Based on some of the comments on social media and some of the ‘talk-radio’ shows, I seem to have upset a lot of people in Trinidad and Tobago by calling for a policy of removing subsidies on electricity.
The Energy Chamber of Trinidad and Tobago has been calling for the removal of transport fuel subsidies for more than a decade and over the years, I have often found myself the brunt of criticism for making these calls. The criticism is typically along the lines that the subsidies on fuel (and electricity) are among the few benefits that the ‘ordinary person’ receives from the government and that by calling for their removal, we are somehow attacking the ordinary person.
The fact that most of the value of the fuel and electricity subsidies goes primarily to higher income households does not seem to factor in to these discussions. It is a pretty obvious point — the more fuel or electricity a household uses, the more value they receive from the subsidies, so a better off household with two big cars, a powerboat ‘down the islands’ and central air conditioning will get a lot more value from the subsidies than a poor household with a couple of fans and residents who are reliant upon public transport. I was surprised that when I mentioned this fact on a radio show just after the budget, the host said that this was a new idea he had not heard before.
Another thing that people seem to not realise when talking about the transport fuel subsidy is that a lot of the crude oil that is processed by the Point-a-Pierre refinery is actually imported. This means that the actual hydrocarbon molecules that anybody uses to fill their car’s tank could just as likely have come up from the rocks in Russia or Gabon as in Trinidad and Tobago. (see related article)
The government has not traditionally done a good job at explaining the fuel or electricity subsidies to the people of Trinidad and Tobago. It is something that people have simply come to accept as the way things are and something that they have a right to receive on the basis of being citizens. I noticed that many people spoke about the increase in gasoline and diesel prices as a ‘tax increase’ rather than a reduction in a subsidy.
But I also think those of us who have been calling for the removal of the subsidies have also not always done a good job at fully explaining our reasoning behind our policy recommendations. An important part of our advocacy on the removal of fuel subsidies has been that government should instead invest heavily in public transport. In other words, government should shift from subsidising fuels to subsidising mobility via public transport. I think that this is something that we have never fully explained and we have been too focused on the headline call for subsidy removals and not enough on what needs to happen as an alternative.
Public transport is an important social issue. While it is richer households who have received most of the value of the subsidies, transport can represent a significant cost in percentage terms for poor households, especially in rural areas. Increased fares can have a major negative impact on these households. Government policy needs to recognise this and find targeted ways of directly assisting these households, especially with transport to and from school.
When it comes to the removal or reduction of the electricity subsidy, similar issues need to be considered. Firstly, there are good social policy reasons to ensure that all households can access a minimum amount of electricity at a low rate. Subsidies can be effective to ensure the provision of this basic service to every household but there are many households in Trinidad and Tobago that use large amounts of electricity. In fact, 43 per cent of households fall into the highest rate tier (using more than 1,000 kwh bimonthly). Does the state really need to provide a subsidy to these households?
The second point that we need to emphasise in our advocacy on electricity is that almost all households in Trinidad and Tobago can do a better job at using electricity efficiently. This means that increased electricity rates do not necessarily mean a higher electricity bill if people get into the habit of conserving more electricity, investing in more efficient appliances or better insulation and air conditioning systems.
As we develop our communications around the electricity subsidy removal, it is important that we communicate both of these points clearly
and consistently. Perhaps then I may not raise quite as much ire when I discuss the topic in public forums.