Higher tariffs will hit the average Azerbaijanis, Natig Jafarli believes

The main reason for the sudden increase in tariffs for gas and electricity is a problem with the budget associated with a decrease in the country's income, says economist Natig Jafarli.

In an interview with the program «Çətin sual», Turan Jafarli said that the government had to either go on structural reforms, reduction in natural monopolies, to optimize their performance, reduce their losses, or to raise prices. It is evident that the  government shifted the entire burden onto the shoulders of the population. The expert stressed that monopolists have big problems. "For years, they have received large subsidies from the state. Now the government, on the one hand does not want to give subsidies, and on the other hand, does not want to lose them. In addition, the government is not willing to carry out structural reforms to make them make profitably. Price increases was the very primitive solution," he said.

The expert recalled that  for many years he and other civil society experts  suggested  that if the government wants to relieve itself from these problems, it should gradually put on the privatization  these organizations, or send them to long-term management.

"The problem is that Azerbaijan has a low investment attractiveness. Investors do not trust Azerbaijan. Echo  of processes associated with the "Barmek" (a Turkish company which made great investments in  the energy systems of Baku and Sumgayit, in their modernization, but was actually expelled from the country) is given so far," he said.

On the other hand, in his opinion, the government itself does not want to let go of their natural monopoly, since these structures are a source of personal enrichment of some government officials. Jafarli believes that even the decision to increase tariffs will not help companies to reduce their losses. According to Jafarli, it should be understood that in the economy, the state is a bad manager.

"Our Soviet past also proved us it.   The more  the state is trying to get more space in the economy,  the more it hurts the economy. Private companies are also more serious about the issues on the losses, since it directly damages  their pocketbook. Losses in gas and electricity are big, and  therefore one of the ways out of this situation is the privatization," said Jafarli. The expert said that if  the management philosophy does not change,  structural reforms  are not conducted, it is inappropriate to talk about the loss reduction.

"Cost of oil production in SOCAR compared to BP is by  2-3 times more expensive. One of the main reasons for this is the bloated budget, inefficient management," said Jafarli.

Thus the economist said that the so-called "differentiated approach" will create big problems in relations with the population controllers, as so far not given a clear explanation as to whether the counters will be able to perform calculations according to the new principles.

"The limit specified by the government is very low.  The average  statistical family in Azerbaijan of four people consumes  a year more than 1500 cubic meters/meters of gas, and in a month more than 250 kW/h of electricity.  So, the decision of the Tariff Council will seriously  affect  the average statistical Azerbaijanis," he said.

Jafarli believes that in addition to ordinary citizens, the rise in prices will hit the small and medium business, agriculture throughout the economy. "The 20-30% of the cost of goods and services accounts for energy. If the price of gas increased by 100% and electricity by 57%, then naturally the prices of goods and services will rise significantly," Jafarli said. According to him, after a while all will witness a rapid growth in prices of agricultural products, food, services, cafes and restaurants.

Economist is sure that the increase in tariffs for gas and electricity in parallel with the growth of the dollar will increase the social tension in the country. At the same time, he believes that unemployment will increase, as the turnover decreases with rising prices, and the number of jobs also decreases.

"Unfortunately, the Azerbaijani government thinks it can manage the social tensions by law enforcement agencies. However,  the situations may  become a chaotic. The government should  think about it, and it should be managed not by the power unit, but by economic bloc by means of reforms," he said. -06D--