Plans to rationalise energy subsidies may soon go into effect, reports Ahmed Kotb The government's recent plan to cut down subsidies of fuel products stirred debate about how that was going to take place. Fuel subsidies went up from LE84 billion in the 2009/10 budget to LE100 billion in this year's budget. The plan is part of an effort to redistribute the funds allocated to subsidies in order to make sure they target those who need them. It includes distributing subsidised butane gas cylinders through coupons to be given to families that have ration cards. The plan also comprises extending natural gas pipe lines to brick kilns which currently use butane cylinders. It involves cancelling subsidies for cylinders used for commercial or industrial activities as well. It further includes the renegotiation of natural gas export contracts to increase the prices and lower the quantity exported in order to make it available to electricity stations that currently use diesel. The distribution of butane cylinders through coupons is the part that is likely to go into effect first. Minister of Social Solidarity Gouda Abdel-Khalek has been quoted as saying that distributing butane canisters through coupons will begin after the holy month of Ramadan which starts next Monday. Two or three governorates will be chosen for a pilot project so that problems could be eliminated before generalising the plan to cover the whole country next March. The minister's announcement came after the results of a poll conducted in 11 governorates showed a 65 per cent agreement that butane cylinders be distributed through a coupons scheme. It showed that 78.3 per cent use butane canisters while 22.2 per cent use natural gas. Moreover, the results indicated that 99.7 per cent of rural population depends on canisters as their only source of fuel for home cooking and warm water, whereas the percentage in urban areas is 16 per cent. A normal sized canister costs about LE55 to produce and is sold at LE2.5, and the production cost of a commercial canister, which is double the size of the normal one, is about LE100 and is sold at LE15. The idea of distributing butane canisters using coupons is not new. The former Nazif government had announced that it would implement it but had delayed the execution for political reasons. According to Darwish Mustafa, advisor to the minister of social solidarity, the plans of implementing this project were already designed by the previous government, yet they may be modified depending on the execution. "The number of gas canisters will depend on the size of the family. And if people need more than their share of coupons, they would buy the canisters at market price," Mustafa said. Despite the fact that many restaurants and cafés already use natural gas, the majority that lie in poorer areas depend on butane cylinders and will have to buy them at market prices which may lead to skyrocketing increases in the prices of the cheaper foods such as beans that are considered a staple meal for the majority of Egyptians. However, Mokhtar El-Sherif, an economic expert, believes these prices should not be affected because restaurant or café owners already set their prices as if they get canisters at market prices. But, he added, they might raise the prices any way since there is no proper inspection. Minister of petroleum, Abdallah Ghorab, announced that lack of inspection is responsible for wasting more than LE4 billion of the funds allocated for subsidising butane gas cylinders. Brick kilns are accused of contributing to the shortage of canisters in the market, because they are said to consume huge amount of subsidised commercial canisters from the black market. Abdel-Aziz Kasem, financial secretary to the building materials division at the federation of chambers of commerce, stated that brick kilns depend on butane gas which has replaced diesel because of the latter's soaring prices. "If the government stops subsidising the commercial canisters, kilns might go back to using diesel and prices of bricks will skyrocket," he noted. Kasem suggests that brick kilns should be provided with natural gas instead. President of the National Bank of Egypt, Tarek Amer, announced last week that there is a plan to provide 1,000 brick kilns with natural gas, at a cost of LE700 million. The project, Amer added, will save LE6 billion from government spending on subsidising petroleum materials annually. According to the Ministry of Petroleum, Egypt consumes four million tonnes of butane gas annually, and imports 50 per cent of its needs.
