Launching a new model for financing passenger rail transport: Ministry for Communities and Territories Development

The Cabinet of Ministers of Ukraine has approved a decision to launch a pilot mechanism for state procurement of long-distance domestic passenger transport services. The project was developed by the Ministry for Communities and Territories Development in cooperation with the Ministry of Finance.

It involves a gradual transition to the European PSO (Public Service Obligation) model, whereby the state systematically compensates the carrier for the difference between the actual cost of transport and the current socially accessible tariffs.

"Railways in Ukraine are a critically important means of transport for millions of Ukrainians. The state's task is to ensure that train traffic is stable and predictable, and that travel remains affordable for people. To this end, we have developed a mechanism that brings the Ukrainian system closer to the European model of ordering socially important transport services," said Deputy Prime Minister for the Restoration of Ukraine – Minister for Communities and Territories Development of Ukraine, Oleksii Kuleba.

Today, the actual cost of travel is on average more than three times higher than the ticket price. At the same time, fares remain as affordable as possible, which is especially important in a state of martial law, when the railway is used by the military, their families, internally displaced persons and millions of citizens across the country.

The railway operates under constant shelling and daily destruction, so it needs stable and predictable funding.

For 2026, the volume of state orders for passenger transportation has been set at UAH 16 billion. These funds shall cover the main long-distance routes to keep the country connected. The state shall not only order services but also monitor their performance.

The State Audit Service of Ukraine (SASU) will be involved in verifying the correctness of expenditures from the very beginning to ensure that every hryvnia of the budget is used effectively. Funds will be transferred quarterly in advance. Transportation services provided in January–February 2026 will also be financed.

The new model introduces transparent and predictable rules for financing passenger transport, reduces the financial burden on JSC Ukrzaliznytsia, and will gradually allow for the elimination of cross-subsidisation between different types of railway transport activities.

The experimental mechanism is a step towards the full integration of the Ukrainian passenger transport financing system into the European PSO model, which is widely used in EU countries.