Does Serbia have to subsidize the prices of electricity and gas?

, SEE Energy News

Since blue energy is mainly imported, it was difficult to avoid giving subsidies, but country have coal, water, wind and sun from which Serbia can produce electricity from domestic sources.

When the Minister of Energy, Dubravka Đedović, in an interview with “Politika” a few days ago, said “that the state subsidizes the price of electricity and gas, but that there is no golden jar”, most of those who leave comments on our website asked why the state has to subsidize the price of electricity when is that our – domestic product? For gas, it is understandable because we import almost 95 percent of it, but we have coal, water, wind and sun from which we can produce electricity from domestic sources.

Asked whether and under what circumstances something like this is realistic, Željko Marković, senior energy consultant at “Diloit” and one of the former directors at “Elektroprivreda Srbije” (EPS), tells our paper that unlike natural gas, EPS can without state aid. With the rationalization of operations on the market, it could ensure reasonable electricity prices that will not be a brake on economic development. And which, along with the protection of sensitive segments of the population (energy-dangerous customers), will be acceptable for households as well. If EPS had produced sufficient amounts of electricity at the end of 2021 and during 2022 and there had been no imports, with minor corrections in the price of electricity, subsidies would have been completely avoided.

– The exact percentage of state subsidies in the price of electricity has not been published, but I remind you of the assessment of the Fiscal Council, given at the beginning of December last year, where in the budget for 2023, about 1.2 billion euros, i.e. more than half of the fiscal deficit in 2023, are planned as immediate consequence of the unsuccessful business of EPS and “Srbijagas”. However, these are not even all the costs that taxpayers bear because of these companies. The budget also enables the state to issue up to one billion euros in new guarantees for their borrowing, which formally does not enter the deficit for 2023. If these loans are not returned by public companies (which used to happen as a rule), this is also a probable future expense for taxpayers – says Marković.

Bearing in mind that the income of EPS is about 2.7 billion euros, and “Srbijagas” is about 1.05 billion euros on an annual level, we see that state subsidies amount to about one third of their income, emphasizes our interlocutor and adds that this problem can to be solved by, on the one hand, it would be necessary for these companies to increase their income by correcting energy prices, but in order for that increase to be as small as possible, they need to reduce their costs and rationalize their operations as much as possible.

– Therefore, the prices of the products (electricity or gas) produced and traded by EPS and “Srbijagas” should be formed in such a way that they reflect all the costs incurred by these companies and ensure positive business for them. Since similar legislation exists in the countries of the European Union, even in extraordinary circumstances, such as the current energy crisis, many countries have resorted to subsidizing customers in order to preserve the market – says Marković.

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