Uzbekistan to develop preferential electricity tariffs for areas not connected to the gas network

A proposal has been put forward in Uzbekistan to change the excise tax system for alcoholic beverages, which involves increasing excise duties while simultaneously lowering final retail prices.

According to a study conducted by the Institute of Fiscal Studies, it is proposed to introduce a unified excise rate of 70 thousand soums per liter. It should be noted that as of July 1, 2026, in accordance with World Trade Organization (WTO) requirements, the current price for a liter of hard liquor in the republic is 63 thousand soums. This amount consists of an excise rate of 48 thousand soums and a rate for ethyl alcohol of 15 thousand soums.

The Institute suggests increasing the excise rate from 63 to 70 thousand soums in 2027, but taking into account the projected alcohol rate, which is estimated at 25 thousand soums. Thanks to this change, the cost of one liter of vodka could potentially drop to 45 thousand soums.

Furthermore, due to the increase in excise taxes next year, including fortified wine (increasing from 12,000 to 12,600 soums), natural wine (from 10,000 to 10,500 soums), and beer (from 4,000 to 4,200 soums), the country's budget could receive an additional 62.1 billion soums, according to the institute's calculations.

For the successful implementation of these measures, it is proposed to make corresponding amendments to the Tax Code and develop a special support program for entrepreneurs. This program should include duty-free import of equipment, provision of preferential loans, and simplification of the certification procedure. Analysts also recommend publishing excise rates for a three-year period in advance.

It was previously reported that in 2026, Uzbekistan will begin the phased equalization of excise rates for both domestic and imported alcohol and tobacco, in line with WTO requirements.

The Institute for Reducing the Share of the Shadow Economy, Improving Tax and Customs Administration, and Fiscal Analysis at the Ministry of Economy and Finance has put forward an initiative to begin preparations for introducing a carbon tax for large production facilities in Uzbekistan. This proposal was presented on July 30 during the 'Fiscal Dialogue' event.

According to the institute's plan, the preparatory stage should take place throughout 2027. This period will include tasks such as inventorying emissions, determining rates, selecting the tax base, and establishing the circle of companies that will be taxpayers.

The carbon tax itself is scheduled to be introduced in 2028, starting with the largest emitters. Subsequently, its application could potentially be extended to other enterprises. Two options are considered as the basis for calculating the tax: either the actual volume of carbon dioxide emissions or the volume of carbon fuel consumed.

It is planned that between 2029 and 2030, the tax rates will gradually increase according to a pre-approved schedule, although the exact parameters are currently under development. The fiscal effect of introducing the tax is expected to appear as early as 2028.

Goals of introducing a carbon tax

Institute experts believe that introducing this tax will allow the cost of emissions to be accounted for in the overall expenses of enterprises. This, in turn, should motivate companies to work on improving energy efficiency and reducing pollution levels.

Another important motive is the need to comply with international carbon regulation standards. Implementing internal pricing for emissions can minimize the likelihood that exporters from Uzbekistan will face the need to pay carbon levies outside the country.

It is important to note that this proposal is purely analytical and is not yet an approved legislative act or bill. Previously, in 2020, the publication 'Gazeta' covered international experience in carbon taxation. The essence of such a tax is to make pollution economically unviable: the more fuel consumed by both private households and companies, and the higher their emissions, the more they pay. Those who achieve emission reductions and improve energy efficiency do not incur such high costs.

An example from international experience is Canada, where the carbon tax was integrated into the cost of gasoline, natural gas, and other types of fuel. Furthermore, most of the collected funds were returned to citizens or used to subsidize energy-saving measures. This model is designed to encourage those who pollute less and increase the financial burden on large fuel consumers.

A recent achievement was Uzbekistan receiving the world's first payment from the World Bank for confirmed reduction of carbon dioxide emissions in June 2024. A grant of $7.5 million was transferred for a reduction of 500 thousand tons, which could potentially increase to $20 million. This payment was made under the iCRAFT project, which aims to improve energy efficiency, reduce state subsidies on energy, and develop carbon financing mechanisms. Part of these funds is planned to support families most affected by rising gas and electricity tariffs.

