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. Last Updated: 07/27/2016

Government to Scrap Limit, Hike Duty on Fuel Exports




The government has announced it will scrap quotas on fuel oil exports while raising the export duty as of July 1.


Industry analysts hailed the measures Friday as a significant step forward in the new government's drive to establish a more transparent, free-market economy.


"Provided that the new system actually comes into effect, we see it as a sure sign that the government is implementing a rational and market driven policy," said United Financial Group in a market note Friday.


The move will not only make the market for the oil product more efficient, but also lead to higher tax revenues for government, analysts said.


Energy Minister Alexander Gavrin said Thursday that the ministry will no longer try to protect domestic buyers through fuel oil quotas but instead try to keep production at home by imposing a higher export duty.


The duty will be raised from the current 12 euros ($11.29) a ton to 20 euros in July and then possibly to 27 euros Aug. 1, depending on the world market prices for fuel oil, Vedomosti quoted Deputy Prime Minister Viktor Khristenko as saying.


"These will be regulatory, not prohibitive, duties," Gavin was quoted by news agencies as saying. "They will have to encourage companies that export fuel oil to work on the domestic market."


The government has long kept a tight grip on fuel oil exports, largely to prevent the country from running out of electricity. It feared that the nation's main customer of the commodity, power giant Unified Energy Systems, would face severe shortages if suppliers were allowed to pick freely between the local market and the more lucrative foreign market.


Fuel oil sells for about $40 a ton domestically and $120 a ton abroad.