Subsidies in times of crisis. Could these be higher? Who could offer more, from what sources and at what cost? IPN debate

The energy crisis is the most serious of the problems experienced by the citizens of Moldova and the higher than ever bills are the most pronounced consequence of this crisis. The difficult social situation is further worsened by the different political views about the reasons of this crisis and the way in which the authorities decided to support the population, by direct subsidies through bills. Related issues were developed by participants in IPN’s public debate “Subsidies in times of crisis. Could these be higher? Who could offer more, from what sources and at what cost?”.

According to the standing expert of IPN’s project Igor Boțan, an energy crisis is a situation when the electricity needs cannot be satisfied due to the diminution of resources. It goes to oil, coal and electrical energy. The price of energy resources increases and leads to subsequent rises in the prices of other products. As a result, the inflation rate is high and Moldova experiences now such a situation.

“The Republic of Moldova has few energy resources and is dependent on imports of fossil fuels and electrical energy to a great extent. Since October 2021, the price of gas has grown considerably in the Republic of Moldova and not only. Owing to the latest developments on the energy markets, the prices have skyrocketed and the developments are also related to the war in Ukraine,” stated the expert.

According to Igor Boțan, all these things exerted pressure on public finances and the capacities of the most vulnerable citizens to pay for energy resources. It is estimated that over 60% of the country’s population will fall into the energy vulnerability categories. Therefore, the authorities, with the support of the foreign partners, developed a population support mechanism to subsidize the citizens for the consumed gas, heat and electricity according to the energy vulnerability category into which they fell.

The head of the Parliament’s commission on social protection, health and family Dan Perciun, of the Party of Action and Solidarity, said that the Government this year decided to implement a program of direct subsidization, through bills, entitled “Meter Assistance”. This differs from the mechanism applied last year, which took into account only particular consumption ceilings for all the citizens. This year the program is much targeted and takes into account the incomes of each family, the socioeconomic conditions, payment capacity and history consumption of the family.

“We decided to adopt such an approach so as to be able to primarily support the most vulnerable sections of the population, which are seriously affected by the considerable rise in charges and the consequences of the war in Ukraine, and to also have an instrument by which we can provide this assistance in a more targeted way,” explained the MP. He reminded that besides the subsidies for energy resources consumed during the cold period of the year, the most vulnerable persons also receive social assistance.

Dan Perciun noted that the persons can register on the portal to apply for subsidies for electricity, heat and natural gas. The applicants need to provide data about the consumption points and about the family, including earnings, allowances, pensions and interest at banks. Only the one-off childbirth allowance and care and supervision allowances intended for persons with severe disabilities are not taken into account. “The disposable income is determined based on what the citizen declared and based on the information possessed by the state. Subsidies were set for each vulnerability category. The people who will not get subsidies were assessed as able to pay the costs for energy as these costs represent less than 10% of their available income, as per household,” said Dan Perciun.

The deputy head of the Parliament’s commission on social protection, health and family Vladimir Odnostalco, of the Bloc of Communists and Socialists, said the difficult situation in the energy sector actually started before February 24 (when Russia invaded Ukraine, e.n.). “By then, the people also felt the impact of major price rises. The subsidization program is seriously promoted and has a solid marketing component. But things actually stand well only in the press that serves the current government,” he stated.

Vladimir Odnostalco said the increase in the prices of the main products is constant, not to mention the prices of other goods that are needed by the population. The subsidization mechanism could have been simpler if other prices of energy resources had been negotiated. “The government makes reference to alternative sources for purchasing energy resources. But these resources should be more affordable, not more expensive, as it happens,” he stated.

As regards the subsidization mechanism, the MP said the global income of the family needs to be taken into account and the costs for energy resources should be determined based on this so as to decide the size of subsidy correspondingly. Many people use firewood to heat their homes, not electricity or natural gas, while the state program to provide firewood is inefficient. “Even if the price of firewood is allegedly the same as last year, the people incur large costs, including for transportation and chopping, while the social assistance is insignificant against the costs incurred by the people amid the current price rises,” stated Vladimir Odnostalco.

The public debate entitled “Subsidies in times of crisis. Could these be higher? Who could offer more, from what sources and at what cost?” was the 268th installment of IPN’s project “Developing Political Culture through Public Debates” that is supported by the Hanns Seidel Foundation.

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