Fuel Subsidies in Azerbaijan

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According to the International Energy Agency (IEA) research on global subsidies in 2012, Azerbaijan had an average subsidisation rate of 35.8 percent, equating to US $215.9 of subsidies per person and 3.1 percent of GDP.

As of 2011, $650 million was spend on oil subisidies, $830 million on natural gas subsidies and $470 million on electricity subsidies.[1]

According to a 2003 country assessment by the International Monetary Fund (IMF), Azerbaijan's energy sector is intrinsically linked to the country's Poverty Reduction Strategy, due to the way that utility subsidies have been used as a form of social protection. The paper states that consumers receive "huge" subsidies from the state budget, but that the subsidies are hidden and never explicitly calculated or published. Subsidisation effectively occurs because the two main utility providers, Azerenergy and Azerigas are unable to pay SOCAR for their inputs, leading to a situation where in 2001 SOCAR received only 0.5 percent of the value of the fuel supplied to Azerenergy and 1.3 percent of the value supplied to Azerigas. In 2001 the IMF estimated that the government paid roughly 50 percent more to subsidise the activities of these companies than it spent on health and education. The report concludes that the widespread failure to pay for utilities is a de facto subsidy to households, particularly those living in urban areas, and their use as a form of social protection is "neither pro-poor nor cost-effective".[2]

References

  1. "World energy subsidy index 2012" IEA, 2012.
  2. "Azerbaijan Republic: Poverty Reduction Strategy Paper" IMF, 2003.