Petroleum Authority restructuring fuel subsidies

[TonyC]

Petroleum Authority restructuring fuel subsidies

The government is determined to restructure subsidies on petroleum products so that only those who truly need the subsidies would be able to benefit from them, said Petroleum Minister Osama Kamal on Monday.

“We subsidized petroleum products with LE114 billion last year, 80 percent of which went to people who didn’t actually need [the subsidies],” Kamal said in a press conference.

“We have not yet finalized a new policy. Once we do, we shall open it up to dialogue,” he continued.

The minister added that according to current plans, diesel fuel used by minibuses and tuk tuks would remain subsidized. Fuel used by buses of private universities, yachts and tourist facilities, on the other hand, would be re-priced to cost.

“It was our sovereign decision to restructure subsidies,” Kamal said. “We are not being pressured by any outside force.”

He added that the government is set to provide a strategic stockpile of butane gas that would last for 15 days to help stave off the fuel shortage problem, and that President Mohamed Morsy would allocate US$1.5 billion to cover butane gas imports.

“We stopped exporting gas in June due to growing domestic need,” Kamal said. “And we are now considering importing gas from Algeria and Qatar.”

Petroleum Ministry undersecretary Mahmoud Nazim said subsidized butane gas cylinders would be distributed via a system of smart cards and coupons.

“We would thereby save some 80 to 90 percent of the subsidies,” he explained.

Nazim added that the distribution pipeline project, Erot Smart, would be rolled out through select, authorized distributors which would be equipped with machines that would distribute the cylinders once consumers swiped their smart cards.

Butane gas subsidies stood at LE20 billion the 2011/2012 fiscal year.

http://www.egyptindependent.com/news/pe ... -subsidies

[Hafiz]

I've read that he fuel Imports have been increasing at a surprising rate - haven't read anything which explains it..

If the fuel subsidy is removed for the rich and corporations then demand for imported fuel/oil should go down. Sort of a win win to the budget and the trade balance both of which the government desperately needs to reduce. How this subsidy ever got set up is almost a crime - the big winners were always corporations and trucking companies and the Egyptian taxpayer payed. One problem however, lost of products (like food) have a fuel cost hidden in them (like transport).

The ideas on how to administer the new subsidy program should be a training school for corruption.

I can't understand the gas problem. When I last read about it Egypt was a major exporter of gas - principally to Israel. Then there were some problems with bandits/terrorists blowing up the Sinai lines and with the contract with Israel (allegedly corrupt). Seems this export has stopped - strange. How Egypt has gone from a major exporter to stopping exports and considering imports within a year or so is very strange also.

On subsidies generally, the brothers are keep capitalists and understand that a subsidy leads to excess demand and to waste.Therefore they might also need to have a look at some of the other subsidies which Mubarak used to buy support - and these include food. They might need to learn from M on that one.

[Bearded Brian]

Yes I agree Hafiz - how can Egypt go from an exporter with only minor shortages at home to an importer with major shortages - is it being stockpiled (legally by the Gov or illegally by people) , have the gas fields run out or are the gas fields under maintained and therefore not producing the same quantity?