Without this farmers would have higher expenses such as delivery costs, which will affect retail prices
The Armenian Minister of Agriculture, Ignatiy Arakelyan said that the Armenian President had tasked the government with subsidizing the country’s rural population for recent increases in diesel prices.
The government will cover a certain part of the residents’ diesel expenses, though the subsidies were not initially planned. The decision to support the rural population was made in view of the recent increases.
Arakelyan hasn’t specified what amount will be subsidized nor to what extent the government is going to mitigate the price hikes. Additional details will be provided later.
The taxation on diesel has dropped from AMD 35 000 (USD 72) to AMD 13 000 (USD 27), but from 1 January 2018 diesel has been subject to VAT as prescribed by new tax amendments. Consequently, the price of diesel has increased by 15%.
As farm machinery run on diesel fuel, an increase in fuel prices will, first of all, affect the rural population. Those involved in freight transport will also be affected. Diesel consumers note that a price hike will certainly have an impact on the costs of transporting goods.
“The rural residents’ expenses per hectare has increased by between AMD 20 000 and 40 000 (USD 40 – 80) in today’s prices, given that our farmers pay AMD 6 000 – 7 000 (USD 12 – 14) per bag of nitrogen fertilizer while Russian farmers pay AMD 3 000 (USD 6),” said Hrach Berberyan, Chairman of the Agrarian Association of Armenia.
Farmers warned that if the diesel price doesn’t stabilize, their expenses will increase and it will cost them more to deliver goods to the city. Consequently, it will lead to a hike in prices on agricultural commodities.
Vakhtang Mirumyan, Chairman of the State Revenue Committee stated that ‘it’s a normal thing to impose value-added tax (VAT) on diesel ’. In his words, Armenia was the only country in the world where diesel was VAT-exempt.
Meanwhile, economists believe that the increased diesel price is unsubstantiated.
“The government should provide information on what positive steps have been taken to keep the prices down, which it has failed to do so far. In fact, the impact of the price increase is not that big, simply the price trends have been misrepresented. It’s important that the prices be regulated and controlled by the government in a consistent manner,” said Tatul Manaseryan, an economist.