Weekly economic review

A decision made by the Tariff Council of Azerbaijan last week alarmed the population.

At meeting of the Tariff Council of Azerbaijan held on 26 July, the Council made a decision to decrease tariffs and cut the number of services financed through owners of huge veterinarian facilities.

A total of 120 services were defined in five departments in general.

The Ceyranbatan water reservoir was transferred to a self-financing system through making consumer services commercial. Following the increase of the direct cost (by increasing the amount of electricity) of services by the operation unit of the Samur-Absheron water channel of the Amelioration and Water Economy Company, the wholesale price of 100,000cu m of water was increased to AZN 20 (without VAT) in order to improve the social state of employees.

The Tariff Council notes that the major consumer of the water sold from Ceyranbatan is the Azersu water company and new tariffs will not seriously affect the company's financial economic activities.

The decision of the Tariff Council of Azerbaijan to raise wholesale price for water from Jeyranbatan Water Reservoir may lead to the price increase in the services of Azersu JSC. According to the decision of the Council, the wholesale price of 1000 m3 water from Jeyranbatan Water Reservoir was defined at AZN 20 without VAT. The tariffs will come into force from 1 August.

It is hard that Azersu will continuously sell water to the consumers lower than its prime cost and probably will appeal to the Tariff Council for increasing the tariffs for its services. Possibly at the first stage, tariffs will be increased for the manufacturers and later for population.

As known, the water is the source of life and is necessary for all kinds of commodities and services which will accordingly cause the price increase for them. According to the worldwide statistics, nearly 70% of the fresh water is used for the agricultural demands. For instance, 1500 tons of water are consumed for growing 1 tons of maize and 7000 tons for 1 tons of rice. The industry also consumes large volume of the water: 18 tons for producing 1 ton of oil, 200 tons for 1 ton of page, 3500 tons for 1 ton of synthetic fibre.

Probably the decision of the Tariff Council will cause inflation amongst population. In its turn, it will lead to the price increase which will result in factual inflation. It already causes the increase of the current demand under expectations of price raise in the future which is currently observed in the Azerbaijani market. If certain measures are not taken, the inflation expectations will strengthen.

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