Gas for flowers

Flower prices in Kharkiv are outrageous. The first thing that occurs to buyers is to blame sellers for excessive greed — they are cashing in on beauty. But only those uninitiated into the secrets of flower-related calculations can think so. Whereas in the past a greenhouse could guarantee its owner a stable, albeit small, income, now it only brings losses. “Greenhouse owners spend the bulk of their money on gas the price of which has now skyrocketed,” entrepreneur Serhii Ostroverkh says, “and the biggest stupidity is that we have been classified as rich, so we have to pay even a higher price than industrial enterprises do.”

In the first years of independence greenhouses began to mushroom around this regional center. They grow vegetables and flowers that are in demand not only in Kharkiv oblast and neighboring regions but also in Russia, from where wholesale buyers flock to Ukraine. Business seemed lucrative, and Ostroverkh went into debt to build rose-growing greenhouses in his private backyard. Now he and his wife slave every day, including weekends and holidays. They water, weed, and prune flowers, fertilize the soil, and see to it that the plants do not get sick. They do this from dawn to dusk all year round.

His wife Tetiana’s hands no longer look soft and well-tended: they are pricked by rose thorns because it is not convenient to work in gloves. “This is a manual, hard, and thankless job, but I am forced to do it because I cannot find a better place, even though I have two higher degrees,” Serhii sighs and begins to tell me how prices are formed on the flower market. It turns out that greenhouse owners have to sell their hard- grown produce to wholesalers at absurdly low prices. For example, one good rose may go for one hryvnia or even 50 kopecks when it is sold to a wholesaler.

It was great when the Russians were coming because three or four hryvnias for a flower is very cheap for them, and they were ready to buy everything down to the last flower in the greenhouse. Now that they have to pay cross-border duty, they come only on holidays to buy large batches from wholesalers, throwing producers on their “tender mercies.” Those who sell flowers at marketplaces don’t feel any better. Tagging a price to their commodity, they cannot help factoring in consumers’ purchasing power.

When gas prices shot up, greenhouse owners ended up on the rocks. They are facing a dilemma: to wind up a loss-making business or continue their struggle for survival with no apparent chances of success. There is no use hoping for the government’s help.

Kharkiv oblast governor Arsen Avakov recently urged the Ukrainian parliament to revise gas prices for individual users. His argumentation is that, as a result of the introduction of a new mechanism for fixing gas prices by a decision of the Cabinet and the National Commission for Energy Regulation in December 2006, about 30 percent of rural residents have to pay 980 hryvnias per thousand cubic meters of gas. The governor complains that during last year’s harsh winter, when consumption of heating gas rose steeply, people who used tens of thousands of cubic meters of gas for heating posh villas and those who consumed much less to heat typical village homes paid the same price.

Some time later the governor assured consumers that the average price for rural heating gas would be reduced to 315-440 hryvnias per 1,000 cu. m. However, the regional administration’s official Web site explained that these prices would not be applied to those who consume large quantities of gas to heat multistory mansions.

When the differential gas tariffs were being introduced, it was thought that the rich would pay for the poor, but is it really possible to tell a rich man from a poor one by the amount of gas he consumes? Ostroverkh says that a rich man does not dig earth all day to grow flowers. It takes a large amount of gas to heat a greenhouse, so it is next to impossible to meet the yearly quota of 12,000 cu. m. As a result, rural entrepreneurs have to pay the highest tariff of UAH 1,173 per 1,000 cu. m., which is even higher than UAH 960, the price paid by industrial and commercial enterprises. Is this what you call government support of rural residents and small-scale business in general?

Viktoria Radchenko, head of the State Committee for Entrepreneurship office in Kharkiv, reported optimistically last year that small-scale and medium business output has been increasing by an annual 3 to 5 percent in the past few years. This economic sector markets about 15 percent of the region’s total products and services and employs about 400,000 people, 32 percent of the region’s total working population. The figures are staggering. According to Radchenko, there is a relationship between the development level of small- scale business and state support for this sector. Ostroverkh objects, “I don’t see any support. Yes, we could do without their help if only they didn’t strangle us with such prohibitive gas prices. In whose way are we standing to get this raw deal? We aren’t demanding any special privileges, but we, private producers, want to have a reasonable gas tariff to be able to boost our output. After all, we pay the same price per unit of a certain commodity, no matter whether we actually take one or a thousand units of a product. But gas is also a commodity, so why does its price go up depending on the quantity we buy?”

Ostroverkh can quote by heart from the Constitution of Ukraine. “Individuals shall enjoy the same constitutional rights and freedoms and be equal before the law,” so “there can be no privileges or restrictions on the basis of race, color of the skin, political convictions, property ownership status, or place of residence.”

“But the current tariffs,” Ostroverkh continues, “divide us according to the property ownership principle. I don’t know to whom I should go for help; who can challenge this injustice. There is still a glimmer of hope that the government will not leave us in the lurch and will correct the fallacy of the bureaucrats who drew up these tariffs, because for us, greenhouse owners, it is a question of survival.”