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World Bank forecasts: raise tariff or lose power industry

Power engineers of Kyrgyzstan, stepping on the path of tariffs' increase, decided not to do it in 2017. Experts also believe that it is necessary to raise prices for electricity and heating gradually, at the same time. In such a way, people’s consciousness will quickly adapt to their inevitable growth.

The World Bank in its annual report came to the conclusion that the state spends unreasonably much on power industry. If the tariff is not raised, there is a risk of completely ruining the industry.

Plus 10 percent each year

The State Agency for Regulation of the Fuel and Energy Complex has developed a tariff policy that provides for an annual increase in the prices of electricity and heating.

It was planned to raise tariff for heating for the population since April 1 from 1,134.8 to 1,615.4 soms per gigacalorie.

Electricity was to rise in price by 10 percent from August 1. Tariff for the majority of consumers, using up to 700 kilowatt-hours, would be 84 tyiyn.

Despite the fact that the government decree provides for a gradual increase in prices for electricity and heating, the State Agency for Regulation of the Fuel and Energy Complex did not raise tariffs in 2016. This idea was abandoned also in 2017.

Experts also believe that this approach is ineffective, because power industry can not remain afloat without an infusion of funds. At the same time, the loans received for development gave nothing but an increase in external debt.

Spent a lot, but little effect

According to the Economist of the World Bank office in the Kyrgyz Republic Bakyt Dubashov, the energy sector does not generate revenues that are necessary for self-sufficiency. The industry spends more than earns.

In 2015–2016, the total debts of the industry exceeded 48 billion soms. This figure is 20 percent of GDP or almost 70 percent of the amount that the state spends on paying salaries, or 60 percent of the costs for the purchase of goods and services to maintain government agencies.

The money spent on the power industry is 65 percent of the amount intended for the payment of pensions. The sector was invested 13 times more than the state spends on supporting the poor citizens.

Meanwhile, 45 percent of HPP equipment has reached the end of its service life, but continues to be used. It is needed to replace 40 percent of electric cables in Bishkek. Constant breakdowns undermine the country’s energy security.

«The resources provided are not enough. The problem is that we are at a stage when we are unable to meet the electricity needs. Kyrgyzstan has already begun to import electricity. All financial indicators show how heavy the burden becomes," Bakyt Dubashov believes.

About unfairness of subsidies

Despite this, Kyrgyzstan takes the 1st place among CIS countries in the use of electricity per capita and does not hurry to save energy. Since 2007 till 2016, household electricity consumption has increased by 58 percent, although the number of consumers grew only by 12 percent.

One household consumes 460 kilowatt-hours per month. A preferential tariff is set for those who usr up to 700 kilowatt-hours. Experts of the World Bank came to the conclusion that mostly rich part of the population enjoys the benefits. The low-income people are forced to reduce consumption.

A household spends 6–6.5 percent of the total expenditures on the purchase of electricity. Subsidies are used by those who can pay. The system of granting subsidies is ineffective. Those who are less protected do not receive support from the state. The current tariff policy helps only the rich.

The poorest Kyrgyz citizens consume not more than 100 kilowatt-hours per month. But the rich receive twice much aid from the state than the poor.

Experts suggest using subsidies for other purposes — for the construction of schools or roads. Power industry should work for export.

Is it because of low tariffs?

The Resident Representative of the International Monetary Fund in Kyrgyzstan Yahia Said believes that no one will invest in the energy sector of Kyrgyzstan with the current tariffs for electricity. According to him, they are lower only in Venezuela. Low electricity prices are an advantage only for business development.

Power engineers do not make such harsh conclusions. They are sure that the situation can be changed in complex way, and not just by raising prices.

«There are much more problems in the power industry of Kyrgyzstan. It is not necessary to put forward only one — the increase in tariffs. Before you change anything, you need to think what the vulnerable layers of the population will receive in return. The same benefits should be dealt with separately. Take, for example, the highlands. There are also wealthy people — richer than in Bishkek. But they also receive subsidies," Erkin Abdykalykov, General Director of Bishkekteploset said.

Any proposal to raise tariffs for energy resources excites the public instantly.

Kyrgyzstanis are ready to tolerate rising prices for food, for public transport. But electricity tariffs should remain unchanged. The power engineers understand this so far.

However, before talking about raising the tariff, we need to improve the quality of service and demand a report for the money spent. Where are the billions that did not bring positive result?