Bulgaria will seek EU exemption from excise duties on power and gas

Bulgaria, faced with high power costs and a halt to its supply of Russian natural gas, will ask the European Commission next week to allow it to scrap excise duties on electricity and natural gas to safeguard its economy, the government said on Friday.

The European Union’s poorest member state was meeting over 90% of its gas needs with Russian gas imports until April 27, when Gazprom turned off the tap over its refusal to pay in rubles.

Sofia has managed to secure alternative supplies from neighbouring Greece and has not cut deliveries to clients for the time being, but businesses have raised concerns that any other gas may come at a premium of 20% to 30%.

Electricity costs in the small and open economy have been on the rise since the autumn, prompting the government to freeze prices for households and provide compensation for businesses. read more

The jump in energy and food prices pushed inflation to 12.4% on an annual basis in March, its highest level since July 2008. The centrist government has said it plans to propose a set of measures to ease inflationary pressures later this month.

“One of the measures the cabinet will launch next week is to request a derogation from the EU for an exemption from excise duties on electricity and natural gas,” the government said in a statement.

Bulgaria’s leading business organizations, worried over new gas price spikes, have asked the government to find ways to resume talks with Russian gas supplier Gazprom and extend compensation for the spike in power prices.

Transport companies have threatened national-wide protests, demanding the government halve excuse duty on fuels among other steps that could lower fuel prices.

Sofia has also asked for exemptions from the EU’s planned embargo on Russian oil, as its dominant fuel supplier, Lukoil Neftochim Burgas refinery, processes Russian crude, but has not been offered concessions, one EU source said. [Reuters]