A new plan released by the Petroleum Ministry set to be implemented in April stipulates that all vehicles with engine size between 1400cc and 1800cc will receive1800 litres of gasoline per year, or 5 litres per day, through a new “smart petrol card” programme. The program is set to provide taxi and microbus drivers with 10,000 litres of diesel per year, or 30 per day.
The plan would include partial subsidies for gasoline used by cars ranked above 1400cc, with the price of diesel reaching EGP 1.65 per litre and 92-octane gasoline EGP 2.5 per litre.
Hani Dahi, former head of the EGPC, said that the 5 litre daily quota allotted for car owners using smart cards would only be enough to cover 50km worth of driving. He added, “diesel and gasoline subsidies totalled EGP 70bn a year, a number that exceeded the amount set aside in Egypt’s budget for both education and health care. Considering that there exist 5m car owners in Egypt, citizens who own cars were benefitting at the expense of those who don’t.”
He added that the amount of diesel and gasoline resources allotted for each smart card had been determined after careful study and review.
He added that if steps were not taken to restructure Egypt’s subsidy programme for petroleum products, that the expected cost of such subsidies could surpass EGP 120bn by the end of this fiscal year.
Khalid Yousef, president of the car sector for the international Egyptian car company EIM, an agent of Renault and Kia, said that he expected that the ministry’s plan to have a negative effect on car sales for all models above 2000cc, and other models above 1400cc. He added that ultimately it would not be companies affected, but rather the market itself.
He added that the plan’s negative effects could be avoided if car owners were willing to curb their use of fuel in order to help protect the Egyptian economy.
On the other hand, Yousef said that the ministry’s decision would have a positive effect on citizens, as it would help direct subsidies to those who most deserve it. He added that low-income citizens who do not own cars would benefit from the programme, since the saved funds would be directed to the state treasury.
Amr Hanafi, director of sales at Subaru of the Abu Gali Motors Company, agreed that the new programme would only affect the sale of cars above 2000cc, but not those between 1400cc and 1600cc.
He added that although the decision was in the interest of the state and the nation’s citizenry, any failure to study the full effects of the plan could have a negative impact on Egypt’s economy, pointing out that the government was still seeking to pursue plans to help close its current budget deficit.
Alaa Al-Saba, president of the board of directors for Al-Saba Automotive company, dismissed claims that the smart card programme would have a negative impact on car sales, saying that car companies were not opposed to efforts to restructure the nation’s subsidy programme.
However Hossam Arafat, president of the petroleum resources division, predicted that the government would not be able to implement the programme, saying that the negative response from the Egyptian street would be to strong.
“It would be better to gradually raise the price of petroleum products, while channelling subsidies to individuals in the form of cash.” This he pointed out, would be better because “it is primarily car owners who benefit from petroleum subsidies, rather than all Egyptians. He further stated that before implementing the programme the government should consider providing new means of transportation for its citizens.”
Muhammad Saad, vice president of the petroleum resources division for the Federation of Egyptian Chambers of Commerce, said that the petroleum ministry had not yet informed gas station owners of its plan to create and distribute smart cards. He pointed out that car owners would indeed use smart cards to fill up their vehicles, but that once the card’s quota had run out, they would be forced to continue buying fuel at standard market prices. He said that it would be difficult to implement this new program now, as the extent to which such a plan would force car owners to purchase their fuel at specific gas stations was still unclear. Smart cards for microbuses he added, would be different from those used for regular passenger cars.
Saad added that it would be necessary to conduct studies regarding the actual amount of diesel fuel used for different transportation routes, and to structure the smart card plan in a way that did not raise the cost of goods and commodities for drivers.