Government begins reduction of subsidized energy

The Egyptian government began its plan to eliminate energy subsidies to most industrial sectors late last month, to the dismay of business owners.

Al-Masry Al-Youm obtained a copy of the decision, adopted by cabinet minister Ahmed Nazif on the 29 July, 2010, which involves a partial liberalization of  electricity prices, and was applied retroactively at the beginning of July.

Details of the decision reveal that the government plans to eventually eliminate subsidized energy to all industries; previously subsidized energy was eliminated for heavy-consumption plants during peak hours, a decision the factory owners described as a violation.

According to the new plan, electricity prices for heavy-consumption industries such as cement, fertilizer, aluminum, and copper have increased to 21.3 piasters per kilowatt / hour, up from 20.2 piasters in 2009 for extra high-voltage subscribers; 26.3 piasters up from 24.5 piasters for high-voltage; and 35.8 piasters up from 33.4 piasters for medium voltage.

Glass and chemical industries were spared the price increase.

Trade unions responded to the decision at  the Naga Hammadi Aluminuim Complex in Qena, describing the new plan as a blow to field operators who this year received LE80 million worth of subsidized energy.

Engineer Ragab Allam, head of the Networks and Controls Department at the company, told Al-Masry Al-Youm that the new plan will cost the company about LE165 million annually. Taking into account the four peak hours, the monthly increase will total LE14 million and the yearly LE168 million if the voltage reaches 570 megawatts, said Allam. When the voltage reaches 580 megawatts, he said, the total annual increase will stand at more than LE24 million.

In 2007, with the price of electricity up by 61 percent and natural gas by 110 percent, the government declared its intention to eliminate subsidized energy for heavy-consumption industries. The plan was put on hold during the 2008 global economic crisis.

In October 2009, the Minister of Finance, Youssef Botrous Ghali, announced that the government planned to abolish subsidies on energy products, such as gasoline and electricity, by 2014. Butane, however, will continue to be subsidized. The declaration left Egyptians outraged over what they believe would lead to a massive rise in necessary daily costs such as using their cars, and taking the metro and taxis. 

Translated from the Arabic edition.

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