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 September 26, 2003 




Unpopular Prices: Increase in goods and services may be necessary, but are unwelcome



Essential goods, including bread have seen a recent price increase.

Seventy-six year old Anahit Atoyan says that early this summer when she heard news about increase of prices of essential goods such as bread, she immediately started to curse the government. But more price increases announced in the past two weeks made the pensioner cry with helplessness.

"Why didn't they tell about it before elections? Why they were lying to us," she asks.

Ministers representing social, healthcare, transport and communication fields, explain the increases dispassionately, saying that public utilities are already offered below costs and unless there is an increase, gas, water and electric services will be on the edge of decay.

During the past two weeks prices for flour and bread again increased in the republic. Prices for flour have increased 10 to 15 percent. For instance, a sack of flour that cost 8,200 drams (about $14) now costs 9,500 drams (about $16.50). Prices for bread increased 10 drams. The reason for such increase of prices is a report by the US Department of Agriculture published in August. According to that report, worldwide grain production has decreased 11 million tons in one month.

That information was enough to cause disturbances in the grain market. However, if increase of prices for bread was a result of the reigning situation in the international market then the problem connected with the increase of prices for transport charges, electric energy, gas and water has completely different roots.

The first increases were announced by the head of the Government's state committee for water resources, Gagik Martirosyan. According to him, in 2004 the prime cost for 1 cubic meter of water will increase from 56 drams (about 9 cents) to 105-120 drams (18-20 cents). But there is more to come. Martirosyan says that costs of upgrading water supply systems will force the cost of water service to 250-300 drams (about 43-52 cents) per cubic meter.

Starting this year residents are required to install water meters (at a cost of about $20-25), and were led to believe that installing the meters would assure 24-hour service. Now, it is apparent that those costs are not the end of water woes in Armenia.

The increases in essential goods and proposed increase of utility costs are part of a price-increase trend that has also affected travel in the capital, as a 10-dram increase was recently imposed on the Metro service (bringing the cost of a ride from about 7 to about 9 cents)

Further price increases are expected for electricity and propane, which most likely will lead to increases in minibus and taxi service fares.

Today one cubic meter of propane costs 51 drams (about 9 cents). An average family uses 10-12 cubic meters of gas monthly. Some economists from the Institute of Economy have calculated that gas and electric energy will increase 20 to 25 percent.

The head of the Public Relations Department of the "Hayrusgazard" Shushan Sardaryan said that a double-tariff taxation system will most likely start functioning soon.

It would mean that besides paying bills for consumed gas, consumers will also have to pay for service and maintenance of pipelines.

 


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