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BATL: absurd decisions may cause a complete collapse in Latvia

Inga Antane/publicity photo.
Problems keep piling up in the transport and logistics industry, which is the second largest national economy industry in Latvia. On top of that, this industry may experience a complete collapse because of two unreasonable and absurd decisions, experts say.

The situation with dramatically declining cargoes has forced LatRailNet to increase railway tariffs by 7%, which will scare away cargoes and weaken local transporters.

It was previously reported that the government and Saeima have decided to increase excise tax for diesel fuel, ‘thereby making Latvia’s cargo transporting operations even less competitive and limiting the industry’s capabilities to attract new cargoes to replace lost Russian cargoes,’ specialists add.

«Weakening the transport and logistics industry will create a very serious fissure for Latvia’s national economy and will also impact nearly all economic fields, affecting the state budget, residents and commercial associations,» says Baltic Association – Transport and Logistics President Inga Antane.

She also notes that it has been observed since May that Russia has been gradually abandoning its previously coordinated plans and transporting considerably less cargoes than what was agreed upon. Only 27.9% of the previously planned cargoes were transported in July. On top of that, the rate at which cargoes decline continues to increase. While it was 15% on average at the beginning of the year, the rate grew to 30% in spring. Now it reaches 70%.

According to current estimates, each ton of cargo will become EUR 0.25 more expensive next year. Germany, on the other hand, has approved a master plan that includes reducing tariffs. Lithuania also has a flexible tariff policy, which puts it ahead of Latvia. Because of its flexible tariff system, Lithuania is able to react to changes in the industry more quickly.

BATL has proposed many different solutions to help make the industry more efficient to avoid losing competitiveness. «Increasing the current tariff plan and price of diesel fuel is a very bad signal for current and potential partners,» says BATL president.

According to BATL, raising tariffs is the easiest, but not the most optimal solution.

As alternative solutions for facilitating the industry’s development, BATL proposes the following:

-forming a unified railway tariff offer for cargo transports, so that cargo transports to Ventspils cost the same as they do to Riga. This is because it is already clear that high prices already hurt both Ventspils and Riga, as cargoes steadily leave for Klaipeda in Lithuania;

-introducing electronic document turnover for railway transports to help reduce the amount of time it takes to process and coordinate information;

-reviewing the investment programme and seriously reconsidering the usefulness from railway electrification, because under the current rate of cargo decline, Latvia cannot possibly afford such major investments;

-making railway operations more efficient, because Latvia’s established infrastructure was built for cargo processing power of 60 million tonnes, which was possible in the past thanks to Russian cargoes. Because those cargoes are no longer coming in, it is worth considering ways of reducing transport costs per 1 km.

«In the context of the tax reform, the decision to raise excise tax for diesel fuel is a wrong one, and will only hurt the industry, and everyone who voted in favour of this decision should take responsibility for the inevitable collapse of the country’s transport and logistics industry,» says BATL president.


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