On February 8 2008, Turkmenistan’s president Gurbanguly Berdymuhammedov held an extensive Cabinet session where the major courses of Turkmenistan’s economic reform were discussed. One of the key issues was a petrol price shake-up that promptly caught the population’s attention and caused a nationwide panic among car drivers.
President Berdymuhammedov has put significant efforts into reforming the country’s economic and trade sectors in order to make them correspond to international standards and to move toward a market economy. Mr. Berdymuhammedov recently embarked on a project designed to conduct financial reforms by establishing a single exchange rate and declaring a currency denomination starting from 2009. As a part of his Cabinet speech, Mr. Berdymuhammedov spoke of developing a private sector by giving the growing businesses more incentives, such as tax relief and low interest rate loans. However, many wonder why the president would increase the price of petrol by a factor of almost ten while salaries remained unchanged.
Under the state welfare program, the population of Turkmenistan has consumed natural gas, electricity, salt and drinking water free of charge and petrol prices have been next to nothing. At the Cabinet meeting on February 8, Berdymuhammedov put an end to the old system of petrol trade by signing a new plan devised by his deputy prime minister for the oil and gas sector, Tachberdy Tagiyev. Starting from February 11, one liter of petrol costs between 2,800-3,100 manats, equivalent to 15-20 U.S. cents. Previously, one liter cost 1,5-2 cents (cheaper than a glass of soda), ten times under the newly established prices.
Despite the new price hike, the price of petrol is still significantly lower than in neighboring countries, let alone international rates. However, it strikes hard in the pockets of ordinary drivers and the general population. Upon hearing the news on February 8, car drivers hurried to petrol stations the next day, forming lines of several hundred meters, in an attempt to store extra petrol before the new rule took effect. Transportation prices in central cities and for intercity routes almost doubled. The symbolically low prices remained unchanged only for the government-subsidized transportation services in the capital city, Ashgabat. Similar buses for public transportation have long been anticipated in other cities around the country but have yet to appear. The radical shift to change the price has also caused a price increase for common consumer goods and most of the manufactured goods in the market.
The new regulation was met by muted but aggravated reactions. The people who used to pay almost nothing for petrol received the ten-fold increase with disbelief. A series of random interviews held among different layers of local society revealed that the majority of the population is disappointed with the reformist policies of the government. Some are hesitant to criticize the move, and regard the decision to stop a massive illegal flow of petrol and smuggling in other oil products into the neighboring countries as correct. As stated by petrol station employees, the increase in the price of petrol and diesel fuels will also affect the foreign heavy load trailer truck drivers who have benefited from low-priced refueling on their transit route through Turkmenistan.
In order to mitigate heavy resonance from the price hike, the authorities simultaneously introduced a system of rationing by establishing a quota of free petrol for Turkmen citizens. Consequently, car drivers are entitled to receive 120 liters per month, while trucks, buses and tractors receive 200 liters, and all types of motorcycles 40 liters of free petrol. Anything beyond the fixed allowance will be sold at the new price rates. The monthly allowance is given by issuing car owners with special coupons, which are distributed and obtained through the country’s banks. However, obtaining the coupons for 120 liters of free petrol has already caused irritation among drivers. First, drivers complain that the allocated monthly amount is insufficient. Secondly, due to the limited number of banks in the smaller districts of the country, thousands queue to acquire the daily coupons, causing many drivers to give up their entitlement for a free allowance.