Cheap fuel good for CAL, bad for Tobago
From time to time, and now with greater frequency, the bubble of complacency that surrounds the Trinidad and Tobago fuel subsidy appears in danger of being pricked. Outside of budget day ruminations by finance ministers, the fuel subsidy is little talked about in terms of an arrangement too good to last.
Here and there in Finance Minister Larry Howai's October discourse, references to the subsidy appear, as if reflecting relevant nagging concerns about financial and economic management. "I propose to address the inefficient allocation of resources and the associated budgetary implications of the fuel subsidies, as we move toward a balanced budget in the medium term," said the minister, in his most ominous suggestion that cheap fuel should not be regarded an unqualified blessing from any God who is a Trini.
Like predecessor Winston Dookeran, Mr Howai characterised the subsidy as a "substantial disincentive" in the conversion of vehicles to the more economic use of compressed natural gas. Both ministers resolved to market the idea of using CNG, but noted that consumers would hardly trouble to convert so long as subsidised gasoline and diesel kept prices at levels so attractive as to be even addictive.
Matters actually got worse with the creation of Caribbean Airlines at a time of sky-high international energy and fuel prices. To give the new airline a leg-up, CAL for its purchases of aviation fuel was made a beneficiary of the T&T state subsidy.
In the event, the ramifications of the Treasury subsidy inevitably extend beyond the shores of T&T. If the fuel subsidy benefit, which is not an entitlement, enjoyed by T&T motorists remains a thorny question of public affairs, the cheaper-gas benefit afforded to Caribbean Airlines looms as an ever-larger Caribbean concern.
Fuel sold at the T&T pumps below world market prices, thanks to the Treasury subsidy, has deflated transport and other costs in this country. Caribbean Airlines, which services Jamaica and the rest of the region, happily makes use of its subsidy to keep its costs down, and its fares competitive against other airlines.
More and more, however, other carriers, especially Liat, owned by regional governments, resent this advantage uniquely applicable to T&T's CAL. On behalf of Liat, complaints of unfair practices and of treaty violations have been voiced by St Vincent Prime Minister Ralph Gonsalves.
That this is more than a regional bandwagon has now become clear. THA Chief Secretary Orville London has clambered aboard, identifying a Tobago interest that he charges is being disserved by the CAL fuel subsidy. Mr London claims CAL, with fares lowered through subsidised fuel, has been squeezing out other airlines serving Tobago's tourism.
Suddenly, the CAL fuel subsidy question is being agitated both regionally and nationally. The T&T government, and T&T public opinion, cannot continue deferring consideration of when such potentially disruptive fuel freeness can be reduced or ended.