By Atom Markarian
Armenia's notoriously inefficient power distribution companies are continuing to incur huge losses despite government pledges to slash them dramatically this year, it emerged on Wednesday.
The head of the country's independent Regulatory Commission on Energy, Vartan Movsesian, and World Bank experts said the ongoing restructuring of the state-owned power utilities has so far not had a major impact on their performance.
Movsesian predicted that the so-called "excessive losses" of electricity caused by fraud, mismanagement and obsolete equipment will shrink by only about one percent in the first half of this year. "The amount of the losses has a tendency to decline to a certain but not sufficient degree," he told a roundtable discussion in Yerevan.
He said that if the situation does not improve considerably in the coming months the Armenian energy sector will again suffer an annual loss of between $50 million and $60 million.
Much of the losses result from the widespread theft of electricity by power grid managers and their subordinates, making the sector one of the main sources of government corruption in Armenia. Movsisian estimated that it amounted to at least $13 million last year.
"Technically, it is very hard to prove the theft," he said. "Some of the money is being recovered, but on the whole, the problem has not been solved."
The Armenian energy ministry says the four power distribution networks have undergone sweeping restructuring over the past several months. In March, they were merged into a single company, the Unified Electrical Distribution Network. According to ministry officials, some 3,200 jobs have been cut as a result and more layoffs are expected later this year.
Energy Minister Armen Movsisian said last month that the restructuring has already enabled the government to improve collection of electricity bills and vowed to reduce the sector's losses by "by 2.5 to 3 times" in 2002.
But according to Gevorg Sarkisian who coordinates the World Bank's infrastructure projects in Armenia, the amount of the losses remained uncharged in the first quarter of the year. "At least we have not seen any improvement in that regard," he told RFE/RL.
The Energy Commission's Movsesian argued that "administrative measures" alone would not remedy the situation and that the authorities should opt for "radical economic solutions." "The radical solution is their privatization," he said, adding that the sector will be beset by serious financial problems as long as it remains under state control.
After two failed attempts to privatize the troubled utilities last year, the Armenian government is now making preparations for leasing them to a foreign company capable making them efficient. Energy officials have pledged to call an international tender for management rights to the electricity companies by the end of the year. Privatization remains the ultimate goal of the effort.
World Bank officials in Yerevan say the government will stand a better chance of success this time around if it completes the restructuring process and makes the networks more attractive to foreign investors.
Armenia's notoriously inefficient power distribution companies are continuing to incur huge losses despite government pledges to slash them dramatically this year, it emerged on Wednesday.
The head of the country's independent Regulatory Commission on Energy, Vartan Movsesian, and World Bank experts said the ongoing restructuring of the state-owned power utilities has so far not had a major impact on their performance.
Movsesian predicted that the so-called "excessive losses" of electricity caused by fraud, mismanagement and obsolete equipment will shrink by only about one percent in the first half of this year. "The amount of the losses has a tendency to decline to a certain but not sufficient degree," he told a roundtable discussion in Yerevan.
He said that if the situation does not improve considerably in the coming months the Armenian energy sector will again suffer an annual loss of between $50 million and $60 million.
Much of the losses result from the widespread theft of electricity by power grid managers and their subordinates, making the sector one of the main sources of government corruption in Armenia. Movsisian estimated that it amounted to at least $13 million last year.
"Technically, it is very hard to prove the theft," he said. "Some of the money is being recovered, but on the whole, the problem has not been solved."
The Armenian energy ministry says the four power distribution networks have undergone sweeping restructuring over the past several months. In March, they were merged into a single company, the Unified Electrical Distribution Network. According to ministry officials, some 3,200 jobs have been cut as a result and more layoffs are expected later this year.
Energy Minister Armen Movsisian said last month that the restructuring has already enabled the government to improve collection of electricity bills and vowed to reduce the sector's losses by "by 2.5 to 3 times" in 2002.
But according to Gevorg Sarkisian who coordinates the World Bank's infrastructure projects in Armenia, the amount of the losses remained uncharged in the first quarter of the year. "At least we have not seen any improvement in that regard," he told RFE/RL.
The Energy Commission's Movsesian argued that "administrative measures" alone would not remedy the situation and that the authorities should opt for "radical economic solutions." "The radical solution is their privatization," he said, adding that the sector will be beset by serious financial problems as long as it remains under state control.
After two failed attempts to privatize the troubled utilities last year, the Armenian government is now making preparations for leasing them to a foreign company capable making them efficient. Energy officials have pledged to call an international tender for management rights to the electricity companies by the end of the year. Privatization remains the ultimate goal of the effort.
World Bank officials in Yerevan say the government will stand a better chance of success this time around if it completes the restructuring process and makes the networks more attractive to foreign investors.