The government in Latvia may convene a week prior to the next Saeima elections to decide on setting energy resource price cap, said Saeima deputy Arvils Ašeradens after a meeting of parties of the ruling coalition.
Minister of Economics Ilze Indriksone presented proposals for additional support mechanisms for residents under conditions of increasing gas, heating and electricity prices.
According to the Ministry of Economics, the average tariff in Latvia – 150 EUR/MWh – presented by the government in June, has already been exceeded in many municipalities across the country. According to the minister, residents may face problems paying bills without additional support measures.
Considering that the current planned support mechanism to help residents cover heating costs provides for a compensation for tariffs above 68 EUR/MWh, further compensating 50% of the continued increase, once the tariff exceeds the previous predicted average tariff, it may be necessary to introduce greater support intensity, said Indriksone.
The ruling coalition has agreed that support intensity definitely does not have to be 100%, because them heating companies and municipal administrations will not have motivation to offer cheap energy resources or approve the lowest possible tariffs, said the minister.
According to Indriksone, the current intensity of support will definitely be higher than 50%, but it will not reach 100%.
To cover increasing price of electricity the government plans to set a fixed tariff for a specific number of kW/h a month. Similarly to heating, electricity traders will form cooperation with the state so that aid provided to households is automatically added to their bills, said Indriksone.
Additionally, there are activities planned to allow heating companies and municipalities to submit plans for transition to renewable energy resources, because the increasing prices of tariffs partially comes from the unfinished work of companies and municipalities, said the minister. She stressed the Russian-Ukrainian conflict has the biggest influence on growing prices.
According to Indriksone, the government will continue assessing support mechanisms for entrepreneurs to preserve their competitiveness.
In this crisis, it is important that as the energy sector reorganises, the national economy is able to continue operations, develop and provide a greater contribution to the country’s development, stressed the minister.
This week it is planned to evaluate submitted proposals, added Ašeradens.
Answering the question about the possibility of setting reduced 5% VAT rate on food, Ašerādens explained this topic was not discussed at today’s meeting of the coalition.
Government parties concentrated on setting a price cap for energy resources. This is why the politician is sceptical about the possibility of reducing this area of VAT.
Minister of Economics Ilze Indriksone stressed that that the National Alliance will continue supporting this solution because it would help both households and provide support to local traders.
Representatives from the Ministry of Agriculture, farmer organisations and merchants invited the government to set a 5% reduced VAT for food products on Friday, 16 September, after a discussion organised by the ministry.
Rector of Latvia University of Life Sciences and Technologies Irina Peilvere mentioned that
reduced VAT for fresh meat, fresh fish, eggs and dairy products would help increase Latvian residents’ purchasing power, which is one of the lowest in the European Union.
The current VAT rate for these products is 21%.
As previously reported by Prime Minister Krišjānis Kariņš, to compensate electricity prices, the government in Latvia may set a price cap for the first 100 kWh.