By Raffique Shah
February 17, 2008
LAST week, in another curious twist to Government’s off-and-on position on the $2 billion annual fuels subsidy, Minister in the Ministry of Finance, Mariano Browne, confirmed that it’s up for review. He gave no time-line for the exercise nor did he hint at the percentage being considered. These, I presume, will come after discussion and hopefully careful consideration of the implications, more so the impact on inflation.
As I argued last week, there is no valid reason why this subsidy should not be reduced. To correct two misprints in my last column, by removing 25 per cent of the subsidy in the first instance, Government will save $500 million annually, and the additional cost of fuels to truckers will be around $1,000. The latter ought to have little or no impact on the cost of goods and services: if truckers cannot absorb $1,000 a year per vehicle, then they should get out of the transport business.
To be fair to transport contractors, I need add that there should be focus on irritating-and costly-bank charges that should be urgently addressed. Recently, consumer lobbies in developed countries prompted banks to withdraw some of their ‘fees’, although these institutions remain some of the most profitable businesses, surpassing even oil companies. Have you ever read any bank’s annual financial statement that showed a drop in profits, even in pre-oil-boom, lean times? I shall revert to them soon.
On the fuels subsidy, while I agree with gradual cutbacks until we get to around 50 per cent of where it currently stands, government needs to bear in mind that certain oil and gas products should remain subsidised. Cooking gas (propane, I think) is among them, since it is the most commonly used fuel across the board, but more so in the homes of the average-to-poor citizens. Kerosene, too, which is used primarily by people who are not serviced by electricity, hence the very poor or very rural, should be exempt. And by way of cutting down on harmful emissions, vehicles powered by CNG should also benefit from special consideration.
There is another major anomaly that should be addressed before Government takes action on lowering the fuels subsidy. T&TEC adds a fuel charge to its billing, along with an “exchange rate adjustment”. The former adds a hefty 40 per cent to the basic consumption charge, while the latter averages around 15 per cent.
The rationale for these additional fees defies logic. T&TEC owns 51 per cent of Powergen, our main electricity supplier. Powergen buys natural gas from the state-owned NGC to power its turbines. One assumes that the “fuel charge” is based on the price Powergen pays for gas, which, in turn, is more than likely based on the Henry Hub price. But the latter fluctuates: it went well past US$8.50 per mcf last year, only to drop to closer to $7 last January. Did consumers benefit from this price decline? And why should our fuel charges be based on the exchange rate between the US and TT dollar? If Minister Mariano Browne wants to address something of substance, especially with his banking background, these are the anomalies he should clamp down on.
Last week, too, I barely touched on the URP programme, which I consider another of government’s “subsidies”. Its name alone-Unemployment Relief-suggests that it should exist in times of high unemployment. The Government boasts of full employment, albeit with around 30 per cent of the labour force ranked among the “working poor”. These are people in the service sector-hotels, restaurants, security, retail sector-where the national minimum wage is considered by employers as the maximum they should pay.
Little wonder employers in the hospitality sector are complaining of not being able to attract local workers. Even the foreign workers, interviewed in an article on the labour problem last week, said wages here are among the lowest in the industry. What baffles me is this: hotel rates in Tobago are far higher than in most other Caribbean countries, and in the region, rates are higher than in many developed countries, especially among mid-range hotels in the USA. If these hotels are charging more and enjoying special incentives from Government, why can’t they pay their employees decent wages?
These are issues government should be monitoring as we seek to offload burdens like the URP from taxpayers. Do you think it’s easy labouring on one’s backside day-into-night, only to see “laahays” sitting at curbs chatting away-then returning to their homes after two hours or so? If an audit is done on the unit cost of projects completed by URP workers, it would be very revealing.
Government should consider establishing a labour bureau where those without jobs can report regularly to source jobs. The agriculture sector, when it does get off the ground properly, will need thousands of workers. The over-heated construction sector is crying out for labour. Let these “laahays” get off their lazy butts and make positive contributions to themselves and their country. “Freeness”, not productivity, seems to be a culture in this country.