Petrol Price Shakeup Panics Turkmen Drivers

Drivers in Turkmenistan are concerned about a radical shakeup of petrol prices, in a country where car fuel has cost next to nothing until now.



On February 9, ministers approved a twin-track reform, ending the old system of selling petrol for only a few cents per litre and introducing more realistic pricing.



Drivers will now have to pay 2,800 to 3,100 manats per litre, equivalent to 17 to 20 US cents. This is still very low by international standards, but represents a massive price hike for local consumers. Until now, a litre of petrol in oil- and gas- rich Turkmenistan cost only 300 to 400 manats, or around 2.5 US cents.



To cushion the blow, the government simultaneously introduced a form of rationing, in the shape of a free petrol allowance.



On presenting a coupon, car drivers are entitled to 120 litres of free petrol a month. Drivers of buses, lorries and tractors can get 200 litres of fuel and motorcyclists and scooter riders 40 litres.



Vehicle users obtain their free petrol coupons from banks on presentation of a passport, a vehicle registration document and a certificate of roadworthiness.



The authorities said the allowance was introduced to ease the transition to market economy rules, as any fuel that drivers obtain beyond the fixed quotas will be on sale at the new prices.



The change has come as a shock in Turkmenistan, where people have paid only nominal prices for petrol since 1992. A litre of petrol then cost no more than a glass of fizzy water or half a loaf of cheap brown bread.



Along with subsidised free petrol, Turkmens have also been entitled to free quotas of electricity, natural gas, water and salt.



Every household is entitled to use 35 kilowatt-hours of electricity for free and 600 cubic metres of gas per year, as well as unlimited quantities of water and salt.



Worried that the fuel rations might quickly run out, drivers rushed to petrol stations as soon as they heard the news on television on February 9.



Within hours, queues stretching several kilometers formed at petrol stations, forcing police to intervene and limit some lines to 100 vehicles.



“They stood in line for two or three hours and after they got their free petrol, some owners just poured it into cans and returned to the queues to try to fill up again,” one eyewitness in the central Ahal region told IWPR.



Taxi drivers were especially alarmed at the simultaneous introduction of quotas and market prices.



“The limited free petrol will only be enough for about two days’ work in the city,” complained one taxi driver in the capital Ashgabat. “For the other 28 days of the month, I will have to buy petrol at market rates.”



Taxi drivers ferrying passengers around the city and to nearby rural areas say they use an average of 50 to 60 litres of petrol a day.



Under the new pricing system, they will have to spend at least 50 dollars a month on fuel over and above their free ration, about the same as the national average wage.



“If I have to buy petrol at the new rate, my earnings will be slashed,” complained one elderly taxi driver.



“We will have to recover the extra expense from the passengers and raise our fares,” another predicted.



Passengers say many taxis have already hiked fares.



“Starting from February 10, the drivers started demanding 5,000 manats [31 cents] for a standard fare, whereas before it was only 3,000,” said a local from Dashoguz in northern Turkmenistan.



Several taxi drivers told IWPR the new prices had caused friction with clients, many of whom did not see why they should suddenly pay so much more for a ride.



“It’s impossible to agree on a payment with the clients,” said one driver in Ashgabat. “They are quite aggressive these days. Some of them say the increase in petrol prices is the drivers’ problem, not theirs, while others say they don’t have the money to pay up, and others just throw us some money [at the old price] and jump out of the car.”



A resident of a suburb in the capital told IWPR that people feared a knock-on rise in the price of other products and services as a result of the change in petrol prices.



“This decision to put up petrol has come as a shock for many people,” she said. “We are nervous – after all, the president did promise to keep fuel prices stable.”



After assuming power last year, President Gurbanguly Berdymuhammedov pledged that low petrol prices would remain unchanged.



At the same time, however, he unveiled a new economic model whose cornerstone was the phasing-in of market prices for most goods and services and an end to heavy government subsidies.



Analysts say the introduction of a more commercial rate for petrol is a sign Turkmenistan is embarking on a slow transition to a market economy.



But there is still a long way to go. Economists say a true market economy depends on a freely floating price system that responds to competition, supply and demand, not on price-setting by government.



Annadurdy Khadjiev, a Turkmen economist based in Bulgaria, believes the government should have taken even more radical steps.



“They should have stopped dictating petrol prices and deregulated them, while simultaneously introducing a package of welfare programmes for the population,” he said.



Without such broader measures, said Khadjiev, petrol rationing is an inefficient mechanism that offers no obvious benefit to people who do not own vehicles, and is also open to corruption.



Many drivers in Turkmentistan fear the rationing system will be abused by corrupt officials so that the free petrol is diverted and never reaches the people it is intended for.



“I’m worried that when I come to the fuel stations with my coupon, I will either be told that the petrol earmarked for free distribution hasn’t been delivered or that its has run out,” said one taxi driver in the Ahal region. “We will be told that the only petrol available is for sale at the market rate, and we can buy as much as we want.”



He concluded, “I am 100 per cent sure that staff in the oil industry and at the petrol stations will line their pockets as a result of this system.”



(The names of people quoted in this story have been withheld out of concern for their security.)