Egypt moves to rein in energy subsidy bill

Fri Nov 2, 2012 5:14am GMT

CAIRO (Reuters) - Egypt has taken a first step to getting expensive energy subsidies under control, a key component of an economic reform programme the cash-strapped government is presenting to the IMF to obtain a loan.

The cabinet received on Thursday the preliminary results of a pilot programme to use ration cards to distribute cooking gas to the needy instead of selling it on demand, Petroleum Minister Osama Kamal said.

The government spent 96 billion Egyptian pounds, or 20 percent of all expenditure, on subsidising petroleum products, including cooking gas, in the financial year that ended on June 30.

A reduction in the government's subsidy bill is likely to be a key component in any agreement with the International Monetary Fund. The government resumed negotiations with the IMF on a $4.8 billion loan on Wednesday.

Under the current system, a canister of butane cooking gas, or "butagas", sells for around 5 pounds, while it costs almost 70 pounds to produce.

Under the petroleum ministry's pilot programme, which began on October 1, the government sells the lower-cost canisters only to families carrying government ration cards or to people otherwise determined to be in need.

"Four governorates have begun the pioneering experiment to monitor and control butagas distribution by way of ration cards," Kamel told a news conference.

One of the governorates, or provinces, is Giza, which includes nearly half the population of greater Cairo.

The governor of Sohag province, also part of the programme, told the conference that the distribution plan had been 85 percent successful.   Continued...

Egypt's Petroleum Minister Osama Kamal speaks to the media at his office in Cairo September 16, 2012. REUTERS/Stringer
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