T&T pays $20 billion fuel subsidy in past ten years

Lead Editor Investigations

asha.javeed@guardian.co.tt

In the last ten years, the Government has spent $20.75 billion on fuel subsidies for citizens of T&T.

According to figures provided to Guardian Media by the Ministry of Energy and Energy Industries (MEEI), the subsidy went from a high of $7.2 billion in fiscal 2014 to a low of $96 million in 2020, which was mainly due to stay-at-home measures during the COVID-19 pandemic. For fiscal 2024, the Government will spend $365 million to subsidise fuel at the pumps for the public. (See Table).

In Budget 2021, Finance Minister Colm Imbert said that T&T spent $25 billion to maintain a fuel subsidy over the previous 14 years (2007-2021), and since 1974, the liquid petroleum products market has been subject to public economic policy.

Guardian Media calculated that since 1974, the Government has spent $29.41 billion in fuel subsidies.

In 2022, Prime Minister Dr Keith Rowley said the Government might cap fuel subsidies at $1 billion. The Government has been gradually easing the subsidy paid on fuel, but it still carries a significant cost to the Treasury as T&T’s motorists have enjoyed a fuel subsidy for close to 50 years.

Imbert had pegged 2021 for the removal of the fuel subsidy and liberalisation of the fuel market. However, three years later, the matter has not been addressed.

Imbert had said that come January 2021 the fuel subsidy would be removed, prices would be subject to market forces, and the Government will sell all gas stations owned by the National Petroleum (NP) to the private sector with first preference given to existing dealers and concessionaires.

At a press conference in 2021, Imbert said that on July 2, he will present legislation in Parliament titled Finance Bill 2021, the primary purpose of which will be to liberalise the retail fuel industry.

“And so that will present a new formula for the pricing of motor fuels. That debate will take place on the second of July. In that finance bill, I have a few other things that we said that we will do in the budget, such as increasing the fines for praedial larceny and things like that. And also, at the same time, there are some incentives for construction in terms of tax waivers for approved development projects that will also be implemented,” he had said.

As such, most gas stations are coming up for grabs, and after 15 years of relatively low fuel prices, as it was supported by a government subsidy, the cost of fuel would increase.

Imbert had said the Government was hoping the increase was marginal but liberalising the fuel market could impact the travelling public as it could affect taxi fares.

“We are of the view that in the context of the projected international oil prices, the fuel market should be liberalised. Under this arrangement, which is targeted for introduction in January 2021, the fixed retail margins for all liquid petroleum products will be removed; petroleum retailers and dealers will now be allowed to fix their own margins. Wholesale margins will remain fixed for the time being, and an appropriate but reasonable tax will be introduced to compensate for the current fuel surplus that is generated on the sale of gasoline, because of depressed oil prices,” Imbert had said.

At that time, the delay in meeting the January 2021 deadline was a result of work to get the legislation right.

“We have analysed the subsidy impact on the national community, and we have formed the judgement that not only did the subsidies disproportionately benefit the higher-income groups, but their usage was inefficient from an economy-wide perspective.

In recent times, however, since September 2014, energy prices have declined and are now stabilising at significantly lower levels with the upshot that subsidy payments would be considerably reduced,” he had said.

Imbert had said he expects little or no increase in the price of motor fuels at current oil prices.

“However, it must be noted that if the price of oil recovers, the price of gasoline and diesel will naturally increase proportionately,” he had said.

In budget 2022, he noted the commitment made in 2021.

“Madam Speaker, since that time the legislative amendments to the Petroleum Act and the Petroleum Production Levy and Subsidy Act required to implement the liberalisation of the fuels market were finalised in the Finance Act 2021.

The legislation was assented to in July 2021. We are now completing the design of the infrastructure within which the commencement of the liberalisation of fuel prices could be initiated, with due regard to the impact of fuel prices on the most vulnerable in society,” he had said.

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