Rejection grows due to the elimination of subsidies

Ecuadornews:

The Government is preparing these days to announce more details of what will be its plan to eliminate fuel subsidies. But while that happens, complaints from various sectors grow against this policy. Yesterday, was denounced a loss of up to 70% of super gas shipments; the shrimpers and tuna vessels, for their part, warn of the loss of competitiveness that they could have, if in the next few hours, the authorities approve also withdraw the diesel subsidy they use.

The rationalization of state aid to fuels began on August 27, with a partial withdrawal of the super gas subsidy, which caused the gallon cost to go from $ 2.10 to $ 2.98. This increase, as announced yesterday by the National Chamber of Distributors of Petroleum Derivatives of Ecuador (Camddepe), has caused the demand for this fuel to be reduced between 30% and 70% in the provinces of the country and that the warning should follow: a migration of consumers to gasoline ecopaís, the one that more subsidy has. “We have preliminary data, maybe they are not exact, but they report a drop from 30% to 70%, depending on the area,” said Francisco Silva, president of Camddepe. The most drastic fall is in the provinces of the Coast, such as Guayas and Manabí. These lower sales, he said, also translate into losses for service stations that depend on the sale of this fuel, especially when the percentage of profit that currently have the fuel marketers, has not changed for years.

With the reduction of the subsidy in this field, the Government seeks to save about $ 130 million of its expenses and, thereby, reduce its fiscal deficit.

The next step, as he has announced, is to apply the same measure to the diesel used by the industrial sector. But this intention worries shrimp and tuna representatives that yesterday, gathered in a press conference in Guayaquil, publicly rejected this measure that, they say, will affect their production costs and therefore the competitiveness of both sectors that, together, generate $ 4.500 million of income for the country, by concept of exports.

Raising the cost of the gallon of industrial diesel to international cost levels ($ 2.20) translates into an increase in each pound of shrimp by $ 0.10. José Antonio Camposano, president of the National Chamber of Aquaculture, said that this increase is important if measured by the volume sold and especially if it comes to apply at a time when that sector reports economic losses due to the fall of the price of the external market: only in the first semester it added $ 110 million, a trend that has signs of continuing in the next months of the year. The moment, he said, “is not the right one”.

Both unions asked the government to reconsider the effect of this measure that could even generate a greater impact on small and medium producers. The scope that this new provision could have is still to be known, but from these sectors a plan B is already being considered, if the authorities do not back down. An alternative is to demand economic compensation, which could arrive via taxes or via return. Yes, said Camposano, this help should be “immediate.”

The electrification in farms, is not yet a solution

The elimination of the diesel subsidy rekindles the importance of the electrification plan for shrimp farms. However, from this union it is affirmed that this way is not yet an alternative. Their development, they say, has stalled due to the lack of policies that encourage investment. Not establishing a ceiling on electricity prices, generates legal uncertainty.

The effect by sectors

In the tuna

A ton of tuna has an operating cost of $ 1,200, an increase in the price of fuel would bring this value to $ 1,400 and more. This increase would make the product less competitive and attractive in the international market and that, other derived industries, also feel the effect.

In the shrimp

Increasing the cost of diesel in this sector would be equivalent to adding $ 0.10 per pound produced of shrimp. That increase, says the sector, will affect their profitability. In the country there are about 215,000 hectares of crop of this crustacean, settled on land that has no agricultural vocation. (I)

Source: https://www.expreso.ec/economia/eliminacion-subsidios-impuesto-diesel-produccion-DM2358603