GEISHA KOWLESSAR ALONZO
Annually, Government subsidises T&T’s public utilities—the Water and Sewerage Authority (WASA) and Trinidad and Tobago Electricity Commission (T&TEC)—to the tune of over $2.5 billion, according to estimates made by former Minister of Finance, Colm Imbert in September 2020.
In light of this staggering figure, could this be sustained given T&T’s current economic state?
While he agrees that now is not the time to increase water and electricity rates, economist Dr Justin Ram, however, is advising that Government look at reducing its support of some State-owned enterprises and that they should either be “shut down, privatised or turned into public-private partnerships.”
“Or even some of those state-owned enterprises that need to become a lot more efficient,” Ram told the Business Guardian in an interview adding, “One of those four categories, you have to place all of those state-owned enterprises and decide how you want to move forward.”
What are the four categories?
Ram further explained that the Government needs to ask,”Do you need this State-owned enterprise or not? Well, then you should shut it down if you don’t need it. If you need it and it is profitable, then you could privatise it. If you need it, it is somewhat profitable, but it also provides a good social service, then you turn it into a public-private partnership.
“And of course, if it is something that will not create a profit, but it provides very, very good social benefits, then you need to keep it as a state-owned enterprise, but try to make it a lot more efficient.”
On which state-owned enterprises he thinks need to be shut down, Ram said he could not say without doing a proper analysis.
He however, emphasised that it is very important that Government examines the profitability of state-owned enterprises and depending on where they fall within that spectrum, then make a decision as to what to do. So anything that is not profitable and provides no social benefit, you should seek to shut that down,” Ram maintained.
Regarding transfers to households Ram agreed that is something Government certainly needs to look at. However, he agreed with Government’s decision not to increase public utility rates at this time as it could result in undue stress on the population.
“You don’t want to be putting too much pressure on households right now, because if you do that, people don’t have jobs to go and get right now. Right now, the priority has to be to improve the business environment and to improve the overall growth rates of this economy initially. That for me is the correct sequence of events.
“Because we have seen in the past, not necessarily here, but some governments have tried to engage in austerity, thereby trying to cut government expenditure and hoping that would lead to the growth but that never really quite pans out like that,” Ram stated.
He added what needs to be done is to promote growth in the economy now.
Over the weekend, Minister of Public Utilities Barry Padarath, told Guardian Media that the Government would hold true to the promise it made on the campaign trail not to raise electricity rates at this time.
He said the Government intends to review the operations of public utilities companies, particularly the WASA and TTEC, to improve the quality of supply and the management before anything else is further done.
The RIC, which regulates the delivery of services by T&TEC and WASA, had recommended an increase in electricity rates and service charges for T&TEC customers and had proposed that all rates—for residential, commercial and industrial users of electricity—increase by varying amounts.
It had also recommended that customers be billed on a monthly cycle instead of the existing bi-monthly cycle, adding that customers would be billed under a four-tier rate system instead of the previous three tiers.
Residential customers were expected to see an increase from 15 to 64 per cent; commercial customers will increase from 37 to 51 per cent, and industrial customers were expected to see an increase from 58 to 72 per cent.
Ramkissoon: T&T has abused subsidies
Economist Dr Ronald Ramkissoon took a different take on the issue, stating that as a country, “we have taken advantage of or abused” many of the subsidies that successive governments have allowed.
“We waste water, we waste electricity, and there’s wastage across the board. We have become inefficient in the delivery of some of these services.
“In other words, if we can increase the supply of any product without increasing the cost through a more efficient system, then fine. But I think all these ideas, suggestions have to be put on the table and we must understand that the economy is in a very difficult place and we have to find answers,” he explained.
He said if T&T is going to have alternative policies, as any government is entitled to have, those alternative policies need to be put on the table, to what the previous Government had.
Ramkissoon added the population also needs to be aware of what those alternatives are and what are the alternatives to “reasonable revenues.”
“And we need to see those alternative programmes, strategies. We need to see them put into place and let’s see if they’ll work,” Ramkissoon added.
He further stressed there needs to be other sources of revenue for T&T.
“Unless the country finds alternative ways of raising revenue, then if we continue to run deficits, and if we continue to subsidise services without reference to how we are going to fund them, we are only going to dig ourselves into a deeper and deeper hole.
“I am not saying whether we should keep or not keep the subsidies, regardless of whether it is relating to whatever utility. What I’m saying is that we need to understand, and the government needs to understand, that we are going to have to find revenues to continue to subsidise whatever we have been subsidising. And if we can do that, fine,” he said.
Ramkissoon noted that the economy is not delivering the kind of revenues that it used to, noting that the alternatives are there.
These include the selling state assets as well as borrowing but he warned they all have certain implications.
“Our debt, in particular external debt, is already very high. Do we want to continue funding subsidies through borrowing? Do we want to sell state assets? And there are some good reasons why we should divest some state assets into the hands of the public but do we want to do that? How quick can we diversify this economy that we have other sectors generating the revenues that will allow us to continue to provide subsidies? Does everyone need subsidies, or should it not only be for the very poor and those who really cannot afford, are questions we have to address,” Ramkissoon asked.
While he did not specifically indicate whether he supported an increase in public utilities rates ought, Ramkissoon said he was simply laying on the table what the options are, as he maintained that T&T cannot continue to run large deficits.
“It has implications for the foreign exchange. It has implications for the fiscal accounts and the management of the macroeconomy,” he added.