With international oil prices in excess of US$100 a barrel, several economies are grappling with the higher cost of energy which has translated into intensified inflationary pressures. Many of our Caribbean counterparts have some sort of a pass-through mechanism whereby fuel prices adjust to reflect market developments. For some time, various government ministers and other commentators have trumpeted the need to reduce or eliminate the subsidy of transportation fuels which exceeded $2 billion last fiscal year. It appears that the Government wants to shift to targeted subsidies whereby those that need it most are the major beneficiaries.
I fully agree that people that have funds to purchase those huge gas-consuming SUVs were not the intended beneficiaries of the fuel subsidy and, as such, people with such financial resources should be able to pay more for gas. However, before we move to implement some sort of adjustment to the fuel subsidy it must be placed in perspective. Caribbean Airlines Ltd (CAL) currently receives a fuel subsidy (fuel hedge) from the Government when fuel prices exceed US$50 a barrel. If the country is moving to targeted subsidies, why must airline travellers be subsidised? People that could afford air travel could hardly be considered "poor." Herein is the sharp departure from Government's philosophical argument.
Additionally, not only is airline travel being subsidised for citizens of T&T, but with the acquisition of Air Jamaica, Jamaican nationals are now also enjoying subsidised air travel. The subsidy will also be extended when CAL expands its routes to the Eastern Caribbean. So on one hand the Government is lamenting the $2 billion subsidy on domestic fuel prices at the pump, but on the other hand is increasing its transfers on airline fuel subsidies for not only T&T but the wider Caribbean. Before any serious attempt could be made to remove or reduce the subsidy on gas and diesel, the Government has to show that its analysis is being conducted holistically and that the State is serious about constraining expenditure.
Kevin Jackson
Tunapuna