Opinion
- Editorial- Commentary
Trinidad Guardian:
Ending
gas subsidy will be painful
Editorial
The Energy Minister and the Government, if in
fact Minister Conrad Enill is speaking for the
Cabinet, will have to outline a substantial argument
for the elimination of the gas subsidy.
Moreover, there will have to be made a serious
case for utilising the subsidy elsewhere in the
economy where he says it could be of even greater
effect than it is at present.
Minister Enill seemed pretty sure of himself when
he made it clear in the Senate last week that the
intention of the Government is to have the national
population pay a commercial rate for petrol by
removing the 34-year-old subsidy.
What Minister Enill did however was to opine that
the most significant effect of the removal of the
subsidy on gas would be a 50-cent increase in maxi
fares along the east-west corridor.
It’s
difficult to rationalise such a conclusion with
someone who was the de
facto Minister of Finance
for six years. First of all, we need to know what
would be the increase in gas a litre at the pump
if the $2 billion subsidy is removed.
Given that level of subsidy, it could safely be
said that the cost of petrol will increase by a
few dollars a litre. Which maxi-taxi driver in
his right mind will absorb the higher cost of fuel
by merely increasing his fare by 50 cents?
But even more significantly, the cost of transport
is factored into every item of consumption and
every service that is offered. The increase in
gas by a few dollars a litre will have such a multiplier
effect on prices that we will come to appreciate
double-digit inflation in a real way.
A
few years ago, Central Bank Governor Ewart Williams
raised concerns about the competitiveness
of the
economy in relation to selling products and services
on the international market. Such an increase in
the cost of gas will certainly contribute significantly
to that emerging uncompetitiveness. Remember, too,
T&T and Caricom now have to sell to Europe
without traditional preferences.
In addition to the economic aspects of removing
the subsidy from gas, the Government will have
to come forward with a rationale to tell the population
why it should not benefit in this very tangible
manner from its energy resources. To those people
at the lower end of the economy, already pressed
with exorbitant food prices, Minister Enill would
need to produce extremely cogent arguments to convince
the population about why they should pay higher
prices for every item and service.
There can also be a cost to pay for removing the
subsidy from gas in the form of social and political
instability. Do Mr Enill and the Government not
factor into the equation the real possibility of
social discontent resulting in disruption to peace
and stability if people on the margins are forced
into paying even more for the basics of life?
The second vital element of the promise to remove
the gas subsidy is the case to be made for the
$2 billion to be put to better use than meeting
a few basic needs of citizens as is now the case.
The
subsidy cannot be removed on the basis of some
projected abstraction that
has no form and
detail. So clearly the responsibility of the Minister
of Energy is to produce a thorough cost benefit
analysis which would outline all of the State’s
options in this matter—one of which could
be the gradual phasing out of the gasoline subsidy
over a period of three to five years.
There
is no doubt that T&T’s dependence
on cheap gasoline has produced some negative side-effects—such
as traffic jams and exhaust pollution—but
those facts should be weighed against the impact
on inflation and, therefore, the negative impact
on low income-earners.
The
Trinidad Guardian is one of the most read TT News
daily.
Petroleumworld not necessarily share these views.
Editor's
Note: This article was first publish in Trinidad
Guardian, Friday 14th March, 2008 . Petroleumworld
reprint this article in the interest
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News 03/30/08
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