(2009-11-17) Mozambican motorists will pay the real market price of the fuel they consume, when the current fuel subsidy terminates, Prime Minister Luisa Diogo has warned.
Speaking to AIM in the Portuguese town of Figueira da Foz, Diogo said that, while the government could continue to subsidise the diesel used in passenger transport, it was an entirely different matter to subsidise the fuel used by private owners of luxury vehicles.
Fuel prices have remained unaltered since March. In the early part of the year, international fuel prices were falling, and on 18 March the Ministry of Industry announced a 20 per cent cut in the price of liquid fuels. A litre of diesel now cost 22.45 meticais, of petrol 23.1 meticais and of kerosene 15.58 meticais (at current exchange rates there are about 27.5 meticais to the US dollar).
Since then international prices have risen sharply, but the government opted to freeze the Mozambican price at the March level (even though the last time petrol was as cheap as this was early 2005).
To keep the prices low, the government had to negotiate with the fuel distribution companies. It agreed to compensate them for their losses with payments equivalent to 34 million dollars up to the end of this year.
Any hopes that the price of fuel might fall again by a substantial amount have been dashed. After dropping to around 40 US dollars a barrel in March, the price (on the New York Mercantile Exchange) now stands at over 77 dollars. The current conventional wisdom is that, with developed economies pulling out of recession, there will be a greater demand for oil, and so prices are more likely to rise than to fall.
"If prices do not fall", said Diogo, "then naturally we Mozambicans will find ways of balancing the effort of the government and contributing so that the cost of living of the population does not worsen".
That would mean a targeted subsidy aimed at passenger transport - both the publicly owned buses, and the private mini-buses (colloquially known as "chapas" that provide so much of Mozambican urban transport).
But unlike the current subsidy, this would not cover "those who own four wheel drive vehicles who have the capacity to buy the fuel at its market price", she added.
"The government will continue to give support to those who need support by subsidising passenger transport", Diogo pledged. "But those who have the ability to do so will have to pay the real price of the fuel".
Diogo was attending the Global China Business Meeting held in Lisbon, but travelled to Figueira da Foz to visit the industrial complex of the Portuguese group Portucel Soporcel. This company is a major paper producer and plans to invest in eucalyptus plantations in Mozambique.
From: Sergio What does owning a four wheel drive vehicle have to do with anything? Subsidising public transport may help the poor but this will be nothing when compared to the increase in price of basic commodities that rely on transport. I dont see poor Mozambicans cheering for the Prime Minister for saving them 5 Mtn on transport when their food bills increase by 20 to 30 percent. 2009-11-17