The head of state has appointed Anatolii Blyzniuk, ex-chairman of the Donetsk Oblast Administration, as Minister for Regional Development, Construction, Housing and Public Utilities. Now the latter “has the honor” of following all that is going on in the “problem sectors” of the economy. It is not an exaggeration, for the crisis has slashed the promising growth rate in the construction industry, while the public utilities sector can be hardly expected to raise the reputation of its top administrator because it has not been modernized for too long a time and the current poor condition of Ukrainian water and heat mainlines is the talk of the town.
Yet this fact seems to be of little concern for the new minister. As Blyzniuk himself admits, he is a “teammate” and will therefore be fulfilling the task set by the president to reform these two sectors. According to Blyzniuk, the Ministry of Public Utilities and the Ministry of Regional Development and Construction will have been finally disbanded by fall. He confesses that a number of not so popular decisions will have to be taken in the process, including the dismissal of about 72 people. Concurrently, the ministry is going to map out an updated strategy of development in the construction and public utilities sectors before the autumn. Besides, Blyzniuk told journalists of the leading media, including The Day, about the main directions of the expected reforms. Here is a brief account of the minister’s vision of reforming the construction and public utilities sector.
ECONOMICALLY SOUND RATES BASED ON PRIME COST
According to the Minister for Regional Development and Public Utilities, public utility rates in Ukraine are being set by local government bodies and, hence, differ from one another. And very often the applicable rate runs counter to real expenses for producing a certain public utility service. So the state compensates for a difference between the prime cost and the actual rate by means of the budget; otherwise this difference bears heavily on heating and public utility companies as their accounts payable. Therefore, the reform should iron out price and rate irregularities and bring the rates to a common indicator. “We should not raise the question of rate increase just to be with it. We must see and take into account the structure of prime cost,” Blyzniuk says, answering The Day’s question about the new mechanism of economically sound rates. Speaking of the specific dates when these rates are to be introduced, he pointed out that his ministry would prepare the overall ideology of public utilities rate formation before the beginning of the heating season. “We start the heating season and begin to form our next year’s budget policy with a clear-cut idea of what should be done with the rate: if we are to raise it, this should be done in a way that people do not suffer from this. We are going to work out the ideology of this process, and then the relevant public administration bodies will make a decision. Should a law be needed, the Verkhovna Rada will pass one,” he further said.
But it is not the minister who will make the final decision on the new rates’ value and dates of introduction. While his predecessors were constantly accused of dillydallying with this problem, the current head can feel much easier. The point is that, in compliance with presidential Decree No. 743/2011 dated July 9, 2011, the National Commission for the Regulation of Public Utility Services has been established. This entity will in fact shoulder the whole burden of setting economically sound rates and shaping a single governmental policy of public utilities rate formation.
For this reason, Mr. Blyzniuk is unable to name the precise value of the new economically sound rates. But he said, when asked by The Day, that he favors introducing differentiated water rate, depending on the actual consumption level. “While a European consumes today 75 liters of cold water and 75 liters of hot water (i.e., a total 150 liters) a day, we do 360 liters. Then we must say that 150, 200, and 300 liters will go at altogether different prices. This requires a differentiated approach, as is the case in the civilized world. Incidentally, this provision is already working in this country, as far as electricity and gas are concerned,” he said.
ONLY A FULL-SCALE OWNER CAN BE AN EFFECTIVE USER
Today, 98 percent of buildings in Ukraine belong to individuals rather than the state, Blyzniuk says. Nevertheless, the latter is in fact forced to spend money to keep up their physical condition, even though the law sets out that if more than 50 percent of the apartments have been privatized, the building is to be no longer funded from the budget but should be placed on the balance of the owners. Still, there are not so many condominiums today. In the minister’s view, their number will grow if there are sufficient incentives. He particularly promises to lobby the adoption of a law that will allow transferring the right to own the land under such buildings and the nearby territory to condominium residents. There is hardly a different way to solve this problem, he says.
PUBLIC UTILITIES TO BE MODERNIZED AT INVESTORS’ EXPENSE
Blyzniuk estimates that it will cost about an average 40 billion hryvnias to refit the public utilities system in a region. Obviously, it is impossible to find such funds in the budget for the entire country. For this reason, the ministry has already begun to draw up a number of public utility programs for 2012 at a total cost of 700 million dollars in order to attract investors. According to Blyzniuk, there are already at least 15 donor organizations that offer grants and loans for these purposes. This first of all applies to household meter programs. “Today, 6,000 elevators in this country are not working, and 3,000 of them have been out of order for more than two years. So we are going to suggest in 2012 that these programs be funded under an absolutely different ideology,” new minister says, speaking of investment programs. “The ministry is spending 140 million hryvnias today in various directions,” he also adds.
Besides, Blyzniuk noted that the ministry wants to take part in two donor programs to raise funds for public utility projects. The minister said, incidentally, that “the Swedes will make us a project” consisting of heavy repairs at residential buildings.
