Cabinet to increase gas tariffs for households to 100% of market price

Wednesday, April 27, 2016 - 12:20 (EEST) Section: Latest news

On Wednesday, Volodymyr Groysman`s government may fulfill one of the most important requirements of the IMF – to raise gas tariffs for the population to 100% of the import parity, according to Europeiska Pravda online newspaper.
A tariff increase was initially scheduled for April 1, 2016, and was supposed to reach 75% of parity, but the previous government led by Arseniy Yatsenyuk postponed this decision for a month.
”In the midst of a political crisis, leaving an unpopular decision for his [Yatsenyuk`s] successor was sort of a little revenge,” a source at the Finance Ministry has told Europeiska Pravda sarcastically.
In fact, by increasing the tariffs to 100%, the Cabinet will do even more than it is required by Ukraine`s main donor – the International Monetary Fund.
”That is in order to survive through all this negative attitude all at once, without stretching the effect for two years. But people have not yet adapted to current prices, plus this year, there was a mild winter, and I am afraid we will see a payments crisis…,” said one of the MPs in a conversation with the EP.
According to him, the dispute on raising ”parity” up to 75% or 100% has been raging until recently. This is the first thing.
Secondly, the price of imported gas decreased more and faster than expected. So now it is possible to increase the domestic price and, at the same time, to enter the zero financial balance of Naftogaz.
Besides, on the one hand, the increase of tariffs means an increase in budget expenditures for the payment of subsidies. On the other hand, the price increase leads to a higher energy efficiency level.
There are expectations that this year, the population will massively respond to the increase in tariffs in 2014-2016 and finally become more energy-efficient, starting saving. It is difficult to calculate the effect but the end, the result of the consumption decrease could partially neutralize the need to increase subsidies.
Parity of imports is the price of imported fuel plus VAT, plus the cost of gas transportation. Today, the imported fuel costs $210, while delivery – about $900.
As previously reported, the IMF is concerned about the lack of a decision of the Cabinet to increase the tariffs for natural gas for the households from April 1.
In addition, Ukraine`s Prime Minister Volodymyr Groysman said earlier that the increase in gas tariffs was necessary.