Armenian Government Still Unsure How to Subsidize Electricity Price Hike: NGO

The Government of the Republic of Armenia is still unsure where it will find funds to subsidize the controversial rise in electricity rates in Armenia; it is also still unknown who, specifically, will benefit from these subsidies, “Union of Informed Citizens” NGO said in a statement issued on Wednesday, July 15.

The organization sent a letter of inquiry to the RA Ministry of Energy and Natural Resources in connection with Armenian President Serzh Sargsyan's offer to finance the price hikes. In response to the NGO's inquiry, Yervand Zakharyan, Minister of Energy and Natural Resources, said the financial source of the subsidy, as well as the range of potential beneficiaries, is still being discussed.

In the event that the Executive subsidizes all types of consumers (industrial enterprises, organizations, and residential customers), as stated by the organization, it will cost around AMD 3 billion per month (USD 6 million), which is quite a large amount of money; it amounts to around AMD 35 billion annually (USD 74 million) and makes up 3 percent of the RA state budget. 

“If, however, the Government decides to subsidize [the tariff hike] for residential customers only, then it will cost our country just about AMD 1 billion per month (USD 2 million). On the other hand, in that case industrial enterprises and other organizations will have to pay increased electricity rates, which will cause a significant inflation, leading to lower competitiveness of national products in international markets, particularly within the [Eurasian Economic Union], where electricity in all countries is much cheaper than in Armenia. As a result, our exports to EEU countries will only decline,” the NGO concluded.

Note, Public Services Regulatory Commission of Armenia decided on June 17, 2015, to increase the tariff for electricity supplied to consumers by 6.93 drams. Starting August 1, 2015, a kilowatt-hour of energy will cost 48.78 drams during the daytime (previously – 41.85 drams), and 38.78 drams – the nighttime (previously – 31.85).