Will coupons replace gasoline subsidies?
Rumours abound about governmental plan to implement a smart card system for fuel consumption as part of efforts to cut energy subsides, reports Ahmed Kotb
Previous governments mentioned on several occasions that energy prices should be changed in order to cut massive energy subsidies that cost the country dearly and yet are badly targeted, benefiting the wealthy more than the poor. Some LE95 billion were earmarked for energy subsidies in the fiscal year 2011/12.
Various plans have been considered for restructuring an unbalanced subsidies system. One of the latest is a smart card system for fuel consumption. Although officials said the new system would not be implemented until a complete database of those who deserve to receive subsidised fuel is ready, and until it is widely debated with the public, leaks about new prices have stirred controversy.
Momtaz El-Said, minister of finance, was quoted as saying that 95-octane, the finest quality of gasoline, would not be subsidised at all and will be sold at LE4.85 instead of the current LE2.75. One litre of 92-octane gasoline will cost LE3.25 instead of LE1.85, and 90-octane will cost LE3, up from LE1.75.
El-Said also noted that every vehicle with an engine capacity of 1.6 litres or less would not have to buy gasoline at these prices unless they have used up their quota of subsidised fuel. "Each vehicle will get 1,800 litres of gasoline per year," he said.
According to Osama Kamal, minister of petroleum, diesel prices for public transportation vehicles will remain subsidised. Diesel is currently sold at LE0.95 per litre.
Many experts praised the new gasoline subsidy system as one way to limit excessive consumption and direct subsidies to those who actually need them. Others refused any increase in the prices.
"Hikes in the prices of fuel means that many other products, including basics, will become more expensive," said Farag Abdel-Fattah, professor of economics at Cairo University. For example, he added, the government would not be able to control transportation fares once fuel prices increase.
Khaled Naguib, an actor who owns a 2.5 cc car made in 1986, says that according to the new system he will not receive a smart card because his vehicle has an engine capacity of more than 1.6 litres. "I know people who own much older cars with more engine capacity and can not afford to replace them, but the government will not supply them with subsidised fuel because they list them as rich people based on the engine capacity," Naguib stated.
"This is not smart at all," he added.
Prime Minister Hisham Kandil announced that the government is still studying the whole system, and that any news about new prices is speculation.