a depth along the course of the river beyond Dnepropetrovsk is sporadic now, as it was during the Soviet era, and it is technologically facilitated by discharge of water by the Dneprodzerzhinsk lock,” Lysenko said. He cited data from the Ukrgidroenergo power company, which states that the cascade of hydroelectric power installations ensures a navigation depth of 365 centimeters for large-tonnage river vessels with drafts of 3.2-3.5 meters all the way from Kiev to the estuary of River Dnieper. This depth allows the use of large-tonnage vessels with tonnages of up to 5,000 tons.

Private companies currently do not bear adequate responsibility for operations in the waterways because there is no law on inland water transport

That notwithstanding, according to the Administration of Seaports of Ukraine’s head Yurii Vaskov, the Ministry of Infrastructure plans to complete the dredging of the shallow section of the river in Dneprodzerzhinsk before the beginning of the 2014/2015 marketing year (i.e., by July). "The depths over the miter sill of the Dneprodzerzhinsk lock will continue to depend on the discharge of water in Dneprodzerzhinsk and Zaporozhye because, according to the ‘Rules for Using the Water Reservoirs of the Dnieper Cascade of Hydroelectric Power Stations,’ water transport is only fifth on the list of water use priorities, behind utilities, industry, hydropower, and agriculture. To the extent that shipping may cease completely if the water level in the Dniprovsky reservoir falls to the level of 48.5-49 meters, and this can be done by decision of the Cabinet of Ministers,” Lysenko quotes the document as stating.

Who is sitting by the river However, to significantly increase the volumes of grain transportation by river, dredging is the only thing missing. In particular, the Ukrrichflot shipping company is saying that it is necessary to increase the number of grain elevators on the river: there are few existing ones, and most of them are linear and are located in the fields while many are outdated and have no railway access. Of the modern elevators, seven belong to the Nibulon agricultural holding company and one to Ukrrichflot. In addition, the UkrAgroKom and Hermes Trading group of companies has launched an elevator with a capacity of 94,000 tons in Svetlovodsk. However, there are also unresolved issues there, particularly bad automobile roads.

In comments to the CFTS portal, Ukrrichflot announced plans to build a new grain elevator with a capacity of 30,000 tons at the Zaporozhye river port. Nibulon is ready to transport at least 3 million tons of grain per year by river. "We plan to build at least four or five more transshipment terminals on River Dnieper in the future. At this stage, our program for construction of river elevators will have been implemented,” said Vadaturskyi.

A shortage of watercraft for transportation of grain is also being felt. According to estimates by the APK Inform information analysis agency, there are 31 watercrafts for this purpose in Ukraine, with a total carrying capacity of 92,100 tons. Nibulon owns 28 of them, the Unigrain company owns two, and Ukrrichflot owns one. According to Rodion Rybchynskyi, the head of business projects at the agency, about 85% of the rolling stock of Ukrainian dry-cargo ships have been in operation for over 20 years, which exceeds the current standard.

Grain traders have stated their intention to change the situation. Nibulon plans to build 12 additional non-self-propelled vessels and 12 shallow-draft tugs (the company has seven tugs) at its shipyard, as well as 35 self-propelled vessels of the Volga-Don Max class, which will provide an opportunity to establish trade relations with Iran or Kazakhstan, for example, not by land but by sea. Hermes Trading’s Director Yurii Skichko said that the company and UkrAgroKom would begin construction of their own fleet to ensure smooth operation of the Svetlovodsk terminal. However, he has not yet said anything about the number of vessels they plan to build and the period in which they plan to build them.