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Eurasianet

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Gasoline Prices Surge in Uzbekistan as Tax Break Ends

  • The price of AI-80, a commonly used gasoline in Uzbekistan, increased as the zero-excise tax rate policy ended.
  • The government reinstated the tax to address revenue losses, despite the public's reliance on AI-80 for its affordability.
  • The AI-80 price hike has environmental implications and has been linked to increased air pollution in areas like Tashkent.

The price of Uzbekistan's most sought-after automobile gasoline, AI-80, has significantly risen since January 1 after the temporary suspension of excises on the fuel was allowed to expire.

Prices at private gas stations currently stand at around 8,800 sums ($0.71) per liter.

The zero-excise tax rate on local and imported AI-80 was introduced in December 2022 amid restrictions on the operations of gas stations selling methane, which is periodically in short supply in peak consumption periods. Many motorists in Uzbekistan run their cars on both methane and gasoline, and they typically base which fuel they use on the basis of need, price availability.

The policy of limiting the working hours of methane stations has been in place since 2018 and is intended to alleviate shortages caused by demand for the same gas for heating in homes, schools, hospitals, and other public facilities.

The country faced a particularly acute natural gas shortage as a result of abnormally cold weather last winter. Heating issues were reported across all the regions.

Initially, the zero-excise tax rate was to remain in place only for a few months, but in March the president extended the tax break through to the end of the year to “ensure price stability.” Uzbekneftegaz, or UNG, a state-owned energy company, began importing AI-80 from Russia to plug the market deficit.

The sharp increase in the cost of AI-80, which is commonly known as “the people’s gasoline” since it is cheapest and lowest-grade variety, in the middle of winter has predictably caused public discontent.

But the government says that foregoing the fuel excise tax has been causing it undue revenue losses. The Energy Ministry estimates the shortfalls at around 1.2 trillion sum (about $100 milliion).

“This exemption has brought more benefits to business owners than to ordinary people,” the ministry was reported as stating by news outlet Gazeta.uz. The ministry noted that some privately owned gas stations have been making a profit by reselling UNG-produced gasoline at a mark-up.  

The authorities have assured the public that reserves of gasoline, including AI-80, are sufficient to meet the demand and there will be no shortages of the type that have been regularly observed in recent years.

Energy officials estimate that the daily demand for gasoline surges from around 5,000 tons to 8,000 tons during colder period. The bulk of that overall total — around 7,500 tons — is accounted for by AI-80.

There is an environmental aspect to all this. As is it is lower-grade fuel, AI-80, poses greater risks than what is more typically sold in western Europe or the United States.

Late last month, Sherzod Habibullayev, the head of Uzbekistan’s meteorological service, Uzgidromet, named AI-80 as one of the primary causes of air pollution in Tashkent, especially in winters.

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In 2020, UNG announced plans to discontinue the production of AI-80 which was supposed to happen after the modernization of existing oil refineries. It is unclear, however, what stage those efforts have reached.

By Eurasianet.org

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