The Gas Price Can Be Reduced More Than Twice: Member of Parliament
03.06.2016
14:00
Although the gas price was reduced by 9.5 AMD per cubic meter by the Public Services Regulatory Commission (PSRC), but there was an opportunity to reduce it more than twice. Vice Chairman of the Standing Committee for consideration on Economic Affairs Mikayel Melkumyan and the President of the Union of Domestic Manufacturers Vazgen Safaryan said this during the discussion on “What impact will have the reduction of gas and electricity prices on the economy?” at Media Center on June 3.

During the last two years, the price of Russian gas supplied to Armenia fell twice on the border. First, it was reduced to 165 USD from 189USD per thousand cubic meters that was explained by a depreciation of the currency against the dollar and had no impact for the users. Then, in the middle of April, during Russian Prime Minister Dmitry Medvedev's visit to Yerevan it was announced that there would be another 15 dollars discount in gas price as a result of which the price of "blue fuel" for 1 cubic meter decreased by only 9.5 drams. Thus, the price for RA population will comprise AMD 146.7 instead of 156.7 starting July 1 of this year.

Consumer rights defenders and experts are confident that there is a large reserve of decline of gas price, given the sharp decline of the "blue fuel" prices in the international market but "Gazprom Armenia" company claims that 9.5AMD is maximum "the company could do today."

Melkumyan is confident that the gas price can decrease twice due to cost optimization, reduction of losses and the reduction of profitability rate of "Gazprom Armenia". "First are technological, natural or trading losses. Excessive loss was more than 1.5-3%, we had up to 6-7% loss. Only 1% of the excessive loss comprises 20 million cubic meters of gas in case of importing 2 billion cubic meters of gas. Rate of return is 10%, if at this stage, we have a competitive product or, in general, a gas supply problem, it should not necessarily be 10%, may be 6-7%. Also purchases, inflated expenses and amortization. Considering all this, it is possible to decrease gas price for the consumers," Melkumyan said.

The expected decline in the price of electricity, which according to the Commission's statement of a member, can be made by 2.5 AMD, the MP said that the process is linked to the decrease in gas and electricity prices. There, according to Melkumyan, the price can be reduced by more than 2.5 AMD, because due to the increase of the electricity price by 7 drams the company's debts are paid. "In addition, after the change of ownership the company's losses are also reduced. Therefore, there is an opportunity to reduce electricity cost. These are important factors,” he explained.

Vazgen Safarsyan said that the decrease of gas and electricity prices would have a significant impact on Armenia’s production, for example on the costs of cement and glass. “So these reductions had a positive response among local producers,” he said and added that the gas ratio in glass and cement manufacturing comprises 60-70%,” Safaryan said.

According to him, this should not be an occasional practice but a continuous one in order to increase the competitiveness of local producers. "Tariffs reduction trend should continue, "Gazprom Armenia" and ENA should carry out optimization projects to have a significant impact on economic development," he said, adding that at the expense of economic development gas utilization volume will enlarge. 

“Residents and businesses will start to use it more gas after price reduction. Therefore, the development of the economy will lead to an increase in the volume of gas as a result of which Gazprom will increase its profits. On the other hand, we must do our best to have gas price like in Russia, that is about $130, because if we are a Eurasian Economic Union member and there the services, human resources, capital movement should be free, there is the products competitiveness problem,” Safaryan said and added that some steps have been made in this direction but the establishment of a common energy market of the Eurasian Economic Union is planned to be conducted in 2025. 

Arshaluys Mghdesyan, editor/events coordinator at “Media Center”

To contact the author please send an email to [email protected].

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