Gubad Ibadoglu: Tariff Increases Will Cause Price Rises at Food Market

Turan agency interview with Gubad Ibadoglu, board member of the Center for Economic Research.

Q: A number of Azerbaijani officials speak about the upcoming price increase. What should be expected?

Answer: In fact, the talk is about the draft budget for 2014 presented by the government to the parliament. The document shows that some areas of government intend to increase prices and make changes in tariff policy. One of these areas is the municipal sphere. The basic policy in this sphere is necessary tariff regulations covering the costs of production. This means that the current prices are not sufficient to cover the actual cost; there is a need to revise the tariffs.

Therefore, state companies "Azerigas ", "Republic", and «Azersu " appealed to the Tariff Council.

I think that by the end of this year the Tariff Council will increase the price of gas, electricity and water.

Q: What can be the price increase? What could be the difference between selling prices and the cost?

Answer: This rate varies for different services.

If this direction is connected to the quality of production and services, and will organized into more efficient and economical production, the current rates will cover the costs of production.

In particular, there are more losses in the energy sector. Perhaps the rise in prices in the energy sector will outstrip the growth for water and gas.

Can the prices for electricity and water be higher than for gas?

Q: What about the prices for fuel, can they be increased?

Answer: Probably the Tariff Board will assess proposals in this sphere.  I think that the increase in this sphere will not be high. 

Q.  What can be approximate increase in percentage?

Answer: It is hard to say due to different approaches.

If the question is about approach to regional prices, we can expect a 25 percent price increase.

If the talk is about the level of international prices, the prices may increase by twofold. 

Q: How will the increase in tariffs affect food and non-energy sector?

Answer: The impact of higher fuel prices and utility can seriously affect the growth of prices in other areas. Other factors that contribute to the rise in prices should be taken into account. 

For example, the state budget 2014 envisages an increase in revenues from the oil sector. This will increase the tax burden on businesses, and will entail raising other obligatory payments to the business.

In the end, it will affect the cost of services and selling goods.

I believe that in the future, the real inflation rate will exceed 10 percent. In this case, the inflation rate will be associated with rising prices in the services sector and the food market.

Q: Will the price increase be equivalent to the salary?

Answer:Even the current prices are not equivalent to the basic salary of the population. With the increase in tariffs, the difference between revenues and expenditures will increase even more.

Q: Can the increase cause social discontent?

Answer: In any case, the price increase contributes to increased tensions between the government and consumers. --0--