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Tariff (price) Council of

Azerbaijan Republic

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Speeches and interviews

Ilkin Majidov, the secretary of the Tariff (price) Council explains the resolutions of the Council

03.12.13

Ilkin Majidov, the secretary of the Tariff (price) Council explains the resolutions of the Council

Mr. Ilkin, we kindly request you to give information generally on the adopted resolutions and the issues considered at the meeting of the Tariff (price) Council. 
- It should be noted that, market economy principles requires quick regulation. Coordination of prices of goods and services with the market economy principles is necessary for dynamic economic development. Next resolutions of the Tariff (price) Council were directed namely on this issue. Tariffs of communication, air transport and internal passenger, sale of natural gas to large consumers (“Azerenergy” OJSC and “Azerkimya” PU) and several oil products were considered, and several resolutions were adopted. 
I should emphasize that, several communication tariffs were reduced to a considerable extent at the meeting of the Tariff (price) Council. In this context, telephone installation tariff was reduced from AZN 40-120 to AZN 30, international communication tariffs from 36, 45 and 54 kopecks per a minute depending on the zones to 32 kopecks on the all zones, intercity communication tariffs per a minute from 7 kopecks to 5 kopecks, monthly tariff for use of fax machine from 80 kopecks to 50 kopecks, and tariff on 107 registered communication service for rural places was fixed at 5 kopecks as currently, and at 10 kopecks for cities and center of the districts after reducing by 2 times. At the same time, payments were annulled for transferring a telephone number from one person’s name to other person’s name, giving explanation on intercity and international conversation, and monthly technical service rendered to telephone. Application of limits to telephone conversation was not considered advisable, however, increase of monthly subscription fees, its determination on limits, and application of payment on minutes in the conversations beyond the limits were offered at the proposal of the Ministry of the Communication and Information Technologies. Monthly subscription fee for stationary telephones was determined at AZN 2,5 on population, AZN 7 on budget organizations, and was kept at AZN 7 of today for non-budget organizations at the meeting of the Council. 
I would like to notice other issue considered at the meeting of the Council. In this regard, for internal passenger transport service by air transport was approved at the high limit, and tariffs for transporting goods, post and luggage above the norm by internal passenger airships  were kept at the previous level (30 kopecks/kg, including VAT). Approval of high tariff level on internal passenger transport services by air transport will pave the way for application of lower and optimal tariffs ensuring profitable activity in the relevant field…

Wholesale and retail prices of oil products were changed at the meeting of the Tariff (price) Council as well. Which reasons urged these changes?
-Retail price of AI-95 petrol that has very little share in general consumption was fixed at 80 kopecks for a liter, and retail price of AI-92 and AI-80 car petrol at 70 kopecks for a liter, at the same time retail price of diesel fuel was approved at 60 kopecks for 1 liter. Furthermore, new wholesale prices of several oil products were approved.
First of all, I should mention that, current tariffs on oil products are lower than not only from Europe, but also from CIS countries. Retail price of petrol in Azerbaijan will be lower than other CIS countries after tariff increase as well. At present petrol price in Russia, holding the 2nd place for petrol production in the world is higher than Azerbaijan. 
I should inform that, the last tariff regulation on oil products was executed on 6 January 2007. While crude oil price in the world markets were 57 US dollars for a barrel in 2007, this indicator is 110 US dollars now. Number of cars has been augmented from 617 thousand up to 959 thousand in our country over this period. Internal demand for car petrol increased from 800 tons to 1.3 million tons, average monthly wage from AZN 215.8 to AZN 417, Gross Domestic Product per capita from AZN 3.3 thousand to AZN 5.9 thousand during the last 7 years. 

How will be affected the transport sector by tariff changes on oil products?
- Influence of tariff changes on public transport is low as well. In this context, special weight of fuel expenses in general revenues in public transport constitutes 20%, and this figure will be 26.5% after tariff augmentation. Moreover, share of fuel expenditure in fees on taxis will rise by 3%, and these increases can be compensated on the account of the profitability of the field. 
Furthermore, tariff regulation on oil products can stimulate transition to fuel saving cars, and this factor has great importance from the standpoint of the ecology. 
I would like to mention that, changes were made to the exciselevels of oil products under the decisions of the Cabinet of Ministers, and the main part of thesecond means arising from tariff augmentation will enter into the budget in the tax form. 
On the other hand, every year great deal of money is directed from the state budget for increasing social expenses and expanding road-transport infrastructure, constructing new roads, renovating roads in cities, settlements and villages. 
All of these – that is to say, good situation of the roads, increase of number of small cars, decrease of traffic jam are the factors diminishing fuel expenditure in public transport. 

But won’t the tariff changes raise production and sale price of foodstuffs and agricultural products?
-Tariff regulation on oil products will not affect agricultural products manufacturers seriously. In this context, non-substitutive aids are rendered to this field by the government. Agricultural products manufacturers are maintained by seed, fertilizer and fuel support, and they are granted soft loans. Agricultural products manufacturers are free of the taxes, excluding land tax.
It should be mentioned that, profitability on entrepreneurship entities engaged in agricultural products production in the capacity of physical person was  54.8%, while profitability level was 19.2% in other agricultural enterprises in 2012. Special weight of diesel fuel in prices of agricultural products constitutes 3.5%, and 1.2% of this is paid on the account of the subsidy directed from the state budget. Special weight of diesel fuel in prices of agricultural products will constitute 4.7%, and subsidy directed from the state budget 1.8% after tariff change. It is obvious that, profitability on the agricultural products production is sufficiently high, and tariff change will not influence unit cost and profitability level of product seriously. 

Natural gas price sold to large consumers is changed as well.
-As it is known, for the last time natural gas tariffs on chemistry, aluminum enterprises, steel foundry on the base of mountain-mine ore, as well as, electricity generating enterprises consuming natural gas for the purpose of production was approved at the lower level in comparison with the other consumers by the relevant resolution of the Council on 14 March 2007 (AZN 42/1000 cubic meters). Investments in the big volume were directed to the electroenergetics sector over the past period, and generation powers in the energy system of the country increased to a considerable extent. Special expenditure ofprearranged fuel on the energy system decreased to a considerable extent as the result of the operation of the electricity stations constructed on the base of the newest technologies. This process is continued according to the target of the State Program on the development of the fuel-energy complex. At the same time, influences of the natural gas tariffs to the chemistry and aluminum industries have been learned, and it was considered advisable to sell natural gas to these enterprises with new tariffs (AZN 80/1000 cubic meters). This tariff change will not affect population consumer group. 

The resolution of the Tariff (price) Council was declared on December 2 when the meeting was held. But, new tariffs of oil products will be applied from December 3
-Not opening of the resolution of the Tariff (price) Council on the tariff changes of oil products beforehand serves to prevent abusement cases that can occur. New tariffs on communication services adopted by the Council will be applied from January 1 2014.  

© 2007 Tariff (price) Council of
      Azerbaijan Republic