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

On Wednesday, the new government of Ukraine may fulfill one of the most important requirements of the IMF – to raise gas tariffs for the population to 100% of the import parity
Ukrainian Cabinet to increase gas tariffs for households to 100% of market price

The increase of gas tariffs was initially scheduled for April 1, 2016, and was supposed to reach 75% of parity, but it was postponed for a month, Joinfo.ua reports with reference to UNIAN.

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.

“The aim is to go through the negative attitude all at once, without stretching the effect for two years. But people have not yet adapted to current prices, plus this year, it was a mild winter, and I am afraid we will see a payments crisis…,” a source said..
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 (the gas supply company).
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. There is a possibility that the consumption decrease could partially neutralize the need to increase subsidies for households.

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.

It should be recalled that the Ukraine’s government hopes to receive the third $1.7 billion tranche of the IMF loan by the end of 2Q 2016.