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Gas market reform may be under threat

15/ 01/ 2021
  On January 13 this year, the Government made a decision to resume state regulation of gas prices for household consumers. It is worth noting that such a decision threatens to stop the reform of the gas market, as it entails artificially limiting the price of gas and eliminates market pricing mechanisms. The European Business Association has always emphasized the importance of market and competitive pricing in all markets, including the gas market. After all, it is the market and free competition that make it possible to determine the price of gas for the people. Thus, targeted assistance to the population and large-scale energy efficiency measures should become key priorities for the authorities to support the population and reduce utility tariffs. Surely, it is understandable that the Governments decision is socially oriented and aimed at reducing gas prices for the population given their falling incomes and the difficult economic situation in the country. Businesses are sympathetic to the Governments desire to temporarily limit the price of natural gas to the people in order to find out the cause of significant price differences and to develop ways to protect vulnerable consumers that comply with European free gas market principles. However, the chosen mechanism of administrative restriction of gas prices is destructive for the development of the gas market of Ukraine. It should be noted that the practice of artificially limiting the prices of goods, in particular gas, and even during the period of quarantine restrictions, is not common in the EU. Thus, the mechanism of targeted assistance to certain segments of the population in European countries has proven effective in terms of state support, along with compensation to producers for the cost of production. Although, much work should be done to develop a transparent and high-quality mechanism for the implementation of this assistance. At the same time, until the final formalization, the Governments decision should be agreed with the IMF to avoid misunderstandings. In addition, it must comply with Ukraines international obligations. The European Business Association emphasizes that all decisions must be balanced, strategic, and consistent so that, on the one hand, to support the population in this difficult time, but, on the other hand, not to stifle the voice of business. Therefore, businesses ask the Government not to limit gas prices for the population and not to create obstacles to the free market and competition, but to consider supporting the population through the mechanism of targeted subsidies and large-scale energy modernization.   Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.

On January 13 this year, the Government made a decision to resume state regulation of gas prices for household consumers. It is worth noting that such a decision threatens to stop the reform of the gas market, as it entails artificially limiting the price of gas and eliminates market pricing mechanisms.

The European Business Association has always emphasized the importance of market and competitive pricing in all markets, including the gas market. After all, it is the market and free competition that make it possible to determine the price of gas for the people. Thus, targeted assistance to the population and large-scale energy efficiency measures should become key priorities for the authorities to support the population and reduce utility tariffs.

Surely, it is understandable that the Government’s decision is socially oriented and aimed at reducing gas prices for the population given their falling incomes and the difficult economic situation in the country.

Businesses are sympathetic to the Government’s desire to temporarily limit the price of natural gas to the people in order to find out the cause of significant price differences and to develop ways to protect vulnerable consumers that comply with European free gas market principles. However, the chosen mechanism of administrative restriction of gas prices is destructive for the development of the gas market of Ukraine. It should be noted that the practice of artificially limiting the prices of goods, in particular gas, and even during the period of quarantine restrictions, is not common in the EU. Thus, the mechanism of targeted assistance to certain segments of the population in European countries has proven effective in terms of state support, along with compensation to producers for the cost of production. Although, much work should be done to develop a transparent and high-quality mechanism for the implementation of this assistance.

At the same time, until the final formalization, the Government’s decision should be agreed with the IMF to avoid misunderstandings. In addition, it must comply with Ukraine’s international obligations.

The European Business Association emphasizes that all decisions must be balanced, strategic, and consistent so that, on the one hand, to support the population in this difficult time, but, on the other hand, not to stifle the voice of business.

Therefore, businesses ask the Government not to limit gas prices for the population and not to create obstacles to the free market and competition, but to consider supporting the population through the mechanism of targeted subsidies and large-scale energy modernization.

 

Be the first to learn about the latest EBA news with our Telegram-channel EBAUkraine.

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