State-run petrol firm proposes shake-up in Egypt subsidies

Ahram Online, Thursday 3 May 2012

Egyptian General Petroleum Corporation suggests slashing subsidies for energy-intensive industries and the introduction of a coupon system to let car-owners buy cut-price fuel

petrol station
An employee of a petrol station fills a car tank in Cairo (Photo: Reuters)

The Egyptian General Petroleum Corporation (EGPC) has made proposals to help the government cut LE35 billion ($5.8 billion) of subsidies on petroleum products from the country's budget over the next five years, the state-run Al-Ahram newspaper reported on Wednesday.

Subsidies for petroleum products totalled around LE110 billion in Egypt's budget for the 2011/12 financial year.
The new suggestions from EGPC, a state-run firm owned by the Ministry of Petroleum, include proposals for selling car-owners books of coupons every year worth a total of LE2,500 ($417), which can be redeemed for a monthly allottment of 200 litres of petrol. 
Once a consumer spends all their coupons, they will pay for petrol at the standard, non-subsidised rates.
A litre of Octane 80 currently costs LE0.9 ($0.15); Octane 90 sells for LE1.75 ($0.29), and Octane 92 for LE1.85 ($0.3).
Octane 95, which costs around LE2.75 ($0.45) per litre, should see a price hike to reflect production costs, EGPC said.
The corporation also proposed that Egypt's government increase by 30 per cent the prices for natural gas paid by energy-intensive industries.
The price of fuel oil should be hiked to LE1,250 per tonne as it is used for industrial purposes, EGPC suggested. However it said that energy used by domestic consumers, such as cooking butane, should not see price readjustments.
In December 2011, Egypt's cabinet approved a plan to cut energy subsidies for energy intensive industries as part of an austerity plan to reduce the budget deficit by LE20 billion ($3.3 billion). 
But despite an agreement to gradually lift industrial subsidies from the start of this year, business figures say the plan has not been enacted.
Contacted by Ahram Online, Galal El-Zorba, head of the Federation of Egyptian Industries, said: "The minister of finance has given the go-ahead for reducing subsidies but the measures have not yet come into effect."
Correction: The 3rd paragraph has been corrected on 3 May 2012.
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