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Tuesday 20 August 2019
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Gas subsidy revisited

As the country signs the Dragon gas deal with Venezuela, bringing some measure of resolution to the gas shortage situation at the Point Lisas Estate, there is another gas situation that remains unresolved for the country, with some new variables introduced since its last mention in October.

Since Finance Minister Colm Imbert drew the ire of large sections the country, including the trade union, movement by suggesting the gas subsidy was to be further reduced, the issue has gone largely unremarked.

Following last week’s meeting at which OPEC members agreed to cut production, there was a small increase in oil prices which have settled around $51.36 for West Texas Intermediate and $54.57 for Brent crude. Several international energy analysts are predicting further rises.

Bloomberg quotes Andurand Capital Management as projecting the price of oil reaching as high as $60 or $70 in the short term and possibly of $100 by the end of the decade.

While noting that the development was good last Thursday, the finance minister has taken a “wait and see” approach, saying it may be too early to tell how this will affect the country.

If the high oil prices continue, it will be interesting to see how it affects the decision and the timing to remove the subsidy. The finance minister had initially said an adjustment was likely to be made in April 2017.

The need to cut the subsidy and allow fuel prices to be set by the market is clear.

Minister Imbert, during a morning television programme appearance last month said the subsidy was not achieving its intended purpose. It was encouraging pollution as cheaper fuel meant greater consumption with more vehicles on the road. Finally, he said, it was not benefiting lower income groups as intended, but middle and upper income ones to the tune of $2,000 to $3,000 a month, whereas poorer families were only experiencing savings of $500.

“What you have to do when you remove the subsidy, is take that money and target it on programmes for the poor,” he said at that time.

The country’s economic circumstances also make it necessary to cut costs.

The minister also promised improvements in the public transport system in order to reduce the dependence on personal vehicles as the price of fuel increases.

Removal of the subsidy is therefore a laudable goal. But questions arise.

Anyone living in TT long enough knows the gap between what is said and written by officialdom, and what happens in the day to day life of the average Trinbagonian.

The subsidy’s removal could see the price of transport fuels increase by as much as a further 40 per cent.

The last increase in transportation fuel saw an increase in the cost of transport and foodstuff. How does the government propose to treat with these kinds of increases going forward as the subsidy is further reduced? What programmes to benefit the poor will be put in place of the fuel subsidy? Will care be taken to ensure that these are designed to actually assist those of lower income? And, will the savings represented by the gas subsidy’s reduction actually go to this purpose? What steps will be taken to see that it does? In the final analysis, while the subsidy’s removal is necessary, key issues need to be considered before it is.

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