The government will start distributing petrol and diesel through a smart card system over the coming few weeks, Petroleum Minister Sherif Haddara announced late last week. The smart cards will first be issued to tanker trucks and petrol stations, and then the programme will be expanded to include private car owners, he said. The new system aims to monitor the distribution process of petroleum products in such a way as to end smuggling and the selling of these subsidised products on the black market. It also aims to rationalise petroleum subsides that currently eat up a fifth of the government's spending and contribute significantly to the country's budget deficit. According to Ministry of Finance figures, the budget deficit to GDP increased to 10.1 per cent during the first nine months of fiscal year 2012/2013 at some LE175.9 billion, compared to the LE113 billion recorded during the same period the year before. The total bill for energy subsidies is targeted to reach some LE100 billion in 2013/14, compared to LE120 billion estimated for this year. The new smart card system is expected to reduce the energy subsidy bill by some LE30 billion. “In the first stage, we will be distributing smart cards to fuel depots, tanker trucks and petrol stations across the country,” first under-secretary at the Ministry of Petroleum Mahmoud Nazim told Al-Ahram Weekly. “These institutions are currently receiving their smart cards,” he added. Nazim stated that the government was also providing petrol stations with the infrastructure needed for the programme. He said that points of sale had already been established in many stations and the rest were being set up. He also said that petrol stations and distributors were being trained on how to use the new system. The government will issue cards to tanker trucks, 2,870 petrol stations and 43 fuel depots in June, while car owners throughout the country will get their cards in July and August. Under the new smart card system, car drivers will get a specified amount of subsidised fuel, and, should they need to consume more, they will have to buy it at cost price. In the first couple of months, the system will be tried out and the smart cards will only be used to assess and collect data on consumption patterns without placing a limit on the amount of fuel allowed per car. Smart cards would be issued in relation to a car's license number, Nazim said, and the government would issue the cards using the database of the traffic department. “If a car is not registered with the traffic department, it will not receive a smart card,” he said. Once issued, car owners could receive their smart cards through the post, Nazim said. However, not everyone is optimistic about the new system. Head of the General Division of Petroleum Products at the Federation of Chambers of Commerce, Hossam Arafat, said that he believed the new system would not realise its aims. “This system will fail like any other,” said Arafat. “These are mere ideas without proper mechanisms for implementation,” he added. Arafat said that the system lacked a mechanism to control and monitor the distribution process. “If anything, this system will only substitute a manual registration of the distribution process with an electronic one,” he told the Weekly. He said that managing the distribution process electronically did not mean that the process would be properly executed on the ground. “What guarantees that fuel allotments are actually delivered to petrol stations, or that fuel is actually being distributed to people,” he asked. Nazim said that the distribution process would not only be monitored electronically but also through on-the-ground inspection teams in order to ensure that the process was in fact taking place. Arafat criticised the government for not engaging the General Division of Petroleum Products in the implementation process, adding that the government would not be able to apply the system alone. While the new system aims at reducing smuggling, Arafat believes that the energy crisis in Egypt is not caused by smuggling alone, but that it is also caused by a general shortage of petroleum products. “The reason we have so many diesel shortages is that the demand for diesel is much more than supply,” Arafat said, adding that the gap between diesel consumption and production amounted to 25 per cent. According to Arafat, the energy crisis was a result of a shortage in the supply of diesel and fuel oil, in addition to poor management from the government's side. He said that the government did not provide the governorates with their assigned allotments of fuel, in turn causing shortages. In a bid to alleviate the energy problem, the minister of petroleum said in a press conference last week that Egypt aimed to increase its oil production in the long term to produce a million barrels of oil per day, up from the current 670,000 barrels. However, Arafat said that in order for Egypt to increase its oil production, it would need foreign partners and investors, who would not invest in the country owing to the ongoing political instability, he claimed.
