FINANCE Minister Colm Imbert has said subsidising fuel with oil at its current rate would cost Trinidad and Tobago $3 billion – and that was a cost that government simply didn’t budget for.
Imbert made the statements during an interview with TTT, in which he explained the issues surrounding the price of fuel and the fuel subsidy, and why the subsidy was reduced.
“At this point in time, with oil at US$95, or if you use an average price of US$95, the cost of premium gasoline would be over $7/litre, or $7.25. The cost of super would be about $7.05. The cost of diesel would be $6.50 or $6.70.
“Let’s say the average is TT$8. With our annual consumption of a billion barrels of gasoline, that means the country has to pay TT$8 billion to purchase fuel. At the prices (prior to the increase) the revenue that would have been generated would have been about TT$5 billion.
"So the remainder that would have to be made up by government would be about TT$3 billion. Someone has to pay that extra $3 billion.”
He said the bulk of the supposed $3 billion deficit would have come from the treasury, which holds money from VAT, income tax, corporation tax and all the government's other revenue sources.
He added that government allocated $200 million to subsidise the price of fuel in the 2021-2022 budget. That was calculated from an oil price of about US$65 a barrel. But the price is now much higher.
“So the subsidy has to be paid to maintain prices (at previous levels) is an expense that was not budgeted for.”
He knocked criticism of the reduction of the fuel subsidy and described comparisons with places such as Barbados and Guyana as false. He added that the arguments that these countries are reducing taxes and increasing subsidies in separate countries are irrelevant to the point that TT would have to find billions of dollars to maintain the subsidies at previous levels.
“What is relevant is, where are you finding $2 billion or $3 billion to make up the difference between the cost of purchasing the fuel and the price at which you sell it?
"None of the commentators are saying where they would get that from. Are they going to increase VAT? Are they going increase the income tax rate? Are they going to reduce personal allowance? Are they going to increase duties on imported goods? Where will they get the money from?
"They (commentators) don’t want to treat with the reality that there is a $2-$3 billion deficit that has to come from somewhere.”
Imbert said government took the decision to reduce the fuel subsidy in such a way that some of that expenditure could be applied to other things.
“We could put it into development programmes, patching potholes, fixing roads, cleaning drains, making sure that there isn’t any flooding in the oncoming rainy season, on the health sector, free education or tertiary education.
"We don’t think that it is a good idea to take $2 billion or $3 billion and spend it on keeping the fuel prices down. It should be spent on something that is of a much better benefit to the nation.”
Imb
