President Ali announces plan to subsidise increased fuel costs
CONSUMERS in Guyana will not be forced to pay higher water and electricity rates stemming from the global surge in fuel prices because the government will be subsidising the increased fuel costs, President Dr. Irfaan Ali said on Tuesday.
The increase in fuel prices, like the increased costs of food and other commodities, has been linked to the COVID-19 pandemic. More recently, the price surge has been exacerbated by the ongoing war in Ukraine. Both the pandemic and the war have led to supply chain disruptions and other adverse economic implications.
While speaking at the commissioning of a water well at Lusignan on the East Coast of Demerara (ECD), on Tuesday, President Ali lamented that the cost of fuel increased by more than 100 per cent. This has resulted in the Guyana Power and Light (GPL) and the Guyana Water Incorporated (GWI) spending more than was budgeted to procure fuel for use.
Consequently, the rates ordinary consumers pay for water and electricity services were expected to increase to offset the rising cost of production. The Head-of-State, however, said that the government will ease the burden on consumers.
“Here in Guyana, the government is not going to allow that increase to translate to people. I said to both entities that you are not going to increase a cent,” President Ali said at the event, adding: “The government will take up the responsibility.”
Already, GPL has lamented that its landed cost for fuel today is approximately US$140 per barrel, a quadrupled amount from 2016 when the fuel price was approximately US$30 per barrel.
This increase has moved GPL’s total monthly operating expenses to approximately $4.5 billion against monthly electricity sales of approximately $3 billion, according to a press release issued by the company.
The company did not caution customers that it may be forced to increase electricity rates; instead, the company asked that consumers practise energy conservation to reduce the amount of electricity used, thereby reducing the amount of fuel needed.
President Ali’s assurance comes only days after Vice-President, Dr. Bharrat Jagdeo, echoed similar sentiments.
“We will keep the electricity prices the same way, and water prices, because we have to subsidise it to make sure that the impact is not felt by ordinary people,” the Vice-President said at a recent event commemorating the life of Guyanese founding father Dr Cheddi Jagan.
Subsidisation refers to payments made by a body (in this case, the government) to pay a portion of expenses to keep a selling price low. With expected increases in the cost of fuel, for example, this means that the government will spend money to offset the increases so that consumers’ rates are not raised.
Dr Jagdeo also said that the People’s Progressive Party/Civic (PPP/C) government’s economic philosophy of social spending to ensure that people did not face hardships will be maintained.
Countries around the world, not just Guyana, are grappling with electricity costs because of fuel challenges. The Wall Street Journal reported on Monday that with sanctions against Russia threatening to further constrain global fossil fuel supplies, higher prices are likely to persist.
To mitigate the burden of higher prices, the European Union (EU), for example, intends to subsidise household fuel prices and offer support to companies hit by surging energy prices. Reuters reported on Tuesday, that this is part of the EU’s three-pronged strategy to counter the price surge.
Meanwhile, President Ali also recently assured Guyanese that the government was examining other relief measures to cushion the ongoing economic fallout.
At a recent press conference, the Head-of-State said that the government has commenced consultations to determine what measures will be used to expend the G$5 billion that was set aside in the 2022 National budget to mitigate the effects of the global price surge contributing to the rising cost of living.
Cognisant of the challenges experienced globally as food prices and the general cost of living continue to rise, the government has included in its fiscal plan for this year, Budget 2022, a sizeable allocation to address the situation.
“I am aware of the impact that cost of living is having,” President Ali had said in his budget speech, adding: “While we cannot address all of the issues surrounding cost of living, I have instructed that resources be set aside to address the issue.
“This sizeable allocation will be used, through consultation with communities across the country, to identify specific ways and initiatives in which we can deploy this budgeted allocation to ease the burden on the population.”
President Ali said his government’s $552 billion budget focuses on removing the burden on Guyanese citizens, and creating opportunities, enhancing welfare, giving back more to the population, improving living conditions, and improving their overall quality of life.