THE SOCIAL REFORM STARTUP

Eka Gabadadze

Two of attempts to privatise the Tbilgazi has failed: first – the tender has been wrecked, and the second – cancelled. As to the third one, it’ll be announced in June 2001. It’s difficult to say, if any of investors desires to purchase the object run into debts.

Nevertheless, one is true that involved in Tbilgazi management American PA Consulting is so busy with preparing the object for privatisation that it looks too optimistic at new investor’s appearance. For today, Tbilgazi is due to paying 50 million laries, including value-added tax, customs duties, ecology and transportation taxes as well as liabilities to Trasgazmretsvi and gas supplier. Because of indebtedness and investment hugeness, the selling price of Tbilgazi reaches to two millions.
Our society is too interested with Current processes in Tbilgazi, as, those, with an easy and engaging scheme, finally define will we be having gas or not. Why is simple. If consumers pay, Tbilgazi will provide gas, and if Tbilgazi does so, it’ll purchase, and vice versa: no money, no gas, electricity, water etc.
Because of a.m. reasons, Tbilgazi tender failed two times, as we’ve already pointed. Two serious companies Itera and AES Telasi were interested in Tbilgazi. For that time, as they say, explanation to failure was intersection of American and Russian intentions. After the second crash of Tbilgazi, the USAID contractor company PA Consulting penetrated the matter and assigned the memorandum on mutual understanding with Georgian side. In brief, PA Consulting does work for inviting the investor. Vastly, an agreement with PA Consulting team does serve for privatisation and intends to find the strategic investor. PA Consulting is providing non-profitable technical guidance for Tbilgazi. According to their recommendation, 22 supervising groups had been established, which have already detected 10 thousand illegal consumers.
As a prior, Contractor Company does concede the reorganisation of distribution. Bringing in the institute of a reader, company will introduce a control upon collectors. PA Consulting is going to introduce a testing equipment supervising the web techniques and computing. In close future, they’re going to transform existing system into one responding to international standards.
Guidance program of PA Consulting intends an aid for Tbilgazi in improving its commercial and financial state. According to specialists, the most important that has to be rehabilitated is the technical part of Tbilgazi and if real investor is found, rehabilitation and the prospect future of Tbilgazi is guaranteed.
According to financial analyse of Tbilgazi carried by PA Consulting, each cubic meter of gas is purchased in higher price then customers do pay for. Thereof, company has no sum for paying the wages to employees, for paying value-added tax etc. Tbilgazi does loose 163 laries for each 1000 m3 of gas, which is considerably higher then its cost price (149 L – 1000 m3). There’s nothing to say about it. However, another reason for loss could be the technical question caused by nonexistence of ordinary repairs. To experts’ opinion, large part of losses is caused by commercial and other managerial matters.
Tbilgazi needs inescapable repair works, for providing the safe distribution of gas first of all. Because of indigence, works like those are hard to carry out. Tbilgazi has always been on state donation. For today, as the donor appears the Municipality of Tbilisi. In the Y2000, budget municipality allocated 1094997 laries for Tbilgazi. In the Y2001 it has already done 3,5 millions. In 2000, 200 thousand laries have been allocated for allowances and 450 thousand in the current one. The reason of subsidies by Municipality is related to nonpayment of gas fee. According to unofficial information, population pays 30-40% of amount due to it. Thereof, Tbilgazi faces the problems with suppliers those threaten with interrupting gas supply.
Tbilgazi’s contract term to international company Itera expired on the 1st of April 2001. Since then, the same JSC Sakgazi does supply the gas that was the mediator between Tbilgazi and Itera previously. On the 1st of April 2001, Tbilgazi and Sakgazi have entered into agreement, according to which Sakgazi will supply 76 million cubic meters of gas during the current year.
Conditions for the first tender of Tbilgazi had been announced in May 9, officially it will be published in the early June. Main conditions imply maintenance of existing tariff, compulsory investment of 75 million laries coverage of liabilities including, 10 millions for supplied gas and the rest of 40 millions for different taxes. The selling price of Tbilgazi, for this moment, is scanty – 2 million laries. However, it’s expectable that none will require 2 millions, if the real purchaser investing 75 millions and covering 50 millions appears.
Preparing works for privatisation is carried out by PA Consulting. They have already worked in Tbilgazi for 5-6 months, scrupulously scrutinising each question concerning tender. Tender conditions will be promoted to the Municipality for the future discussion and assertion. After that, special commission for tender conditions will be established, including officials. In a month after announcing the tender, potential investors should submit their suggestions to the commission. According to foremost conditions, investor will have to maintain the existing tariff, invest 75 millions and cover the 50 million debt. Thereof, we are guaranteed that for the first five year of new investor working, cost for gas won’t exceed 25 tetries per cubic meter. Should also be mentioned that Itera advanced the price for gas by $10 and if previously Sakgazi paid $40 for 1000 cubic meters, now it has to do $50. Even Tbilgazi proves that there was no reason of advancing the price: We do not have the generation source, therefore we receive gas from Russia only. The stability of gas fee and its cheapness depend on supplier prices. Yet, nothing works for advancing the price, but important here is to improve the flexibility of the Tax Code for supporting the low and stable costs.
After privatisation (if tender doesn’t fail), important is to bring the strong control upon incoming amounts. In case of fail, Municipality won’t be able to subsidise gas, which reaches to 3 millions during winter, any longer. Consequently, population will not be having a gas, joining the same winters as previously.