Soaring Electricity Charges Undermine Poverty Reduction Plans
Tuesday, 5 June, 2007
Soaring Electricity Charges Undermine Poverty Reduction Plans
Tuesday, 5 June, 2007
Pulod Muhiddinov, the first deputy minister of energy and industry, announced in late May that the government plans to raise electricity tariffs steadily to 2.5 cents per kilowatt/hour by 2010.
At present electricity costs 0.68 US cents per kwh, a rate introduced last year as a 38 per cent increase on the previous price.
The authorities say the price increases are being carried out at the recommendation of the International Monetary Fund and World Bank.
Jura Boboev, head of hydroelectric plant construction at the state power company Barki Tojik told NBCentralAsia that another price rise is expected by the end of this year.
The main motivations for the increase is to attract investment into new power generation projects that would not look attractive if the income was too low.
Boboev said the government has taken the needs of low-income and impoverished families into account and has earmarked around 11.5 million US dollars to subsidise their gas and electricity bills this year.
Tajikistan is one of the poorest countries in the world, and independent experts fear that despite the subsidies, the price rises will make the already low standard of living even worse and undermine the state’s poverty alleviation programmes.
Economist Firuz Saidov says that while this measure is an economic necessity because without it the electricity industry might regress and start running at a loss, it “will definitely have a negative influence on the poorest social strata” unless wages go up at the same time.
The average salary in Tajikistan is about 45 US dollars a month, and more than 60 per cent of the total population is below the poverty line according to the most conservative estimates. Saidov believes that national development and poverty alleviation strategies could reduce the percentage of people below the poverty line to 30 or 40 per cent, but if that does not happen, the state will be unable to subsidise everyone who needs help with their utility bills.
Political scientist Parviz Mullojanov agrees, saying that if rates carry on going up regardless of how much people earn, “utility costs will be too much for the budget of an average Tajik family, reducing the impact of national [poverty reduction] programmes to nothing”. That in turn could lead to social tensions.
“A large proportion of the population already have problems paying their electricity bills,” he added.
Economist Hojimahmad Umarov warns that government subsidies will not stretch far enough, so the deeply unpopular price increases could stir up serious discontent,
He says that even at current prices, the country’s hydroelectric power stations are profitable, and pushing them up further will simply scare investors away from ventures that require heavy use of electricity.
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