Previously, the World Bank indicated that Uzbekistan could effectively use carbon pricing, whether through introducing an emissions tax or through quota trading, to finance the transition to 'green' technologies and stimulate enterprises to reduce pollution levels.

The Institute for Reducing the Share of the Shadow Economy, Improving Tax and Customs Administration, and Fiscal Analysis at the Ministry of Economy and Finance has proposed changing the current system of heat supply subsidies in Uzbekistan. This initiative was announced on July 30 as part of a fiscal dialogue.

Instead of continuing to compensate tariffs for all consumers, the institute proposes transitioning to a model of targeted social support for households that genuinely need it.

According to data presented in the presentation, the total amount of subsidies for heat supply across the republic will reach 3.8 trillion soums in 2026, with 2.9 trillion soums, or 77% of this amount, allocated to Tashkent.

The current situation shows that the population pays less than 20% of the basic tariff, which is set at 711.6 thousand soums per 1 Gcal, while about 80% of the cost is covered by the state budget. The authors of the proposal point out that centralized heat supply in Tashkent heavily relies on these budgetary compensations, whereas in most other regions, the household directly bears the cost of heating.

One of the significant shortcomings of the current system, according to the institute, is its non-targeted nature, as subsidies are provided regardless of the consumer's income or property status. Furthermore, there are differences in tariffs for legal entities: budgetary organizations pay 952.8 thousand soums per 1 Gcal, while other legal entities pay 342.3 thousand soums.

Proposed changes to the payment system

The institute proposes gradually introducing a social consumption norm. Preferential payment conditions may apply to housing up to 60 square meters per household or 16 square meters per registered resident.

For the area exceeding the established social norm, the basic tariff is proposed, which means a 5.1 times increase in payment for the population compared to the current rate (139,860 soums per Gcal). There are also plans for the gradual transition of second and subsequent residential premises to the basic tariff, with the share of payment increasing from 40% to 100%.

For legal entities, it is proposed to gradually increase the share of the basic tariff application: first from 60% to 80%, and then to a full transition to 100%. In the long term, the institute advocates abandoning tariff subsidies in favor of targeted cash assistance for those in need, which will be distributed through the Unified Social Protection Register.

However, for a significant portion of citizens, the payment procedure may remain unchanged. The presentation showed that 45.4% of apartments in Tashkent are no more than 60 sq. m, and the current payment terms will be maintained for them.

Status and context of the proposal

Following reports of a possible fivefold increase in tariffs, the Institute of Fiscal Analysis at the Ministry of Economy and Finance clarified that this proposal represents only an analytical development by staff and is not an official decision, bill, or regulatory document. Current tariffs and payment rules for heat supply remain unchanged.

The institute emphasized that the goal of the initiative is not a general increase in payment but a shift in focus from subsidizing all consumers to providing targeted support to those who need it. The preferential tariff remains within the social norm: 60 sq. m per household or 16 sq. m per person. For a family of four, this norm will be 64 sq. m.

According to the institute's estimates, this approach will not change the payment procedure for 45.4% of apartments in Tashkent with an area of up to 60 sq. m. In the medium term, needy families will receive targeted financial assistance through the Unified Social Protection Register. The study was presented at the 'Fiscal Dialogue' for expert discussion and aims to find fairer methods of distributing budget support.

Previously, in December 2024, Deputy Prime Minister, Minister of Economy and Finance Jamshid Kuchkarov noted that the heat supply problem is more complex than problems with electricity and gas, due to the large difference between the market value of heating and existing tariffs. He also pointed to issues related to the lack of meters and outdated, energy-intensive equipment.

In July 2025, Ilhom Turayev, chairman of 'Issiklik Ta'minoti', stated plans to completely abolish subsidies for heating and hot water in Uzbekistan by 2030, noting that tariffs will be indexed once or twice a year, which will allow for a gradual reduction in the volume of subsidies.