Andrius Romanovskis, president of the Lithuanian Business Confederation, says that he is not receiving any answers from the Government, although 120 million. euros could cover the electricity bills of the entire Lithuanian business for one month up to 24 ct/kWh.
The dialogue with the Government is not helped by the fact that in May of this year the Lithuanian Business Confederation awarded almost half of the cabinet: Prime Minister Ingrida Šimonytė, Minister of Foreign Affairs Gabrielia Landsbergi, Minister of Social Security and Labor Monika Navickienė, Minister of Economy and Innovation Aušrinė Armonaitė, Minister of the Environment Simona Gentvila .
Where did it go? 120 millionhuh?
That the Government really promised to allocate 120 million euros for compensating the prices of energy resources, can be confirmed by looking at the slides prepared by the Ministry of Finance, which presented this year’s state budget amendment project.
The amendments to the Energy Law indicate that after assessing the financial possibilities, support can be provided from state funds to partially compensate the costs of non-domestic consumers for consumed electricity and natural gas.
And the Law on the Approval of the Financial Indicators of the State Budget and Municipal Budgets of 2022 states that the Ministry of Finance is given the right “to distribute to economic entities the funds provided for in the appropriations of the Ministry of Finance for the costs of compensating part of gas and electricity prices to natural and legal persons”.
Thus, although the laws provide for business support when the prices of energy resources increase, it is not received in practice, says A. Romanovskis, president of the Lithuanian Business Confederation.
“When the discussion was going on, the price reimbursement for business was one of the key elements of that whole reimbursement package that was linked to the budget review. Now we see that so far there are no means or ideas to compensate the business or help fight the prices. As far as we raise that question, there is no answer,” said the president of the Lithuanian Business Confederation.
“Those 120 million is included in the package with compensations for domestic consumers, but for now the promise remains only a promise. Maybe it was hoped that they would not be needed, that the prices would not rise? But we clearly see that right now the support that was planned by the Seimas is very much needed,” says A. Romanovskis.
According to the interviewer, the Seimas have allocated 120 million. EUR could be given to businesses as a subsidy through the tariff, but only to those businesses that suffer the most from rising energy resource prices.
“We believe that one of the criteria for support could be that if in the cost structure the costs for electricity account for more than 10 percent, then the state could provide such companies with at least basic offers – for example, subsidizing part of the price. A significant part of the price for electricity consists of the distribution and transmission taxes of state-run entities, these are exactly the amounts that could decrease for business, and the state would subsidize that part for its companies”, believes A. Romanovskis.
According to the President of the Lithuanian Business Confederation, 120 mln. euros would be enough to compensate for one month’s electricity costs for the entire Lithuanian business up to the rate of 24 ct/kWh.
“This could cover the monthly expenses of the entire Lithuanian business from the current 45-50 ct/kWh to 24 ct/kWh. And that is a lot. But there is no need to compensate the whole business, besides, not in the cost structure of the whole business, electricity costs make up a significant part and that subsidy can be lower, not necessarily up to 24 ct/kWh, it can be up to 30 ct/kWh, but it could be at least for a couple of months soften the blow. There is enough money here,” explains A. Romanovskis.
When asked what response the business receives from the Government when asking about the support planned for this year, A. Romanovskis said that it is mostly positive, that everything is calculated and thought about.
“All those answers are such that I can’t boast that we have a clear answer. We don’t have a ‘no’ answer, but we don’t have a ‘yes’ answer either. My hunch is that those 120 million euros were planned for one purpose, such an idea was sold to politicians, and then it was thought that the money could be directed somewhere else”, the president of the Lithuanian Business Confederation thought.
From 120 million distributed 5 million euros
The Ministry of Finance explains that out of 120 mln. EUR 90 million, which are planned in this year’s budget draft. EUR is allocated to the Ministry of Environment’s measure, which would help businesses invest in energy conversion. This is, as the ministry explains, the replacement of fossil fuel boilers with heat pumps, biofuel boilers, solar collectors (except for the installation of wind and solar power plants for electricity production).
