Egyptian households see energy prices increase

[DJKeefy]

Hike in electricity prices in February plus last year's increases in gas price means consumers' bills are higher than ever.

In its quest to rein in a growing budget deficit, the Egyptian government has turned to its extensive subsidy bill to find savings. The government has already announced plans to ration subsidies for petrol and diesel fuel, and hiked fuel prices for heavy industry by 33 percent at the beginning of the year.

However, it seems that the government has recently moved to reduce subsidies on electricity and natural gas, which make up a meagre 5 percent of Egypt's LE145 billion subsidy bill.

In the past few months, households across Egypt were surprised to see their electricity and gas bills rise without prior notice.

Fatma, a resident of Al-Abbasiya in central Cairo says her electricity bill has jumped from LE21 to LE32 in one month, while her gas bill climbed to LE30 compared to an average of LE10.

"My consumption level has not changed. I live alone, with my daughter occasionally spending the night with me every now and then," she says.

The February hike in electricity prices is the second of its kind in recent months, after a similar decision was taken in November.

Electricity prices in Egypt are subsidised according to an increasing scale so that the higher the consumption, the lower the subsidy.

The first consumption category, a monthly 50 kilowatts per hour or less, has not seen any changes, keeping the pricing structure for this category unaltered since 1993.

The tariff for the second category, whose monthly consumption is up to 200 kilowatts per hour, increased by 4.4 percent to LE0.12. Including the previous increase, this category has seen a 10 percent hike in cost since November 2012.

The two higher consumption categories saw an increase of more than 17 percent each.

The government, however, did not announce how the LE5 billion of electricity subsidies would be affected by the new decisions.

Electricity tariffs have not changed for more than a decade until 2004, when the government announced a plan to raise prices which was halted in 2008 as a consequence of the international economic crisis.


Officials deny recent gas price increases

Many Egyptian households have also been complaining of hikes in their gas bills over the last couple of months.

Wafaa, a resident of Agouza, a Cairo district, says she paid LE25 for her monthly gas bill for the first time ever. Her normal bill is around LE10. Nabil, a lawyer, says his bill doubled during the last two months while Ragab, a teacher, reports a smaller increase from LE8 to some LE13 in the last month.

"Everybody is complaining this month. Some bills are really high. I feel embarrassed to deliver them to consumers," says Mohamed, a gas bill collector, in Giza Governorate.

Officials, however, have denied any recent price hikes.

"We have not imposed any tariff increases recently. The last time was in July 2012," Essam Awad, assistant of the president of the Egyptian Natural Gas Holding Company told Ahram Online.

"The last increase in tariffs took place few months ago and there were many complaints that month," an operator in charge of responding to consumers’ complaints at Petrotrade (the company in charge of collecting gas bills) told Ahram Online.

She explained that consumers who have old gas heaters are the one who saw the biggest increase in their bills.

In July gas consumption categories were reduced from three to two. The tariff for the first category of monthly consumption up to 30 cubic metres remained at LE0.10 per cubic metre.

Since July, any extra consumption is charged at LE0.5, versus a maximum of LE0.3 previously.

Natural gas, used for domestic as well as industrial purposes, is allocated LE2.5 billion worth of subsidies in Egypt's 2012/13 state budget.

Source: http://english.ahram.org.eg/News/67954.aspx

[biosceptic]

What is the energy cost for the average Egyptian family at the moment? What would it be like with no subsidies? How long would the government last if they removed the lot?

[A-Four]

What is the energy cost for the average Egyptian family at the moment? What would it be like with no subsidies? How long would the government last if they removed the lot?

A really good and interesting set of questions Biosceptic, I and, I am sure, a certain French lady who runs the IMF are waiting, with baited anticipation as to the answers you are going to get from your average ex-pat in Luxor.

[Dusak]

The increase in the cost of electricity and gas only affects the poor. The high to middle class portion of the population can weather the storm with little or no difference to their living costs or quality of life. Its always the poor, which is the grater part of this countries inhabitants that suffer. Food costs are also increasing at a rapid rate so they suffer even more while the fat cats of this society do not even feel the tremor let alone experience the earthquake. It would be a good idea to concentrate their [Government] efforts on sorting out a structured tax system to start putting money into the system via legitimate means instead of continuously expecting the less fortunate to subsidies the country's level of debt.

