Government to give up $3 million to provide subsidies

The government has committed to losing at least EC$3 million of its revenue over the next three months, as it attempts to implement measures that will ease the burden being placed on electricity consumers, farmers and motorists due to rising prices. 

Finance minister, Camillo Gonsalves announced these measures, which include subsidising fertiliser and other inputs, slicing excise duties on fuel in half, and waiving the customs service charge on fuel for the St Vincent Electricity Services Limited (VINLEC), during a press conference on April 28. 

“Of course, since the volcano erupted, we have had continuing economic challenges related to COVID, related to what monopoly capitalism is calling logistical problems and supply chain problems, but a lot of it is just price gouging; they see a chance to make an extra dollar so they raise the price on things,” Gonsalves said. 

He noted that when the rising costs of fertiliser is factored into what farmers are selling their produce for, “sometimes the dance can’t pay for the light” unless the government takes measures to make these inputs more affordable. 

The finance minister said at least $420,000 is lost on every shipment currently being subsidised by government in an effort to offer “tremendous subsidies on fertilisers to farmers”. 

NPK fertiliser should cost $150 but with a government subsidy of almost $55, farmers now pay $95 per sack. 

The cost of urea sits at just over $177. Gonsalves said the government is subsidising it to be $72.67 less, taking the overall cost to $105.
 
Vegetable fertiliser and Sulphate of Ammonia have a $125.73 and $97.73 price tag respectively. 

With government subsidies, these farming inputs are now being sold at $95 and $75 respectively. 

Gonsalves also announced on April 28, the resumption of the Love Box programme, to provide persons with starches alternative to wheat and grain products, in the face of rising prices on the global market. 

“The government has decided to resume the Love Box programme so that we can purchase locally grown starches from farmers, local producers and give those locally produced starches to vulnerable people in St Vincent and the Grenadines who have nutrition vulnerabilities. That will ensure the farmers a market at a steady price and it will ensure the vulnerable people that even if bread one up, and rice gone up, we can still assist with other starches,” he said. 

VINLEC is also currently benefiting from government relief efforts, as the custom service charge on all fuel imported by the electricity company has been waived. 

The finance minister said the waiver is likely to result in a fuel surcharge reduction that will be passed on to the consumers. 

“It’s going to cost the government about $165,000 a month, roughly $500,000 over that three month span, in waiving the customs service charge on all the fuel VINLEC buys. That will make fuel bought by VINLEC cheaper, and that will…soften any increases in electricity cost to consumers,” Gonsalves told reporters at last week’s press conference. 

He added that as of May 1, relief should also be felt at the pumps. 

The government official noted that as of March, the average cost of diesel within the Eastern Caribbean Currency Union was EC$15.76, while the average cost for gas was EC$14.53. 

He also noted that in Barbados, which is not a part of the currency union, gas is being sold at what is the equivalent of EC$ 21.10 per gallon. 

According to Gonsalves, this country has the lowest gasoline prices in the Eastern Caribbean at EC$14.69, and the second cheapest diesel, at EC$13.20. 

“So, already as prices increase, we have the cheapest gas and among the cheapest diesel, not because we subsidise it but because those countries put more tax on it,” the finance minister said.

He added that “once you cross that $15 threshold, gas starts to feel very expensive and people start to feel it a bit more both real and psychological terms even though there was a point in the past when gasoline exceeded $16…in 2018”. 

Gonsalves announced that the government will halve excise duties on fuel, which should result in cheaper prices at the pump. 

He explained that in real terms, excise duty is approximately EC$2.10 of every gallon of diesel and EC$3 for gasoline. 

“We are trying to hold the line against the increases by reducing this excise tax by 50%,” he said, while adding that taxes account for about 18.75% of gas prices at the pump.

The finance minister said the government is also looking at ways to subsidise cooking gas. 

When all lost revenue is considered, the government stands to lose at least $3 million over the course of the next three months, Gonsalves said. 

The government minister said he is hoping that these measures do not have to be extended beyond the three-month period.