Economists criticize 1997 court decision declaring the practice unconstitutional
CAIRO: Minister of Petroleum Sameh Fahmy proposed to the Shura Council’s Industrial Production and Energy Committee Tuesday lobbying the High Constitution Court to reverse its 1997 decision prohibiting multi-pricing of gasoline and natural gas.
Fahmy argued that since demand for investment in Egypt has become stronger, especially in the cement and steel manufacturing sectors, the ministry could afford selling energy at higher prices to factories, while maintaining the subsidized price for the general public.
Fahmy’s suggestion comes on the heels of the recommendations of economic experts issued during last week’s annual Egyptian Center for Economic Studies Conference.
Out of the LE 100 billion subsidy budget for 2006-7, LE 53 billion are slotted for energy.
“The [High Constitution] Court’s decision has been a disaster, president of Genco Group Tamer Abou Bakr told The Daily Star Egypt. “Setting two prices for gasoline and natural gas is common practice in many other countries.
Abou Bakr says subsidization has resulted in inefficient use of the country’s energy resources by the general public, the public and private sectors. A cubic meter of liquefied natural gas (LNG) costs the local consumer LE 0.45 at the pump, compared with its actual value of more than LE 3.
Fahmy said demand from 22 new cement and fertilizer factories established this year alone has reached almost 900 million cubic feet of natural gas annually. Meanwhile, the petroleum ministry’s export policy, which allocates a third of proven natural gas reserves to export, has recently come under scrutiny as Egypt’s reserves officially stand at just 67.2 trillion cubic feet.
Setting two prices for gasoline and natural gas, Fahmy argues, will encourage foreign oil investors now working in Egypt to sell their products locally and ease the pressure off the ministry of investment to enter into long term export-guarantee contracts with investors looking for high returns on their initial investments via exports.
