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Apr
17
Cost-cutting Start: Government set to abolish subsidy on Russian gas, prices to increase for consumers
Filed Under ArmeniaNow Weekly
Beginning next month the government will stop the state subsidy on fees for natural gas supplies for households and enterprises, Prime Minister Tigran Sargsyan announced during his first press briefing in the new capacity on Tuesday.
“By the president’s order, the government is working out a program of complex actions to prepare for the 2008-2009 winter,†Sargsyan said.
From April 1 2006, the price of gas supplied to Armenia was raised from $56 to $110 per thousand cubic meters. Still at that time, to relieve the burden for households and the industrial sector the government decided to provide a subsidy. A sum of $188.8 million was transferred to ArmRosGazprom (ARG) as a partial compensation for the tariff. As a result, households could pay only 59 drams (about 20 cents) per cubic meter instead of 84 drams they were due to pay.
Energy Minister Armen Movsisyan says that as a result of an unprecedented increase in gas consumption the compensation sum had been spent already at the beginning of this year.
“As a result, the compensation was to have been discontinued still in January, but on Serzh Sargsyan’s instruction measures were taken to ensure the continuation of the compensation until the end of the heating season,†Movsisyan says.
Beginning on May 1, users who consumer less than 10,000 cubic meters of gas a month (commonly private households) will have to pay 84,000 drams (about $270) for a thousand cubic meters and those consuming more than 10,000 cubic meters (mostly enterprises) will pay an equivalent of $153.26 in Armenian drams. (It is estimated that annual consumption is 1.5 billion cubic meters of gas)
Premier Sargsyan says that it is not a secret that consumption of electricity and gas sharply increases in wintertime and adds that the government’s goal will be to protect socially vulnerable sectors of the population from rising costs.
“Naturally, our measures must be targeted. First of all, we will focus attention on 130,000 families receiving social benefits,†Sargsyan said.
Albert Arakelyan, a 52-year-old resident of Yerevan, says: “Of course, they should think about 130,000 vulnerable families, but the increase in the incomes of a majority of the population cannot keep pace with rising prices. Besides, there is a fear that the increase in the gas tariff will entail a rise in electricity prices.â€
The energy minister gives assurances that concrete instructions are given by the president and the prime minister to create regimes within the system during the year that the increase in the gas price should not impact the electricity tariff.
“The electricity tariffs will remain unchanged until the end of the year,†Movsisyan says.
Economist Tatul Manaseryan says that the increase in the gas tariff will naturally impact the country’s economy.
“Subsidizing is typical of many countries, but it is more affordable for those that have a budget surplus, and we fulfill our budget with a deficit. And the state should be as attentive as possible to make sure that only socially vulnerable families appear in the list of beneficiaries,†he says.
Premier Sargsyan also stated that Armenia cannot insure itself against gas price increases, since Russia has adopted a clear policy of liberalizing the market to achieve a gradual increase in gas prices matching the international level.
The newly appointed prime minister sounded confident that the decision that may be viewed as unpopular by many would not hit his rating. “I think my rating will suffer more if I am not open, honest and straightforward. We have adopted this policy, we have nothing to hide from our citizens,†he said.
By Gayane Mkrtchyan
ArmeniaNow reporter
Source: http://www.armenianow.com
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