...but Its Size Is Not Quite Clear

The Cabinet of Ministers of Ukraine has determined the single price of natural gas (6879 Hryvnya per 1 000 cubic meters) for all consumers from May 1, 2016. At this, all privileges and regulations which had been in force prior to the specified time have been cancelled. The feasibility of this approach is being argued by a lot of politicians and officials, who, in fact, defend their own interests. For example, a politician criticizes the high price. Officials justify it by market factors, IMF's requirements and additional costs due to budgetary subsidies and so on. And all this develops into a permanent discussion with a number of negatives ... In this regard, the following should be pointed out:

1. The establishment of a single price for gas in the current Ukrainian realities virtually eliminates the resale of “cheap” gas at a higher price to other consumers, that is, excludes this kind of acts of corruption. Introducing it, the state raises its role in the marketing collateral to its citizens. Having established a reliable accounting and control of the quality of the gas, it will be possible to go to the circuit of different price levels for different groups of consumers. This practice has been introduced in many developed countries.

2. The single price in combination with the above-mentioned other measures, will help to improve the gas industry.

3. Massive subsidies, in fact, mean, among other things, preservation of the former imperial (Soviet) principles of operation of gas facilities. So, the dependence of a citizen on the state grows and this is characteristic of authoritarian regimes. There will be lack of money for subsidies very soon (in a year, two, three, or later).

4. The IMF has never specially dealt with utility rates, but vice versa — it examines the proposals of the Ukrainian side — how our government will balance the budget. If we, inter alia, propose to increase the income from municipal payments (guaranteed), the IMF agrees.

Summing up the above-said, we can say that the establishment of a single gas price (at least temporarily, for a certain period) can be a positive step in the right direction and in combination with other measures, in particular — with an increase in incomes of Ukrainian citizens. Most likely, the process will be observed for a few years — until the complete introduction of accounting and control of gas, etc. Then the question of optimization can be considered — including different prices for different customer groups, at different times of the year or even days, and so on. If the population's incomes do not grow due to the increase in tariffs, then this so-called action can trigger negative consequences.

It must be stressed: the risk of this is very high! I mean preserving the single price, rather than the size of the price of 6.879 Hryvnya for 1 cubic meter. This size of the price is obscure and opaque. Where did it come from, what is it based on, how is it determined — it is not entirely clear. Why is it not 7, 8, or 2, 3, 4, 5 Hryvnias? By the way, the calculation according to the procedure available in 2007-2010, provides a price of less than 4 Hryvnyas per cubic meter. But it may be that this is an outdated view at the present moment, which does not take into account something.

At the same time, the current situation (a fear of people, discussions and guesses of experts, etc.) demonstrates that in the issue of establishing a single gas price, the problem is the weak advocacy. First of all — among the population and, in particular, in the expert community, in order to explain that this price is only one of many steps in the complex of measures providing among other things, for raising incomes. This work should be done already by the new government.