[Dusak]

A_four, no problem paying 5Le per bus journey and ferry crossing. Quite happy to pay double for my doctor and dentist visits and any pharmaceuticals I may require. Unfortunately if I was to pay these increases all would only go into singular pockets not into the countries coffers and on the whole, in most cases, I already pay these increases. I would be happy to pay a property tax each year that would top up the bank when you consider how many property's are owned across the whole of Egypt by Europeans. I would not complain if I where to be charged double for my gas, water and electricity. Still far, far less than the UK. Unfortunately there are far to many ex-pats living here that could not afford these increases. Unless of course they were to stop drinking and God forbid if they had to do that.

[biosceptic]

By average I assumed we were talking about the poor. What % of Egyptians would be regarded as poor? What % of income would go on food and rent? What is likely to be the effect for the poor on losing the bread /flour subsidy?

[LovelyLadyLux]

What percentage of Egyptians are regarded as poor?

Without getting into percentages the answer is 'most' and a poor Egyptian does not equate to a poor European, American, Canadian who have access to a host of gov't services to alleviate their poverty. Most of the poor in the USA have colour TVs, fancy phones, ample clothing, are warm and do not lack for food. There are mega social service groups, charitable organizations, religious institutions who do an extremely good job of looking after the poor who do for the most part the POOR have their basic needs met. In Egypt there isn't the same social structures and people do get too cold or too hot, they often have very little to eat, can go hungry and typically have 1 outfit of clothing to wear.

I'd hazard if the bread did not flow from the gov't to the people there would be hunger - REAL hunger akin to starvation.

I realize there are many more factors to consider however as your question was general my answer was without specifics.

[biosceptic]

That was the thought behind my post. Without the bread subsidy would most Egyptians be below the bread line? Is it likely to result in further strife and are government officials ready? Will the poor balm the MB or will blame fall on the exploiting foreigners or the previous Government?
I can't see the status quo lasting much longer unless a white knight from the Arab world rides in for their own political reasons

[Dusak]

By average I assumed we were talking about the poor. What % of Egyptians would be regarded as poor? What % of income would go on food and rent? What is likely to be the effect for the poor on losing the bread /flour subsidy?

The vast majority of Egyptians are poor, the slightest increase in anything that they rely on making them even poorer. These people, the forgotten masses, are in desperate need of help. Only the poor should receive any form of subsidized help. The system needs better control and be tightened up to prevent those that treat such benefits as an extra, but not needed freebie, should have a halt put on their 'its free' grabbing fingers. If you are poor here all available money goes on food, the rent is attempted to be paid and fortunately are low. The children suffer as there is no money for schooling, the people suffer as there is no money for medical care. If the subsidies where to be removed there would only be one outcome, more people would slowly starve to death. These poor households tend to be large in number with many mouths to feed. Its not uncommon that such families actually farm their children out to other family households or trusted long time friends in an attempt to get the children fed and this practice of separating siblings can only lead to more problems to my eyes. I used to live when first arriving here, in an apartment that overlooked a bakery. I saw at first hand the people that bought this subsidized bread, restaurant owners and shop owners that would make a fat profit off the backs of these poor individuals. Three times the police raided the place due to these nefarious practices and three times it immediately reopened and carried on selling after a ''fine'' was paid. This particular scumbag of an Egyptian even sold full bags of the subsidized flour at night to gain extra money.

[biosceptic]

So the issue in the end comes back to governance and oversight of the system to overcome the tendency to rort. Obviously the change in those at the top hasn't done anything to improve this. I wonder what effect some sackings for police / bureaucrats caught in some simple sting operations would have? I know a little too much to hope for

[Hafiz]

Energy is highly subsidized by the Government and the subsidy is not income tested/tested but open to widespread fraud. Even energy to industry is subsidized and all of this is driving the Government broke.

Whether the elegant French IMF person (who is now under criminal investigation but not for orgies!) wants it or not, benefits will be means tested (or better means tested) so that very limited Government funds will go to those most in need. Ms Legarde is just delivering 'advice' that the Government agrees with and which they might find it easier to implement if they can convince Egyptians that it is necessary to get the needed loans/the demands of the oppressive west.

Unfortunately the benefits have gone to the better off for so long that they will scream as they are removed from the public tit and, as with the middle classes across the world, their screams will be louder than their poor cousins.

Poor Egyptians. Can't find the reference, but up to 40% is often bandied about with the poorest regions in Upper Egypt where the figure is much higher. These figures pre date the current problems.