Will Prices Continue to Rise?

Rumors are circulating on social media that after the increase in prices for electricity, gas, and water, some other tariffs may also be raised. Economist and chairman of the REAL Party, Natig Jafarli, addresses this and other issues on the agenda in the program "Difficult Question."

According to him, the authority of the Tariff Council to make decisions on revising prices raises questions. Under the Constitution, the exclusive right to form the state budget and, accordingly, tariffs belongs to the parliament. The Tariff Council can only propose tariff revisions, but it is the parliament that has the authority to approve or reject these proposals.

"Everyone knows how things work in reality. Nevertheless, the parliament is an elected body and should have such powers to be accountable to voters. Members of the Tariff Council, on the other hand, are appointed officials and are not accountable to citizens. This is the legal aspect of the issue," Jafarli stated.

Addressing the economic aspect of the problem, the economist reminded that government-regulated prices pertain to state-owned companies that are natural monopolies, as they have no competitors.

Since this is the case, price formation should not occur arbitrarily but must follow some logic and include certain limitations.

The expert noted, "They (state monopolies—editor's note) justify price increases by citing high expenses and unprofitability in their operations. That is, they raise prices to ensure profitability."

According to him, it is evident that to improve profitability, the primary focus should be on reducing expenses.

"In order to identify where overspending occurs and what costs can be reduced, audits are conducted. Only when reducing unreasonable expenses is insufficient to ensure profitability should tariff increases be considered," Jafarli emphasized. He added that in Azerbaijan, however, it is the citizens who end up paying for tariff increases caused by poor management and numerous instances of corruption within natural monopolies.

"They operate extremely poorly and inefficiently, yet we are the ones who have to pay for it. This is unfair," Jafarli stated.

He pointed out that the expenses of natural monopolies are excessively inflated, and tenders and state procurement processes lack transparency.

"Until transparency is achieved in these areas, the losses of state monopolies will persist, and tariffs will continue to rise," the expert concluded.