On July 26, in response to a request for information from the Ukrainian news outlet Suspilne, Deputy Minister of Infrastructure for European Integration Anna Yurchenko confirmed the ministry’s plans to finance the construction of six new road segments with private financing.
The plans are part of a pilot program to launch Ukraine’s first ever public-private partnerships in Ukraine’s road sector as part of Ukrainian President Volodymyr Zelensky’s Big Construction infrastructure program that plans to reconstruct 30,000 kilometers of roads by 2024.
Yurchenko also told Suspilne that the government had approved a maximum fee for driving on these roads that will depend on the vehicle and will range from 0.023 to 0.133 euros per kilometer.
Following the news, Minister of Infrastructure Oleksandr Kubrakov, released his own statement on Facebook, saying that none of the six pilot projects will ever charge users a fee to use the roads.
“I remind you once again, because our position here is unchanged – the roads of Big Construction will never be toll roads,” the minister said.
It is unclear whether or not that is true. According to multiple sources from the Infrastructure Ministry, state road agency Ukravtodor, and the International Financial Corporation (IFC) who previously spoke with the Kyiv Post, while these six pilot projects will be funded by the State Road Fund that currently accumulates funds from excise taxes on fuel and vehicle sales, there are plans to eventually introduce some sort of user fee on roads, especially for trucks.
But in Ukraine, where there is no history of paying for roads, the idea of toll roads are a very sensitive subject.
To get around the cultural aversion to toll roads, Ukraine’s government is going with an availability-based payment plan with private investors to pay for the new roads. Under this style of public-private partnerships, the private investor puts up all the money for the project up front and the government pays the investor back in monthly payments, known as availability payments.
Taras Boichuk, head of Office at the Spilno PPP Management Office at the Ministry of Infrastructure, confirmed with the Kyiv Post that the government approved a maximum fee for tolls for the future possibility of introducing tolls in Ukraine, not necessarily to introduce them as part of these six pilot projects.
Earlier in December state road agency Ukravtodor also said that any toll roads in Ukraine would have alternative roads nearby that will remain free of charge, a standard around the world when building toll roads. Their announcement is another sign that there are intentions to introduce some sort of toll roads in Ukraine.
These six pilot projects are a major priority for the presidential administration. The planned highways will connect ten regions of Ukraine and will reach 1,500 kilometers. They will mostly be based on existing roads that will be reconstructed.
The six roads will stretch between Kyiv-Zhytomyr-Rivne, Boryspil-Poltava, Kharkiv-Dnipro-Zaporizhia, Kherson-Mykolaiv, Yahotyn-Kovel-Lutsk and Dnipro-Kryvyi Rih-Mykolaiv.
Completing these six pilot projects will require attracting billions of dollars of private investment. According to IFC assessments, the nearly $3 billion currently in the State Road Fund is already a huge step forward: five years ago, there was no Road Fund at all. But it’s not enough to maintain the entire network and to build new roads.
According to Oleg Kudashov, investment officer at the IFC, toll roads will have to be introduced eventually to generate additional revenue.
“Once the highway system is properly rehabilitated, we don’t want to get back to the situation where most of the roads are destroyed, and so to avoid that, you have to properly operate and maintain these roads. That costs money,” Kudashov previously told the Kyiv Post.