That this is somewhat of a scam is evidenced by the fact that the draft budget was revised in May of this year (similarly at that time, about 120 million euros of business support was announced), and at the end of June, the Ministry of the Environment announced that 5 million euros were allocated for the first projects this year. euros, but the remaining 85 million EUR is intended to be used in 2023-2024.
In other words, the already planned and “slow” measure was likely introduced as a new aid to business after Russia’s war in Ukraine drastically increased the prices of energy resources.
Another 30 million EUR, according to the Ministry of Finance, will be allocated to sectors affected by the rise in electricity and gas prices, which do not have the possibility of conversion due to technological reasons.
“The need and sectors will become clear after receiving applications from business companies for the above-mentioned investment activities of the Ministry of the Environment,” says the Ministry of Finance. This may mean that the aforementioned 30 million euros can be planned for the coming years.
The Ministry of Finance says that 2.26 billion EUR 253.7 million was also incorporated into the package. euros from European Union funds and all of this should go to the installation of solar, wind power plants and electricity storage batteries in business, hydrogen production equipment from renewable energy resources, “green” renovation of buildings for the production of wood components, technological equipment renewal and investments in biofuel and hydrogen production technologies.
It can be assumed that, with the exception of investments in renewable resources, direct support measures for business, such as partial compensation of energy resource prices, tax reductions, are currently not foreseen.
The Ministry of Finance, like most ministries, only says that various calculations are currently being made, and work is being done on a package of proposals for next year.
“It is predicted that high energy prices in international markets will remain for some time, so businesses must make sustainable investment decisions and ensure lower bills in the future.” For this, together with the Ministry of Energy, a financial package is currently being prepared, which will contribute to the long-term energy transformation and lower bills not only for businesses, but also for people,” the Ministry of Finance says.
It is believed that no European country directly supports business, but this is not true
Representatives of the Lithuanian Government usually communicate that no European country directly supports business entities.
“I want to point out that today there is not a single country that subsidizes business. Except maybe Croatia is thinking about these things, and so is Poland, other countries, but just now that wave is starting. With us, those aid measures are currently being put together”, said Energy Minister Dainius Kreivys at the September 15 meeting with the “Vardan Lietuvos” faction of the Democratic Union.
However, for example, Germany already started paying subsidies to companies in the sectors affected by the Russian war in Ukraine on September 12.
Bloomberg reported on September 21 that the United Kingdom intends to allocate 40 billion pounds (45.8 billion euros) and will partially offset the increased prices of energy resources for business for as long as six months. This means that electricity will cost businesses no more than 21.1p per kilowatt hour (24c/kWh) and 7.5p for gas (0.09c).
Balkan Energy News reported back on May 17 that Bulgaria will continue providing subsidies to companies for electricity and natural gas consumption for May and June. Then there were budget adjustments from July.
The Greek Reporter reported on August 23 that the Greek government intends to double subsidies for both residents and businesses for energy resources.
Bruegel has produced an overview of European countries on how countries support citizens and businesses. For example, it is written about Bulgaria that the country will be at the end of 2022 decided to compensate businesses for electricity prices. the aid was continued, and the increase in gas prices was partially compensated from May. The formulas for how much is compensated have changed a bit over time, but the support itself has remained.
Cyprus also promised to subsidize from 50 to 80 percent. energy consumption: it is said that, excluding the population, it will affect about 111 thousand companies. In June, the Czech Republic allocated 2.7 billion to help businesses. euros, then added another 81 million. euros. In Estonia, according to Bruegel, electricity distribution taxes for business have been waived, and in France the fixed tax for electricity (excise duty) for business has been reduced from 22.5 euros per megawatt hour to 50 cents. In Greece, business is partially compensated by the increase in electricity and natural gas bills, and various similar measures are applied by other countries.