Government announces power subsidies

Government has announced a $2 million per year subsidy to electricity consumers and farmers, as escalating oil prices drive up the cost of electricity and petroleum based products like fertilizers.

“I am trying to soften the blow of the effects of these things,” Prime Minister and Minister of Finance Dr Ralph Gonsalves said last Friday as he announced the new measures.{{more}}

He said that while the fuel surcharge by St Vincent Electricity Services Limited (VINLEC) was about 53 cents per unit in April and May this year, the bill for June will reflect a 10 cent per unit hike.

“I have to try and do something about that for the most disadvantaged groups in the country.”

To this end, Dr Gonsalves announced that government will absorb six cents of the additional charge for the 17,000 domestic customers that use 100 units or less per month.

This subsidy will cost the government about $1 million per year, he said.

Farmers will also be given an ease, as the cost of fertilizers has also shot up. This happens at the same time the government is promoting its national food production plan.

The landing cost, insurance and freight (CIF) incurred on physically blended fertilizers has moved from US$290 per ton in 2005,US $390 per ton in 2006, US $409 per ton in 2007 to a more than double of last year’s rate at

US $875 per ton.

Two weeks ago a new rate was quoted as being $957.

Dr Gonsalves said that at $875 per ton, farmers will have to pay approximately $120 EC for a sack of physically blended fertilizer.

So government has decided to subsidize this cost by $21 per sack, which the Prime Minister anticipates will cost the government about $1.05 million.

Fertilizers are currently being sourced from Barbados, but Dr Gonsalves said that the search is on to see if a cheaper alternative could be identified.

Talks are ongoing as regards the possibility of Petrocaribe setting up a special petro-chemical facility with the aim of producing cheaper fertilizers.

Dr Gonsalves also lauded the Petro Caribe agreement which his government signed with the South American oil producing state, Venezuela, which allows VINLEC to pay 50 per cent on the cost of the fuel it buys from Venezuela, allowing the other 50 percent to be utilized in the country for social development projects.

That 50 per cent is given as a soft loan at one per cent.

Dr Gonsalves explained that while money from the Petrocaribe agreement cannot be directly used to fund the subsidies being given by government, because the money retained from the agreement could be used to do social development projects, monies that may have normally been used for such ventures, are now available to government to invest otherwise.

“This is not the time for

orthodox thinkers, people who think purely from the text book. You have to be very creative, and to work out ways and means to ease the problems on the poor,”’ Dr Gonsalves said.