Gov't requests $100m for fuel subsidy

The Ministry of Energy has requested $100 million from the Standing Finance Committee of Parliament to pay fuel subsidies. Energy Minister Franklin Khan made the request this afternoon as the Committee met in the Parliament Chamber, saying that while the subsidy was reduced last year in the Budget, the Government still pays approximately 45 cents per litre of diesel, and 32 cents per litre of super unleaded gasoline. There is no subsidy on premium gasoline. The money will be paid to state fuel distributor, National Petroleum (NP), who will then pay state oil company, Petrotrin, who produced the fuel.

The Budget was predicated on an oil price of US$52 a barrel, but the price has since risen to just under US$70 a barrel today. Ironically though, a higher oil price is not the boon one might expect for the government. That’s because Petrotrin is the country’s biggest oil producer, churning out about 60 per cent of the country’s output. It’s nearly over $10 billion debt burden—including $3 billion to the Treasury— means it has not been paying its royalty payments to the government as it attends to more pressing liabilities. The government then, is losing out on income, while still incurring an expense because of the subsidy.

“We are not getting a royalty payment from Petrotin,” Finance Minister Colm Imbert clarified for the Committee. In reality, he said, higher oil prices may actually create a problem for the government rather than solve a problem, he said.

“People may look at oil prices and see US$70 dollars a barrel say, wow! The Treasury must be getting a lot of money! But that is not necessarily correct because 60 per cent of oil is produced by Petrotrin. They may not be in a position to remit the royalty. But the liability falls to the government repay the subsidy,” he said.