Egypt Independent

State losing billions on energy subsidies, says minister

The delay in implementing energy subsidy

cuts is costing the state LE10 billion every three months, claimed Petroleum Minister Osama Kamal on Monday.

These additional costs are on top of provisions in this year’s budget to boost the petroleum sector with an estimated LE70 billion.

While LE17.5 billion per quarter is typically set aside for energy subsidies, the state spent LE28 billion on these subsidies in the first quarter of this fiscal year alone, Kamal said.

The minister added that the subsidies would probably cost the state about the same for the second quarter without restructuring the subsidy system.

The budget for this fiscal year had been drafted assuming that energy subsidies would be restructured starting in early July, but that has not yet happened, partly due to the fact that governmental studies on the subsidies have not yet been finished, Kamal said.

Kamal told Al-Masry Al-Youm that studies are still ongoing into the quotas allocated to vehicle owners who benefit from petrol and diesel cards.

He stated that the government is working to finish the study before the end of 2012, and would present the conclusions to the public before applying them.

Kamal pointed out that a reported plan giving petrol cards to owners of cars with engines smaller than 1,600 cc was still only in a proposal phase and needed furthery study by officials. Decisions in that matter would be made to the benefit of the majority of users, he said.

Each car is scheduled to receive roughly 1,800 liters of subsidized petrol annually, allowing it to run about 60 km per day, suitable for average daily consumption for cars in Egypt.

Trucks owners, on the other hand, are scheduled to get 10,000 liters of diesel and petrol per year, and according to their license type could also obtain additional quantities at cost from the local market.

When asked about exactly when the subsidy restructuring would be implemented, Kamal said he could not give an exact date, as this was a decision beyond the control of his ministry.

He added that these plans were not linked to the upcoming parliamentary elections, or the upcoming constitutional referendum, as has been rumored.

Analysts say the restructuring of the energy subsidies is imperative for the government to obtain loans from the International Monetary Fund and other international financing institutions, to help bridge the budget deficit.

Edited translation from Al-Masry Al-Youm