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Hasty removal of subsidies may lead to revival of ‘black market’ Proposal receives mixed reactions from MPs

KUWAIT CITY, April 15: The political arena particularly the Parliament has prioritized the proposal of lifting the subsidization of petrol for expatriates, and reducing subsidies on electricity in order for the latter to pay the market price for most of their power consumption, reports Al- Rai daily quoting reliable sources. They revealed that some lawmakers supported the proposal while others refused it, warning that lack of precise analysis of the proposal will lead to the revival of a black market in the future.

Head of Finance Committee MP Faisal Al-Shaye commended the government for its keenness in controlling the depletion of public funds through the provision of such subsidies. MP Dr Abdulrahman Al-Jeeran said the step of limiting the subsidization is essential but it requires intensive analysis. He stressed the need to consider the impact on expatriates from a humanitarian perspective.

MP Abdullah Al-Tamimi insisted that removing subsidies for 2.8 million expatriates in the country will help the country save hundreds of millions of dinars from its treasury, and control the traffic congestion, as Kuwait provides the cheapest rates for energy for its residents. In addition, sources stressed the need to refrain from integrating the issue of lifting general governmental subsidy with that of removing electricity subsidization, as the Minister of Electricity and Water and Minister of Public Works Abdulaziz Al-Ibrahim has referred a proposal to the Ministry of Finance regarding removing subsidies provided to certain groups of power consumers.

They added that both citizens and expatriates will be affected if the proposal is applied, while the group of low-income consumers will continue to receive the subsidy.

Meanwhile, reliable ministerial sources revealed that a ministerial committee was earlier formed to study the proposal of revising the subsidization structure. They reiterated that the proposal suggested removing fuel subsidies for expatriates and cutting electricity subsidies such that they pay market price for most of their power consumption.

They explained that the structure of subsidization for Kuwaiti citizens will be modified based on the results of a study or questionnaire that will be conducted to identify their monthly power consumption.

Currently, the country spends around 47 fils to produce one kilowatt of electricity, which it sells to its consumers for just 2 fils. They went on to explain that an expatriate will have to pay 22 times the current rate for power consumption after the subsidy on electricity is lifted.

For example, an expatriate who pays KD 25 per year for electricity consumption will end up paying KD 550 if the electricity subsidization is removed. In many cases, expatriates currently do not pay the electricity bill, as their electricity and water charges are included in their monthly rent. However, the removal of electricity subsidy could lead to changes in their rental contracts and installation of an electricity meter in each apartment.

Regarding the removal of petrol subsidies, sources said the expatriates will end up paying 2.5 to 3 times the current rate of petrol. For instance, an expatriate who pays an average of KD 200 per year on petrol will have to pay about KD 500-KD600 per year without the petrol subsidization.

They said the proposal stressed the need to prepare a separate study on the Kuwaiti citizens’ average monthly consumption of petrol based on which each citizen will be allotted certain percentage of subsidy on petrol, adding that the price of petrol will increase in proportion to increase in use of petrol by each citizen.

Sources said the proposal also suggested lifting subsidies on diesel because only companies use this fuel and it is not reasonable to provide subsidies to companies particularly those that are gaining profits.

They indicated the possibility of disagreements during discussions about the proposal by the ministerial committee particularly when conferring about its social and financial impacts on the citizens and expatriates, as it could lead to inflation and increase in demands for salary increments.

They lamented that the proposal will adversely affect large group of expatriates with low income.

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