According to the Ministry of Energy, an average of $1.15 billion is spent annually to subsidize the energy needs of households. If market laws are introduced in the sector, it will be possible to spend these funds in the social sector, the Ministry informed.
Due to the lack of market mechanisms of price formation, the state is forced to subsidize the energy sector, but the sector cannot be developed without constant subsidies, the Ministry of Energy of Uzbekistan stated.
According to the Ministry, the net cost of 1 kWh of electricity is 970 soums, and the net cost of 1 cubic meter of gas is 1,890 soums.
For comparison, according to current tariffs, 1 kWh of electricity is supplied to households for 295 soums, and 1 cubic meter of natural gas for 380 soums. Starting from October 1, a tariff of 900 soums for 1 kWh of electricity and 1,500 soums for 1 cubic meter of natural gas will apply to most business entities.
“So, even when an average of 200 kWh of electricity is consumed per month, the state actually gives a subsidy of 135,000 soums for each consumer. The number of consumers in the country is 7.4 million households.
Similarly, if the cost of 1 cubic meter of gas is 1,890 soums, one family that burns 750 cubic meters of gas in the heating season receives an average subsidy of 1,132,000 soums. Currently, the total number of gas consumers in our country is 4.1 million households.
This means that today more than 14 trillion soums of subsidies are allocated to the population for the consumption of electricity and natural gas.
This means that an average of $1.15 billion is spent annually to subsidize the energy needs of the population,” the official information reads.
It should be noted that the official information given in May 2022 stated that the cost of 1 kWh of electricity is 800 soums, and the cost of 1 cubic meter of natural gas is 1,400 soums. It can be seen from the above data that in a little more than a year, the cost of electricity has increased by 21%, and the cost of natural gas by 35%.
According to the statement of the Ministry of Energy on September 19, the subsidization of the sector from the state budget is leading to a deficit due to the fact that the industry is operating at a loss. This does not allow more funds to be allocated to the social sector. As a result, funds that could actually be used to upgrade the system are being used to cover this gap.
The authorities noted the need to introduce market principles to the sector, to introduce payment of fees based on market requirements for consumed energy, instead of fully subsidizing prices.
“If market laws are introduced in the industry, these funds will be saved tomorrow. As a result, the saved funds can be spent on the development of the social sector, the construction of new schools, medical institutions, the introduction of modern technologies for the development of production in each field, as well as the deep modernization of the energy system.
In addition, living with the rules of the market in terms of energy, like other goods necessary for living, will undoubtedly motivate the formation and development of our life skills such as consumer culture, not excessive waste, independent control of expenses and rational distribution,” the Ministry of Energy of Uzbekistan informed.
It should be recalled that earlier in the first half of 2023, it was known that Uzbekistan increased natural gas import by 7.2 times, as a result of which state budget expenses increased by 25% compared to the corresponding period of the previous year, and the consolidated budget deficit reached almost 6%.
