The government on Wednesday adopted a set of measures to buffer energy price hikes worth almost HRK 5 billion, including a bill of amendments to the VAT Act, decisions to subsidise gas prices for households and small businesses, and once-only aid to pensioners and the socially vulnerable.

The measures enter into force on 1 April, whereby the government is directly helping households and businesses, Prime Minister Andrej Plenkovic said.

The measures are aligned with European Commission guidelines which allow for regulating prices in case of need and justifiable circumstances, he added.

VAT cuts

The government sent amendments to the VAT Act to parliament for fast-track adoption, under which VAT would be reduced from 25% and 13% to 5% on children’s food, edible oils and fats, butter and margarine, live animals, fresh meat and fish, vegetables, fruit, eggs, seedlings, fertilisers and pesticides, food for animals, and tickets for concerts, sporting and cultural events.

The government also proposed a 13% VAT rate on natural gas and heat deliveries, firewood, and menstrual products, among other things, and a 5% VAT rate on natural gas deliveries from 1 April 2022 to 31 March 2023.

The VAT cuts are estimated at HRK 2.1 billion.

Gas subsidies for households and businesses

To buffer the impact of gas price hikes, the government decided to subsidise the price for households with HRK 0.10/kWh as well as the price for microbusinesses and SMEs, whose average annual consumption is up to 10GWh, with HRK 0.15/kWh.

The cost of the subsidies is HRK 1.2 billion and will be financed by selling greenhouse gas emission units at an auction in Croatia. The government estimates that the revenue from the sale of those units by 2025 will amount to HRK 4.72 billion.

The government also decided to release 22,000 tonnes of diesel on the market to be sold at market prices.

Measures for the socially vulnerable

At the moment 51,000 persons eligible for a minimum allowance and 40,000 persons eligible for disability benefits and members of their households receive HRK 200 a month for their electricity bills. Today the government decided that 5,700 elderly persons eligible for the national allowance will also be entitled to this monthly allowance.

As of 1 April, this HRK 200 allowance will be doubled to cover the gas bills. The annual cost of this measure will be HRK 300 million.

The government also adopted a decision on a monthly allowance, ranging from HRK 1,000 to 4,000, for 1,100 providers of social services for 40,000 persons.

Also, 2,570 foster families and 6,000 beneficiaries will be entitled to a HRK 400 monthly allowance, which measure will cost HRK 33 million.

The government tasked the Environmental Protection and Energy Efficiency Fund with paying HRK 1.2 billion from the auction sale of emission units into the state budget to be used as direct support to energy end buyers.

Energy allowance for pensioners

The government adopted a decision on a once-only allowance for 721,000 pensioners whose monthly pension is up to HRK 4,000.

Those whose pensions are up to HRK 1,500 will receive a HRK 1,200 allowance, those with pensions between HRK 1,500 and 2,000 will receive HRK 900, those with pensions between HRK 2,000 and 3,000 will receive HRK 600, and those with pensions between HRK 3,000 and 4,000 will receive a HRK 400 allowance. The cost of this measure totals HRK 480 million.

Aid to farmers and fishermen

The set of measures also envisages aid for 88,000 family farms estimated at HRK 200 million and for fishermen in the amount of HRK 75 million. This aid is subject to approval by the European Commission.

(€1 = HRK 7.5)