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Fuel prices up after subsidies removed, decision triggers protests
By Omar Obeidat - Nov 13,2012 - Last updated at Nov 13,2012
AMMAN – The Cabinet on Tuesday decided to lift subsidies on oil derivatives, raising the prices of four fuel products.
The decision prompted protests in several cities and caused a rise in demand for fuel, with cars seen queuing at gas stations around Amman and other cities. Sources told The Jordan Times that scores of angry protesters vandalised public property in the southern city of Karak and that two policemen were injured in an attack by angry mobs in Taybeh near the northern town of Irbid.
According to the anticipated decision, the price of 90-ocatne gasoline will go up by 15 per cent from JD0.70 a litre to JD0.80 a litre.
Diesel and kerosene prices will increase, according to the new update to be effective as of Tuesday midnight, to JD0.685 per litre instead of JD0.515 a litre, which means the prices of the two products will go up by 33 per cent.
Cooking gas saw the highest rise, with the price of a gas cylinder going up from JD6.5 to JD10.
The decision to lift subsidies and sell fuel products at cost was taken to avoid further financial losses to the Treasury, according to Prime Minister Abdullah Ensour, who estimated the cost of subsidies on this year’s budget at JD800 million.
In an interview with Jordan Television, the premier explained that the new subsidy regime will deliver direct cash support to low and medium-income Jordanians.
Each individual of a household that consists of six members or less and whose income is less than JD800 a month or JD10,000 a year will receive JD70 in compensation of the hike in prices, Ensour said.
He further noted that there are 7.5 million people living in Jordan, 1.5 million of whom are not Jordanians but benefit from the blanket subsidy regime.
Those who deserve government support after eliminating the subsidy system are between 3.5 million and 4 million Jordanians, whose families’ annual income is less than JD10,000.
A government official told The Jordan Times Tuesday that the new subsidy system will reduce the cost on the Treasury from nearly JD800 million to between JD270 million and JD300 million.
He stressed that the decision to eliminate fuel subsidies could not be delayed due to the financial and economic situation of the Kingdom, which he described as “very critical”, emphasising that such a step should have been taken two years ago.
“This government came to office to supervise parliamentary elections and I would have preferred to spend my term without addressing such a sensitive issue to gain popularity, but my duties towards the country have forced me to lift the subsidy in order to avoid a financial crisis,” he said at the interview.
Ensour said public expenses in this year’s state budget were higher than revenues by JD3 billion.
He noted that the cost of generating power will reach JD1.7 billion due to interruptions in gas supplies from Egypt.
This means that next year, state finances will see a shortage of over JD5 billion.
To cover such additional burdens, authorities had to raise taxes and remove the current subsidy regime, he added, noting that foreign assistance is also needed.
Local banks almost covered the financial shortfall the government has been facing, but banks may no longer be able to do so in the coming years, the prime minister elaborated, noting the recent measures are aimed at avoiding insolvency.
Ensour said the government has also endorsed several austerity measures that seek to reduce public spending, in addition to other policies that would raise state revenues.
During the interview, the premier addressed the Jordanian audience in an attempt to convince them of the soundness of the recent measures by mentioning that there are two diesel shipments at the Aqaba Port that the government cannot find the liquidity to pay for.
He told the public that he is fully responsible for the decision to lift the subsidy, adding it was the right move to prevent an economic catastrophe.
Protests erupted in several parts of the Kingdom, including the capital, Karak, Irbid and Maan, on Tuesday night after the government’s decision on subsidies was announced, according to local news websites.
In Amman, protesters blocked traffic on the vital Interior Ministry Circle, chanting slogans against Ensour’s government and demanding his resignation.
Demand for petroleum products dropped sharply over the past few days after prices of oil derivatives in the local market went up following a government decision to lift fuel subsidies, according to the Gas Station Owners Association (GSOA).
Economists on Wednesday agreed that allowing the private sector to import refined petroleum products into the domestic market is a proper alternative for authorities to cut the cost of fuel subsidies.
The government will review prices of fuel products on a monthly basis as of January 1, 2013, Ministry of Energy and Mineral Resources Secretary General Farouk Hiyari said Monday.
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