Ukraine approves single natural gas tariff for households, industry

By bne IntelliNews April 27, 2016

The Ukrainian government on April 27 approved a single gas price for households and industry, to be imposed from May 1, in a move that will sit well in Kyiv's efforts to restart suspended funding flows from international creditors.

"We'll consider an important decision for us and for the state - the question of establishing a single gas price," local media quoted Prime Minister Volodymyr Groysman as saying before the Cabinet approved the move. "I am convinced we'll put an end to this issue today, and it will be the last change in gas prices in the life of our state."

The decision should primarily help the new Cabinet that was appointed in mid-April to unlock cooperation with the International Monetary Fund (IMF). The multinational lender effectively froze its disbursement of funds under a $17.5bn bailout package last September as Ukraine veered off the reform path and deeper into a crisis of government. Since then, two credit tranches totalling some $3.4bn were withheld, with other foreign credits also contingent on the IMF resuming its credit programme with Ukraine.

The Ukrainian government is now looking at establishing the uniufied price of UAH6,879 ($272.7) per 1,000 cubic metres of natural gas.

"[The move is] market positive, should help get the IMF programme back on track, and further helps reduce the budget, energy and current account deficits as it supports further energy conservation efforts," emerging markets strategist Timothy Ash of Nomura International wrote in a note. He added the move was, "Low hanging fruit for the Groysman admin, given that the heating season has ended now anyway."

The price of natural gas for industrial consumers in Ukraine in March 2016 ranged from UAH5,503 ($218.1) to UAH6,745 ($267.4) per 1,000 cubic metres (excluding VAT, tariffs for transportation), according to data published by the National Commission for Energy, Housing and Utilities Services Regulation (NCER).

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