Govt mulls cheaper oil import instead of subsidy rationalisation
If the cost of fuel subsidies is not reduced, the cost of fuel subsidy will be close to MVR 2 billion this year as well.
By
Ahmed Naif
Government has backtracked on its plans to rationalise power subsidy to reduce the overall financial burden of blanket subsidies on the state, and is considering findings ways to import cheaper oil.
When this year's budget was presented in parliament, the government had said that the subsidy to reduce power tariff will be only available to those who need it and it will be implemented in January.
The finance ministry pointed out in the budget that the change was needed because blanket subsidies cannot be sustained in light of high fuel prices. As mentioned in the budget, it was pointed out:
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Last year, MVR 341.5 million was allocated for fuel subsidies, but by the end of the year MVR1.7 billion had been spent
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This year, MVR 788 million has been earmarked for the subsidy, considering the change in subsidy policy
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MVR 169 million allocated for power subsidy for poor households
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The president's presidential statement in February also said that efforts were underway to rationalise the power subsidy
When asked by Atoll Times about the implementation of the change in power subsidy, Mohammad Saruvash, head of the finance ministry's department of fiscal affairs, said there was no guarantee that the change in power subsidy would be implemented this year. According to him:
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The government is now trying to find a way to buy cheaper fuel
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But that is also challenging
"The government is in talks to get fuel cheaper. If successful, we will get cheaper fuel and reduce the cost of fuel subsidy," Saruvash said.
If the cost of fuel subsidies is not reduced, the cost of fuel subsidy will be close to MVR 2 billion this year as well.
According to the budget, the change in fuel subsidy will affect a large number of people. The government intends to revise the subsidy so that the impact is minimised as much as possible, the finance ministry said while presenting the budget in parliament.
The government's efforts to buy cheaper fuel are yet to be finalised. However, countries such as India and China are buying Russian crude at cheaper rates as demand for Russian oil, which has been hit by Western sanctions in the wake of the Russia-Ukraine war, has dropped.
