By Andre Bagoo Tuesday, September 23 2008

THE DECISION to increase the price of premium gasoline is part of the Government’s policy of getting “the ones who can afford” to pay for the poorer in society, Minister in the Ministry of Finance Mariano Browne said yesterday.

“The ones who can afford to pay are the ones who have been asked to pay... It’s part of a larger policy from that perspective,” Browne said speaking with reporters shortly after yesterday’s 2008/2009 Budget presentation in the Red House.

Browne revealed that the rise in the price of premium gas from $3 a litre to $4 which was announced yesterday in the Budget was a compromise which the Government has adopted in order to preserve the $3 billion fuel subsidy, which the Government has linked to protecting the poorer in society.

“The estimate for the subsidy in May of this year was $2.2 billion when, in fact, it is going to go up to $3 billion,” Browne said. “It continues to go up. Internationally, the price of gas is going up. So that by definition you are going to have an increasing percentage (of the Budget) for maintaining the subsidy. At that point the question is: is it maintainable? And is it equitable?

“So what you do is you adjust the price on the premium in other words the high end cars,” he said. “It is fully understood that diesel is used to a large measure by the taxis and the maxi taxis and if you were to affect the prices of all the fuel across the board then you will have a negative impact on inflation.

“It was decided as a deliberate measure in terms of the tax structure to go after the one market segment that can most afford to pay and then leave all the other subsidies intact at that level and that would mitigate the impact on inflation,” the Minister said.

Browne said the rise in taxes on private cars, also announced yesterday, was meant to send a “message” to the population. Asked what was the policy behind this decision, he said, “it was very simple: congestion on the road and the fact that we have gone through three series (of cars) in a very short space of time.

“We can’t build roads fast enough to accommodate the cars. You have to do something else so you send a price message. And the message has been sent,” he said.

Asked about the lack of measures to deal with rising food prices, Browne said the Government’s hands were tied with regards to this issue because of a desire to reduce the non-energy deficit.

“Food prices is not an issue that you can deal with in any new measure apart from for example putting subsidies in which case you will increase the non-energy deficit.

“The Government has a medium term strategy with regard to bringing the non-energy sector deficit down. The intention is to carry it down between ten and 12 percent,” Browne said.

Of concerns over the role of the Government’s own spending on its mega-projects, which has been linked to inflation, Browne said the Government could not abruptly halt its initiatives.