Finance Minister: Hospitals, higher salaries with gas subsidy removal

With the complete removal of the fuel subsidy, the Government could finance the construction of more schools, hospitals and still have enough for a “ten per cent increase for public servants per year,” Finance and Economy Minister Larry Howai said yesterday. He was speaking at yesterday’s annual general meeting of the Energy Chamber at the Hyatt Regency Trinidad hotel, Port-of-Spain.

Howai was giving the audience an example of all that could be done with the savings the Government would derive from the elimination of the fuel subsidy, which, Energy Minister Kevin Ramnarine said on Monday stood at $4.47 billion at the end of the 2012 fiscal year.

Howai said that while the Government “is appropriately concerned to mitigate inflation” and mindful of the pressures borne by the disadvantaged in society, the removal of the subsidy will redound to the benefit of the country and is an imperative for national development.

Roger Packer, who was returned for a second term as president of the Energy Chamber, agreed with the Finance Minister that the fuel subsidy needs to be removed, but also advocated that he “put in place a clear multi-year programme to gradually phase out all of the fuel subsidy. The current structure may simply encourage many people to switch to regular gasoline or to switch to diesel vehicles, as has already been taking place.”

In Monday’s budget, Howai announced a 44 per cent increase in premium gasoline, from $4 a litre to $5.75. Packer, who was sitting up front with Petrotrin president Khalid Hassanali, said, “Petrotrin has been challenged in delivering capital investments projects by the fact that the company is owed significant sums from the Government for unpaid gasoline and diesel subsidies.

“As of the end of 2011, the company was owed over $7 billion in subsidy repayments. This is hidden national debt, which needs to be taken into account when assessing the impacts of the fuel subsidy. It must also be remembered that National Gas Company is also owed significant amounts of money from T&T Electricity Commission for subsidised gas sold for power generation. The last published figures put the level at over $300 million.”

Packer said in the aftermath of the fiscal changes introduced in 2010 for the onshore sector, “We have seen an increase in drilling activity from small independent oil companies.” This increased activity is now feeding through into increased production from the onshore oil sector, with an increase of 16 per cent between the 2011 average and the average production of the first seven months of 2012 from the lease out/farmout (LO/FO) sector, Packer said.

However, Packer said, “We need to be realistic that these increases in LO/FO oil production have had a negligible impact on offsetting the overall declines in crude oil and, in particular, condensate production. Between 2010 and today, we have lost almost 18,000 barrels per day of condensate production.”