Oleg Burlachenko: There are investments, but there is no clear understanding of game rules

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Bad harvest and heavy yield are two problems of the Ukrainian agro-industry. In the second case, as practice shows, the market is heavily shaking. Logistics, cargo handling, lack of elevator capacities are core areas of «grain fire». As a rule, participants of the market enter into new season without knowing how they will end it because from one year to the next they repeat the same mistakes. Why does this happen and what should be done so that harvest doesn’t remain in the agrarian hoppers?

The National agroportal Latifundist.com discussed these issues with Mr. Oleg Burlachenko, Director of «First Logistic Company».

Latifundist.com: Mr. Burlachenko, your company stake on railroad transportation. What is your opinion: will there be a problem with grain cars this season?

Oleg Burlachenko: The problem will be for sure, regardless of declarations of «Ukrzaliznytsia». The problem lies not in the availability of grain cars, but in bad infrastructure of Ukrainian ports. We have ultramodern ports but roads to them and entry points leave much to be desired. The car park of «Ukrzaliznytsia», and it is more than 13 thousand wagons, would be enough for all, if we loaded and unloaded in time.

Latifundist.com: So that means that lack of grain cars is only small part of huge iceberg?

Oleg Burlachenko: The main reason is the low traffic capacity of port railway stations. Now nobody is engaged in the development of port infrastructure while port capacities allow handling large volumes of cargo and goods.

Latifundist.com: Isn’t it practical and profitable for port owners to solve this problem?

Oleg Burlachenko: There should be cooperation of three branches, namely, railway administration, ports administration and owners of port terminals. They should join their forces and only this way they can reach a consensus.

Latifundist.com: What share of railway transportation does «First Logistic Company» possess in Ukraine?

Oleg Burlachenko: We stand in the first three of grain forwarders.

Latifundist.com: Do you have your own park of grain cars?

Oleg Burlachenko: Basically we work with cars of «Ukrzaliznytsia». It is enough for transportation in a season for us.

Latifundist.com: What is your daily loading?

Oleg Burlachenko: In a season it is 150 grain cars. Last season we experienced the opportunity of engaging leased cars — 150-200 grain cars in a season.

Latifundist.com: Do your plan to organize your own park? Or is it expensive and non-profitable?

Oleg Burlachenko: It is really expensive, but we consider such possibility.

Latifundist.com: What is stopping you?

Oleg Burlachenko: Absence of clear game rules. For example, Russians do not have state-owned park: all the grain cars there are in private ownership due to development of railway leasing. The state has made clear rules, attracted investments under state guarantees. And theoretically speaking leasing rate allowed many companies to start and expand leasing business.

Latifundist.com: Are there any similar practices in Ukraine?

Oleg Burlachenko: There is no development of railway leasing in Ukraine at all.

Latifundist.com: If you say that it is advantageous for business to buy railway cars through this scheme, why don’t you promote this initiative? 

Oleg Burlachenko: We are currently working on this matter. However, this issue is not priority.

Latifundist.com: And what is your priority?

Oleg Burlachenko: It is important to clean all aspects which remained from the previous authorities in each and every controlling inspections, to simplify as much as possible the process of cargo transportation and handling. Our company is focused on continuous work and plans to invest funds into buying wagons, but today we do not have clear view of what will happen next.

We want to hear a message from the state on how «Ukrzaliznytsia» will develop itself, what conditions will be made for business. Meaning whether practice of general fleet of cars will remain or cars will be given to some owners, or they will be divided between market players under specific conditions. As I said before, there is no clear understanding for now.

Latifundist.com: There is no longer certificate of quality. Time for arranging documents shortened. Did it simplify your work?

Oleg Burlachenko: «First Logistic Company» provides full range of services on transportation of agricultural shipments, and for grain transportation we perform full certification — certification for ports, for direct export. We also provide customs clearance for export and import of goods if it is necessary.

Yes, after the certificate of quality was cancelled time for arranging documents shortened and it made the process cheaper for agrarians.

Today critical problem is cancelation of quarantine control which, in fact, doubled in our country — cargo passes through quarantine control during dispatch and then for the second time the procedure repeats in port. It is pointless. We are conducting active work in association with respective organizations regarding this issue. And I hope that all participants on the market will support this initiative.

Latifundist.com: It was reported that certificate of quality was more an instrument of corruption.

Oleg Burlachenko: There was corruption. Wagons stayed in one place. The certificate itself cost a few dozens of hrynas but believe me if inspector wanted to detain wagons, those wagons will stand for a day or two. And then it is hundreds or even thousands of hryvnas lost.

Latifundist.com: In your opinion why has nothing changed? Why do all participants of the market make the same mistakes from one year to the next?

Oleg Burlachenko: The problem lies in professionals. Specific positions are occupied by the people who don’t understand issues which they have to control and regulate.

Latifundist.com: Please explain what should be done?

Oleg Burlachenko: The work of «Ukrzaliznytsia» should be transparent as much as possible. In theory some technical moments and processes which existed from previous authorities should be removed; the international audit of long-term leasing of the wagons should take place. And we have to make sure to check legal basis for transfer of infrastructural facilities.

Latifundist.com: If everything is so obscure on railroad, maybe it will be advantageous to enter the field of river transportation?

Oleg Burlachenko: It is very interesting and promising direction. This season we will try to transport grain to ports by means of river fleet of «NIBULON» company.

Latifundist.com: Some people say that river transportation of cargo is very cheap, and others state that it is the same money as in railway transportation. What is your view?

Oleg Burlachenko: Everything depends upon infrastructure. If we consider cost of transport, than, naturally, river transportation is much cheaper. Unfortunately, in Ukraine there are problems with infrastructure: it is necessary to transport grain from fields and load it onto ship. All these moments “eat up” the benefits of cheap river transportation.

There are also other problems — lack of hydroelevators which can load grain onto river barges, lack of barges themselves. The Dnepr river is very silted and not deepened.

Latifundist.com: Do you consider construction of your own trans-shipping terminals?

Oleg Burlachenko: Yes, we are considering this issue and conducting negotiations on assigning to us land plot in Nikolaev. We are interested in investments into «zero» level — realization of railway infrastructure, construction of port elevator for transshipment of cargo.

Latifundist.com: What are company’s plans for the nearest future?

Oleg Burlachenko: We want to make a company with closed cycle. For example, as NIBULON company — production, transportation from field to end user to any place in the world.

We are applying the practice of transloading cargo through ports so we can offer conditions FOB to our clients, the next step is freighting of vessels and delivery to any part of the world on CIF terms. We do have funds but we need understanding of the market, as I said before.

Latifundist.com: What period of time do these plans comprise?

Oleg Burlachenko: These are plans for the next five years. We entered the market last year and have achieved some success. The clients are satisfied with the quality of our services. I think if we do not stop our development and nobody stays in our way, I mean corrupted officials, then everything will be all right.

Latifundist.com: What principles do you use in your work?

Oleg Burlachenko: I like when there is dialogue between us the company and our clients. We do not really like tenders because it is impersonal cooperation. Decency also plays an important role. If we take obligations but force-majeure circumstances appear, we will never leave our clients – we will do everything possible to fulfill obligations even under force-majeure circumstances.

Latifundist.com: Thank you for your time and interesting conversation.