Gas supplier unhappy

RIGA - Russian natural gas suppliers are dissatisfied with the Latvian government’s decision to increase taxes on natural gas, therefore Latvia will face a difficult task of negotiating the purchase price on natural gas supply next year, Juris Savickis, head of Itera Latvia, one of the gas distribution company Latvijas Gaze (LG) shareholders, said in an interview on the Latvian State Television program ‘Labrit, Latvija!’ (Good Morning, Latvia!) on April 4, reports Nozare.lv. Last year, during President Valdis Zatlers’ and Economy Minister Artis Kampars’ (Unity) visit to Moscow, an agreement with Russian company Gazprom was reached, according to which the purchase price of natural gas will be lowered by 15 percent. Due to the increased taxes, Latvian residents will not be able to benefit from it, said Savickis.

Russian natural gas suppliers are not content with the situation and point out that they might as well pay the difference between the prices directly to Brussels. Russia will recall these Latvian government decisions when negotiating the purchase price on natural gas supply next year, warned Savickis.

On March 22, the government approved amendments to the Law on Value-Added Tax, which stipulate applying the standard 22 percent VAT rate to natural gas supplies to residents starting July 1 this year. Currently, the VAT rate for supply of natural gas to residents is 12 percent. Applying the standard VAT rate of 22 percent to the supply of natural gas to residents is one of the measures in the government’s plan to increase budget revenue this year.

According to the Finance Ministry’s estimates, increasing the VAT rate on natural gas supply to residents from July 1 will hike residents’ gas bills by 8.9 percent, on average. It is planned that lifting the reduced VAT rate on natural gas supply will increase budget revenue by 1,595,000 lats (2.2 million euros) this year and by 4 million lats in 2012.
The amendments are yet to be voted on by Saeima.

For the first two months of this year, there has been a 10 percent reduction in natural gas consumption in Latvia, show data at  the Central Statistical Bureau (CSB). A total of 489 million cubic-meters of natural gas was consumed in Latvia in the first two months of the year, which is a 10.9 percent reduction when compared to the first two months of 2010.
However, since the heating season began this past October, a total of 1.095 billion cubic-meters of natural gas has been consumed in Latvia, compared to 1.085 billion cubic-meters between October and February of the previous heating season.