Romanian City Halls Must Ensure Heating Subsidy From Local Budget

The new measures, which eliminate the thermal energy subsidy granted from the state budget, are stated in a draft Government emergency ordinance.

The Government currently subsidizes up to 45% of fuel costs of thermal power producers. Local budgets also cover a part of these costs.

The draft emergency ordinance repeals the provision whereby local reference prices are set by regulators, with the approval of ministries with authority on the matter, and allows mayoralties to approve heating prices lower than prices of thermal energy production, transport and distribution.

Under the draft decree, local authorities must cover the difference between the price charged by suppliers and that price set by mayoralties exclusively from the local budget.

If local authorities fail to cover the respective sum from local budgets or fail to pay the sums owed to thermal energy suppliers, the Government will cut a significant part of the funds meant for local budgets.

According to the Government, thermal heating subsidies will be granted only to families on low income.

According to Government estimations, the state budget will save 702.5 million lei (about EUR166 million) in 2011 after eliminating the heating subsidy, and about RON944 million in the next four years.

Early May, the Government pledged during talks with the International Monetary Fund to eliminate the thermal energy subsidy by the end of the year, which could increase household heating bills by up to 60%, depending on the mayoralties’ capacity to cover the difference.

Jeffrey Franks, the head of the IMF mission to Romania, told MEDIAFAX the government plans to eliminate the subsidy granted from a central level by the end of the year, with the exception of social cases, who may even receive an increase.

(EUR1=RON4.2160)