A complete swing round being prepared for tariff regulation

logo russianconstruction.com
A complete swing round being prepared for tariff regulation
Tags: Photo source:

How to standardize the tariff system in Russia?

There is real disorder in the sphere of tariffs in Russia, where each industry determines them on the basis of its own methodology. There is no distinct law, and the majority of tariffs are calculated based on departmental laws and regulations. The Federal Anti-Monopoly Service decided to correct the situation and to prepare a unified concept of tariff regulation. However, new drawbacks are anticipated to arise after the elimination of the old ones, and they might be even more serious.


At sixes and sevens

The calculation methodology of tariffs is an important aspect of the investment climate of the country. Russia has not managed to put the system in order for years. The existing rules have been constantly changing because of those who are able to urge advantageous decisions for themselves. Additionally, the calculation itself often looks cumbersome and irrelevant as it is mainly carried out in manual mode. It is also very labour-consuming, as there are 35,000 tariff plans in Russia!

All this results in a paradox. Tariffs for similar services and approximately the same economic realities may differ manifold. This then gives birth to mass corruption, and an absence of consumers’ trust in the presented tariffs.

According to Sergei Puzyrevsky, Deputy Head of the Federal Anti-Monopoly Service, the rules of the game must be integrated. The project of the federal law, “On basic principles of state regulation of prices (tariffs)”, is presently under development to resolve matters.

A complete swing round being prepared for tariff regulation


Behind seven seals

The Federal Anti-Monopoly Service proposes creating a standard method of tariff regulation in the country on the basis of the law. It should be applied in all key branches of the economy.

The essential idea of the concept is calculating tariffs on the basis of economically sound expenditures. Presently, there is an outrage in the sphere, and everybody determines tariffs from the point of view of their own benefit. Expenses for similar services may differ 1000-fold! It is clear that this does not actually mean real expenses.

— The economic branches’ specific features should be preserved, — Puzyrevsky stresses. — But they should comply with some general principles.

The law will provide for the solution of another important problem — the creation of an integral tariff space. Presently, it is divided into federal and regional, and they do not fit with each other well.

First of all, it concerns such an important issue as the procedure of adopting and changing tariffs. The feasibility and transparency of the adoption of new prices then depend on it. At present the process is closed in the same way as the most important state secrets. Actually, the problem is not in the secrecy but in lobbying the interests of certain economic entities by favouring them officials.

All methods behind the formation of tarriffs should be preserved, but the calculations should become real and open. That is why the bill draft makes provision for public participation in regional tariff committees.

Mr Puzyrevsky admits that one of the most complicated issues is in the way the unification of the tariff regulation is conducted. According to the bill draft developers, the mainstream is to regulate the maximum number of issues. Basic principles should be formulated to be developed in by-laws and subordinate acts.

Presently, even a competent consumer cannot understand how tariffs are formed, which is why the procedure and the methodology of their adoption should be simplified. Otherwise the regulation of tariffs will remain a mystery for the majority of the population. And the system will not be trusted.

A question additionally arises about how to balance prices and the quality of services. People must understand why different prices exist for similar services that are in a different place. It all depends on the expenditures for the service.

Presently, tariffs are somewhat connected with the quality of, say, supplied water. And a customer cannot investigate this because the quality of water depends on many parameters.

— However, if only 5—6 parameters are taken into account, both the quality and the price for it will become clear, — Mr Puzyrevsky is sure. — The same principle might be applied to other resources, of course.

According to the Federal Anti-Monopoly Service’s assessment, the switching over to the new system will lead to a 10—15% decrease of the tariffs.


A new twist

The concept looks very sustainable on paper. However, some are not sure of its usefulness when implemented. Thus, Yekaterina Kosogova, Head of Tariff formation department of the Siberian generating company, thinks it might be more useful for investors to switch over to from economically justified expenses to targeted indicators, otherwise it is difficult for them to calculate the return on their investments.

Participation of a consumer in the formation of tarriffs is also very doubtful. A consumer is not interested in economically feasible prices, he wants to pay as little as possible for a service.

Elena Dovlatova, Executive Director of the Russian Association for water supply and sewerage, points out that the better the water is the more expensive it is. The draft bill concept does not take it into account. However, the working conditions of different organisations responsible for water supply and disposal may differ significantly. The use of an integral approach might impact on their ability to improve the qualitative parameters of their work. It is far better to focus on the targeted support of consumers than to implement a common integral methodology. This might destroy the system of water supply as a whole.

Experts think the issue of industrial specificity to be very complicated and that the proposed concept does not factor it fully. Besides, it suggests changing the rules of the game. Many have just got used to them, and a new swing is now being prepared for them. There is a danger in “failing to follow a road bend”.

Only one thing is good in the present condition: representatives of the Federal Anti-Monopoly Service promise to continue discussing the document together with those who it concerns. This is not such a widespread practice in Russia, is it?

Vladimir GURVICH