Three sectors warn of damage if they remove the diesel subsidy

Ecuadornews:

The announcement of the revision of the industrial diesel has ignited the alarms in the productive sector. Between tomorrow and Thursday (September 4 and 6, 2018) the Government is expected to announce the increase in the price of the derivative for these activities, which will be carried out gradually (in three phases), until reaching the international value of USD 2. , 20 per gallon, said Eduardo Jurado Béjar, Secretary General of the Presidency.

This fuel is fundamental for the agroindustrial sector, mainly for the processes related to cultivation and transportation, said a study by the Ecuadorian Business Committee (CEE). The fuel for the agricultural sector represents, on average, 5.3% of its cost structure.

In this area, the most vulnerable industries are fishing, where diesel weighs between 20 and 30% of costs; wood, with 16.9%; and aquaculture, with 9.6%.

On August 21, the Government announced an economic adjustment plan that included the elimination of the super gasoline subsidy and the revision of the industrial diesel subsidy. For the National Chamber of Fisheries (CNP), the measure for diesel “will not represent a solution to the problems caused by mismanagement of public resources of previous governments”, as only 5% of the 31.2 million barrels of the fuel that the country consumes per year corresponds to this sector.

 The president of the union, Rafael Trujillo, explains that diesel accounts for almost a fifth of the operating costs of the fishing fleet, which would be the most affected of the chain. Trujillo assures that with the measure of the Government, the cost for the fuel would become more expensive until reaching 45% of the cost of production, “which can cause the bankruptcy of the sector”.

For the trade union leader, the subsidy is the only factor of competitiveness that the activity has against other countries in the continent. The value of inputs and capital goods, of labor, the tax on the exit of foreign currency and other items make local production more expensive.

José Antonio Camposano, president of the National Chamber of Aquaculture (CNA), points out that the increase in the value of diesel would be added to another problem that the sector is going through: the fall in the international price of the pound of shrimp.

The manager said that the differentiated price of fuel represents for the sector “the only variable that gave a margin of profitability to certain pools, to certain producers”. The president of the El Oro Shrimp Association, Segundo Calderón, points out that the fuel is used by the sector for the pumping stations and the aerators in the pools.

For the first activities, 56 gallons of diesel are used per day. While the aerators consume seven each night. “We work with living beings and oxygen must be stable for shrimp growth.” The study of the CCE warns that an increase in the price of diesel would add between 10 and 15 cents to the cost of the pound produced. Álex Elgoul, manager of Aquatropical and director of the Chamber of Laboratories of Santa Elena, explains that diesel accounts for 5% of its total expenses.

The fuel is essential to pump seawater and give the larvae and adult shrimp the optimum conditions for maturation. The rice farmers use diesel to pump water into the crops and operate the planting and harvesting equipment. “We are sure that the subsidy in this sector will be maintained; rice is a product of the basic basket, “says Javier Chon, president of the Ecuadorian Rice Industrialists Corporation (Corpocom).

According to the Chamber of Industries of Guayaquil, there are different price levels and marketing schemes for fuels in general. For example, for the industrial sector, industrial diesel and premium diesel have values of USD 2.26 and 2.40, respectively.

While the diesel 2 (shrimp, electric, fishing, automotive) has a price of USD 0.90. Of the barrels dispatched to the industry between January and July, 2.6 million were diesel 1, 2 and premium. The figure is equivalent to 54% of the total sold to the sector, “which denotes the importance of the derivative for manufacturing,” said the union.

In context

On August 21, the Government announced several measures that include the increase of super gasoline and the revision of the subsidy to industrial diesel. The cost that the State will assume in subsidies for this year is USD 3,000 million. (I)

Source: https://www.elcomercio.com/actualidad/tressectores-perjuicios-subsidio-diesel-combustible.html