Commercial Water Costs Double and Triple
11 April, 2013
Commercial Water Costs Double and Triple
Georgian government decided to double and triple charges on commercialized still and mineral water in spite of the outcry of water producer companies that the sharp increase of tolls would affect their development and export.
Recently, special governmental commission created on April 5, 2013, on the initiative of Prime Minister Bidzina Ivanishvili to work on pricing the water resources consumption, decided to increase fees on extracted water by 100-200% from the currently fixed GEL 10 per ton to GEL 20
and GEL 30 for still and mineral water respectively. According to Giorgi Kvirikashvili, Minister of Economy and Sustainable Development of Georgia, the change making 3 tetri per bottle of water is insignificant for based on the financial data of water producing companies they are flushed enough to easily optimize expenses without increasing consumer prices.
The new water pricing policy of the country was initiated by the Premier who spotted a corruption deal behind water production inasmuch as companies [he accentuated on the most famous Georgian mineral water Borjomi producer company IDS Borjomi International] were enjoying almost 100-fold profits while the regions providing with water resources were neglected.
“Water should be priced normally so as that the region might feel profit…We will increase price sharply on Borjomi soon. They pay 10 lari per a ton of water and sell a liter bottle for GEL1 [100 tetri] that means the price of Borjomi water in the bottle is 1 tetri-this is the only profit which remains in the region. There must have been a corruption deal,” Ivanishvili said during his press-conference with regional media in this past March and kept the promise. Now regions are expected to have doubled and trebled budgets for tolls remain in municipalities. Water producer companies including the most successful IDS Borjomi [exporting in 40 countries world over] remonstrate the instant increase of toll rate and expect the change to affect their competitive power at global market. Some petty water producers like Sairme and Racha Waters worry they are exposed to an irretrievable blow that will cut out their export and perhaps the business itself.
Irakli Lekvinadze, an economic analyst, agrees that the instant increase of fee may dangerously destroy companies’ plans as far as they made their calculations based on the already agreed license terms. “This is an unfair treatment to investors, if government suspects that there was a corruption deal let it investigate the case and punish the culprit official who backed the corrupted license not the investor,” he told Georgian Journal. “License terms can be revised only after they expire.” However Borjomi for example holds a 25-year-eclusive-license acquired in 2009 and the state cannot wait 20 more years to price water properly while it gets more and more expensive due to global warming process, Ditrikh Muller, co-founder of Georgian Investment Group, thinks. He approves the governmental decision for water is the oil equivalent to Georgia and the state should manage with this resource wisely.
“I would approve even much bigger tolls on water extraction and consumption, since all countries with rich water resources charge their companies much higher. Change in contract terms is not good but this is an insignificant change and will not devastate businesses: nobody deprives companies of their licenses giving them exclusive rights on certain water abstraction thanks to which they enjoy huge profits, they just need to improve management and cut down their profit margin a little bit and allow the country to partake in profits,” he said.

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