The desperation of Government to remove the much discussed fuel subsidy to meet the International Monetary Fund (IMF) conditionality for a $34 million loan will increase petrol to Le5,500 per litre. Diesel will increase to Le5,770 per litre and kerosene at Le5,450 per litre.
Currently, for every litre of petrol, government takes money from the consolidated revenue fund as direct subsidy to pay the oil marketing companies. Direct subsidy right now per litre of petrol to the oil marketing companies is Le345.66 and the indirect subsidy which is the taxes foregone on a litre of petrol is Le1,433.93. Government therefore spends a total of Le1,779.59 as subsidy for every litre of petrol sold to the public, Salieu Kamara of the Petroleum Regulatory Agency (PRA) stated.
The payment of direct subsidy began on 31st October this year and the current direct and indirect subsidies will end 13th November 2016. Government can decide thereafter to stop the payment of subsidies or determine how much it will spend for the next two weeks.
Government can decide to stop paying the direct subsidy and reduce some of the foregone taxes to keep the pump prices at a certain value per litre that will not set alarm bells ringing, Mr. Kamara said. Or ask the consumers to bear the cost and remove all the subsidies as dictated by the IMF.
Before 19th September 2016, there is no record showing payment of direct subsidy. From 19th September 2nd October, direct subsidy was Le24.50 and only applied to petrol. The next fortnightly review from 3rd to 16th October 2016 saw the application of direct subsidy on petrol and diesel; and the amount increased on petrol from Le24.50 to Le42.99. The direct subsidy subsequently affected kerosene from 17th 30th October with an increase in the amount of direct subsidy and indirect subsidy for every litre of fuel sold.
Government introduced fuel subsidies in 2007 and subsequently introduced the metric system on 1st May 2011. In 2012 the two tier pricing system of retail price for the public and commercial price for the companies was introduced. These prices are reviewed every two weeks.
From May 2011 October 2016, government claims it has spent Le937.79 billion on fuel subsidy. Subsidy per litre during this period was below Le1,000 per litre. What civil society and the public describe as the shocking reality is that PRA claims government spends on every litre of fuel sold to the public from September to date about Le1,500 as direct or indirect subsidy.
Mamoud Tim Kargbo of Native Consortium, a civil society organisation said in an interview that Government is doing what IMF recommended and ministers citing smuggling as a reason that have increased the amount spent on subsidy is unconvincing. “Where are the receipts to justify that the money they claim have been spent on subsidies,” he said.
Joseph Sannoh, head of the organisation Heal Salone said mentioning smuggling in any discussion on fuel subsidy is a non-starter not to talk of ebola. Total volume of fuel sold up to October with all the rantings about smuggling is still below 2012 and 2015 annual levels. He noted that data presented do not support that assertion.
The data also shows that government paid the lowest subsidy per litre in 2014 and 2015 at Le329.93 and Le328.61 respectively.
But Minister Mohamed Bangura of the information ministry sees Joseph Sannoh and other civil society leaders participating in the fuel subsidy debate as being political and partisan.
Monday November 07, 2016
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