Readers' comments

Would you like to post a comment ? Be the first to share your thoughts.

Post a comment

Comments are welcomed and encouraged. However, comments not pertaining to the topic or containing slander or offensive language will be deleted. You have to be registered to be able leave your comment. Sign in or Register now for free.

Enlarge Photo

Deal! Officials give green light to the new gas tariffs

The Public Services Regulatory Commission set a new gas price for domestic and industrial consumers on March 10 in response to a request by ArmRosgazprom (ARG), the country’s sole supplier of natural gas.

Beginning April 10, gas prices for domestic consumers will increase by 52.5 percent and for industry by 85.2 percent.

The average price for natural gas in Armenia will be $162.95 for 1,000 cubic meters, just a shade below the $168.40 requested by ARG.

For customers using less than 10,000 cubic meters a month (mostly domestic users) the price is set at 90 drams (or 20 cents) per cubic meter, compared to the current 59 drams.

Consumers of more than 10,000 cubic meters (mainly enterprises) will pay $146.51 per 1,000 cubic meters, or 61.5 drams per cubic meter, compared to $79.20 now. Calculations will be based on the US dollar exchange rate of the month prior to the payment month.

Experts say the higher gas tariff will also result in a 15 per cent increase in the retail price of electricity, which is currently sold to the domestic users at 25 drams per kilowatt/hour.

ARG representatives say the review of the tariffs is the result of the increased price of Russian gas supplied to Armenia – from $56 to $110 per 1,000 cubic meters – as well as increases in the company’s running costs.

Ownership of ARG is shared between the Armenian government and the Russian state-owned Gazprom, which each hold 45 per cent of its shares, with 10 per cent held by the international Itera Group, one of the largest independent producers and sellers of natural gas in the CIS. The company imports gas to Armenia via Georgia and reported a delivery of 1.685 billion cubic meters of natural gas to Armenia in 2005.

“Considering the fact that half of the gas the population in Armenia consumes during the year falls in the first quarter of the year, it is already a good result,” ARG Director General Karen Karapetyan said, referring to the postponement until April 1 of the increase in the price of Russian gas for Armenia.

Armen Arshakyan, head of the Tariff Policy Department at the regulatory commission, said that the price of gas had been calculated against an exchange rate of 420 drams per dollar (corresponding to the rate fixed in the 2006 state budget).

He says ARG had asked the commission to approve a price of 108 drams (24 cents) per cubic meter instead of the current 59 drams (13 cents) for domestic customers, and $145 per 1,000 cubic meters instead of $79.10 for industrial enterprises.

“But the Commission thought that in a number of expenditure items the company set the indicators too high,” he said.

“The mutually beneficial price of gas imported from Russia to Armenia could be $70 or $80, and the authorities should have insisted on that during negotiations with Gazprom. No matter how hard the Russian side is trying to convince everyone that this is mere commerce, no one will believe it. It is a political matter,” he said.

Aghajanov says it is wrong to fix tariffs for the population in drams and for industry in dollars paid in drams according to a rate fixed below the market level. He says: “It still means that the population will carry the burden, paying 90,000 drams, or $200, for 1,000 cubic meters.”

According to Aghajanov, a more realistic tariff would be 70 drams per cubic meter, which he says could be achieved with increased efficiency and better management at the company.

“In 2005, ArmRosgazprom reported a 5.37 per cent technical loss of gas, which means 85 million cubic meters, or a quarter of the amount of gas consumed by the country’s domestic users last year.”

The economist says that higher gas prices will inevitably push up inflation. “This increase in gas tariffs will result in price increases in nearly all other spheres. In Armenia gas along with electricity, gasoline and grains is a product that forms the prices of other products and services. Gas is used for everything from baking bread or canned food production to the output of the Nairit chemical plant.”

Many in the public say it will hit their pockets hard. Gohar Avagyan, 49, a Yerevan resident, says: “Last month I paid 6,600 drams for gas. It is fine for summer, but in winter we heat our home with gas.”

Her husband, 55-year-old Manuchar Hakobyan, adds: “First they will raise gas prices and then electricity. We will end up spending all the money we earn paying the utilities bill and buying essential food.”

ARG Deputy Director Ashot Hovsepyan says the company is not happy with the Commission’s decision but accepts it, considering the socioeconomic consequences that higher tariffs may cause. At the same time, he says the increased prices may reduce gas consumption by the public and affect the company’s profits.

Meanwhile, ARG says it is continuing to negotiate with the Russian company concerning gas supplies, in particular possible compensation mechanisms.

“If as a result of these negotiations the price for the gas supplied from Russia will not be $110 per thousand cubic meters, but lower, the company will again ask the commission to reconsider the tariff set for the population,” Hovsepyan says.