Residential tariffs for district heating are heavily subsidized in Belarus, and range from as low as 10 to 21 percent of the cost-recovery levels, depending on the heat producers. The fiscal and quasi-fiscal costs of underpriced heat are estimated to be 1.6% of GDP or US$1 billion in 2012. To address the challenge, the Government of Belarus has committed to a heating tariff reform that would phase out government subsidies and gradually increase household heating prices to cost-recovery levels -a sensitive process that could face strong public opposition and create immediate financial distress for the poor. To facilitate the implementation of the reform, the government requested World Bank assistance to assess the potential social impacts of tariff increase and to recommend mitigation measures.
The BBL presented findings from the ESMAP-supported multisectoral activity "Belarus: Heat Tariff Reform and Social Impact Mitigation." The analysis lays out a package of three approaches for implementing the reform: enhancing customer communications and engagement, improving social protection mechanisms, and encouraging investments in supply and demand-side efficiency. The analysis shows that when price increases and mitigation measures are properly sequenced and coordinated, reform will become more socially acceptable, consumers will benefit from better quality of service, and the government will achieve positive fiscal savings. The findings of the activity have been presented to the government. The government has since made communications a central part of its effort, beginning with a new billing system that includes information on supply costs and consumer subsidies.
The BBL was comprised of:
Chair | Ranjit Lamech, Sector Manager, The World Bank Group
Speaker | Fan Zhang, Senior Economist, The World Bank Group
Discussants | Sheoli Pargal, Lead Energy Economist, GEEDR | Heather Worley, Senior Communications Officer, The World Bank Group