Fiscal Policy Institute proposes overhaul of heating subsidy system

Tashkent, Uzbekistan (UzDaily.uz) — The Institute for Reducing the Shadow Economy, Improving Tax and Customs Administration and Fiscal Analysis under Uzbekistan's Ministry of Economy and Finance has proposed replacing universal heating tariff subsidies with targeted social assistance for low-income households. The initiative was presented on 30 July during a fiscal dialogue.

According to the presentation, total heating subsidies in Uzbekistan are estimated at 3.8 trillion soums in 2026. Of that amount, 2.9 trillion soums, or 77%, is allocated to Tashkent. Households currently pay less than 20% of the base tariff, which stands at 711,600 soums per gigacalorie, while the remaining cost is covered by the state budget.

The authors of the proposal note that Tashkent's centralized heating system is largely financed through budget subsidies, whereas in most other regions of the country heating costs are primarily covered by consumers.

The institute says the current model has several shortcomings, including the provision of subsidies regardless of household income or property ownership. The presentation also highlights differences in tariffs for legal entities, with budget-funded organizations paying 952,800 soums per gigacalorie and other organizations paying 342,300 soums.

Instead of the current system, the institute proposes the gradual introduction of a social consumption norm. The proposed baseline would be 60 square metres of living space per household or 16 square metres per registered resident. Any area exceeding that threshold would be charged at the full base tariff.

The institute also proposes gradually increasing charges for second and subsequent residential properties from 40% of the base tariff to 100%. For legal entities, it proposes raising the share of the base tariff they pay from 60% to 80%, and then to 100%.

In the medium term, the authors propose replacing universal subsidies with targeted cash assistance for eligible citizens through the Unified Register of Social Protection.

According to the presentation, the current payment system would remain unchanged for 45.4% of apartments in Tashkent with a floor area of up to 60 square metres.