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AZERBAIJAN GOVERNMENT INCREASES PRICE ON OIL

Asim Jalilov

During the meeting Tariff Council, tariffs for selling natural gas to establishments, rendered by the State Oil Company of Azerbaijan Republic, were

considered and relevant regulations were carried out. As the retail price for gasoline Ai-98 per liter is set at 1.50 kopecks, (earlier 1 manat) Aİ-95 is set at 80 kopecks (earlier 60 kopecks) while the retail price of gasoline in Aİ-92 and Aİ-80 - 70 kopecks (earlier 55 kopecks) per liter. But retail price of one liter of diesel combustible was set at 60 kopecks (earlier 45 kopecks). In other hand they also increase natural gas price to 80 manat per one thousand cubic meters.

Other descision of Tariff Council price of telecommunication services decrease. And new tariffs on telecommunication services will enter into force from January 1, 2014 and other new approved tariffs will enter into force from December 3, 2014.

Ilkin Mejidov, Secretary of the Tariff Council, said that it was done for dynamic economic development of the country. According Tariff (price) Council of Azerbaijan Republic official web site Ilkin Mejidov has commented that in Azerbaijan all current tariffs of petrol is lower than in most European countries and UIS[KM1] . Even after the increasing of the prices it will be lower than in UIS countries. [KM2] In other hand Russia in the second place in oil production and the price of petrol is higher than Azerbaijan. “Last changes in price regulation for oil products were adopted in 6 of January in 2007. By that time 1 barrel of raw oil price was 57 $ - now it is 110 $. Since that time the quantity of cars increased from 617 MLN to 959 MLN. During Last 7 years local demand for petrol increased for three times”. He also added that the average salary in Azerbaijan increase from 215.8 AZN to 417 AZN. The volume of GDP for each person has increased from 3.3th. AZN to 5.9 AZN Impact of changes in tariffs to public transportation is very few. As the fuel expenses in public transportation covers only 20% of total income, and after increasing tariffs this indicator will be 26.5 %.

However, experts Azer Mehtiyev do not agree with Majidov’s statements. Economist expert Azer Mehtiyev says that rise of prices was in January 2014 from our side but not now. Though Azerbaijan government raises the price in December. The expert noted that the government didn’t explain the reason. “Azerbaijan began to arrive large quantities income from oil sales. As a result 70-75% of the budget revenues come from oil. But since 2010 years, oil production has begun to decline in Azerbaijan,”- said Azer Mahtiyev. He stated that having to worry about be included in the budget the government wants to find supplementary be included budget. This is also a way to raise government owned company energy prices. Compared to last year budget revenues declined but the state keeps the budget expenditures on last year's level.

Ilkin Mejidov, Secretary of the Tariff Council says price increase causes saving fuel, which is good for ecology.   

 “All extra profit will be directly transferred to state budget – allocated for the renovation of roads in villages and towns, broadening roads. Increased prices will not seriously impact on agricultural product producers as well,” – said Ilkin Majidov.

But expert Mehtiyev notes that rise of price will influence all sectors of economy. There includes agriculture, freight transportation, passenger transportation and etc. Because all these sector depend on oil. In this case raise of price is inevitable in these sector.

According http://caspianbarrel.org web site

 

2013-year

2014-year

 

Manat

Manat

Electric power

159 773 701

200 462 623

Fuel fee

63 721 122

88 874 078

Gas fee

29 889 835

35 553 713

Water fee

34 468 020

43 681 809

Thermal energy

23 092 683

27 776 992

Sewer fee

7 829 745

13 100 805

Other Utility Services

57 440 510

280 218 137

 

And after a while the it will be a price increase in the prices of utilities. He noted that the state, should have a strategy to increase the price. And the government should be announced to the public that which period they will change the price and should be explain why they what to change. “For example Russian society knows that the government will change price of energy carriers in 2015 years. But in Azerbaijan government is interested in raising the price in a secret way”.-said Mehtiyev

 

According http://www.caspianbarrel.org Ilham Shaban, Head of the Baku Center for Oil Studies, noted that the budget deficit in 2014 will near $2 billion. The higher petroleum prices would help reduce the figure just 500 million AZN. The experts believe that the current rise in oil products prices is connected with the fact that next year the state budget is forecasted to have a deficit of 2 billion AZN. Rise in oil products prices will   lead to gradual increase in prices for all goods and services. This will lead to growth of tax collection and reduction of budget deficit. In addition, this year the government will most likely end with the pro-ficit budget and the remains will be also used to cover the state budget deficit for 2014.