Friday, August 10, 2012


Let me begin by saying that for me personally, I am all in favour of the fuel subsidy. I understand clearly the economic arguments for getting rid of it (or at least reducing it) and, quite frankly, cannot refute them. My only answer is that you cannot run a country like a business and that getting rid of the fuel subsidy will cause a great deal of pain, especially on those least able to afford it. But this post is not to argue for a retention of the fuel subsidy. That argument is for another time and/or place. I have heard via the usual Trini grapevine (which is often as accurate as it is just plain wrong) that new Finance Minister Howai intends to reduce (if not abolish) the fuel subsidy in the upcoming budget in September or October. In other words, the argument to abolish or reduce the fuel subsidy has already taken place and the abolitionists have won.

So, assuming (though obviously not accepting) that my information is correct, I have some suggestions for the very competent Finance Minister as to how he might lessen or alleviate the "damage" to the pockets of the average citizen if the subsidy is reduced or eliminated.

Perhaps we might start with the abolition of the Motor Vehicle Tax (MVT). You see, the MVT is designed to make cars, especially larger gas guzzling cars, so expensive that citizens will think twice before buying them. But if the subsidy is going to be reduced the "raison d'etre" to tax a large engine goes by the board. After all, surely, the reason that we taxed larger engines was to prevent (or make it harder for) people to abuse the subsidy on fuel. So instead of it costing, say $100 to fill up that Range Rover, by abolishing the subsidy it will now cost, say, $1,000. In other words, it is in the tax man's interests that people buy as much gas as pthey can possibly afford. And right there what the Finance Minister has lost on the swing of abolishing the MVT he will more than make up for on the abolition/reduction of the fuel subsidy.

Also, we would then have an incentive to import more fuel efficient cars. Right now the tax system works against this. I understand, for example, that a Suzuki 2 litre Vitara is less fuel efficient than its big sister that has  the bigger 2.4 litre engine. But the present tax structure encourages the import of the vehicle that burns MORE gas!! Life in the tropics?! Bigger engines today do not necessarily translate into less fuel efficient engines.

Again, we import a lot of foreign used vehicles from Japan and other places. These vehicles are usually about 5 to 6 years old and are not as fuel efficient as later models. But in good old T&T this doesn't matter because gas is so cheap. But because they are so old the MVT is very low making them comparitively inexpensive. But abolition of the MVT will reduce (if not eliminate) the need for such inefficient cars.

I could go on, but hopefully you have got the point. Abolish or reduce the fuel subsidy, then do the same with the MVT.

And because the abolition/reduction of the fuel subsidy will cause hardship the Minister should also pay attention to helping bona fide taxi drivers in converting their vehicles to compressed natural gas (CNG). Again, I am not certain how much the conversion will cost, but let's say that it will be about $10,000, then let the Government say that it will pay for the cost of converting a maxi or a car to CNG for all registered taxis (n.b., NOT the PH taxis) up to, say, $10,000. The cost of operating a CNG fueled taxi is peanuts compared to the cost of operating a gasoline or even diesel fueled vehicle, even at today's subsidised costs.

Also, the Minister ought to look at the terrible inefficiency that takes place on the roads. Right now a lot of cars get almost zero miles to the gallon because every single day they are spent in time wasting traffic jams. Trinis tend not to worry about the very real cost of sitting in a traffic jam for a long time because fuel is so cheap. But if the fuel subsidy is removed/reduced all of a sudden people will feel the cost of sitting in a traffic jam with the engine idling, gas burning needlessly and going nowhere fast. For one thing, a lot of people will wake up to the very bad driving habits that take place on the roads now where cars stop in the middle of the road to take on or disgorge a passenger to the detriment of all those behind.

You might say that the whole point of this post is that if we are to get rid of the subsidy then  let's do so in an intelligent manner that at least will hand back to the citizenry something that they will have lost. Tax, tax, tax is never an answer.


  1. excellent
    of course you will also deal with the matter of an atrocious public transport system which encourages the use of private vehicles

  2. There is a lot of talk about the removal of the subsidy, but I have not been able to find out, for example, what a litre of Super gas which nows costs $2.70, would cost if the subsidy was removed.

  3. This post makes a lot of sense ... as usual!!