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Tuesday, 24 July 2018

Natural gas prices for household and industry to rise by 30-75% as of 1 August

Natural gas prices for household and industry to rise by 30-75% as of 1 August: The Madbouly Cabinet decided on Saturday to raise the prices of natural gas for household and industrial users by 30-75% as of 1 August, pressing ahead with plans to gradually phase out subsidies under the IMF-backed economic reform program, according to a statement carried by Reuters. This translates to an increase of EGP 1.75-3.0 per cbm of gas, depending on the level of consumption. The increase in natural gas prices is meant to correct the pricing imbalance with cooking gas cylinders — which are used as an alternative to natural gas — following last month’s fuel price hikes, Oil Ministry spokesman Hamdy Abdel Aziz tells Al Masry Al Youm.

Natural gas users will now be billed at:

  • EGP 1.75 per cbm for up to 30 cbm of consumption, up from EGP 0.1/cbm;
  • EGP 2.50 per cbm for consumption between 30-60 cbm, up from EGP 0.175/cbm;
  • EGP 3.0 per cbm for anything over 60 cbm, up from EGP 0.225/cbm.

The hike was accounted for in the state budget for FY2018-19, government sources told Al Mal, adding that the amount allocated to fuel subsidies this fiscal year remains the same at EGP 89 bn, down from EGP 125 bn in FY2017-18.

This will likely not go down well with manufacturers: Rising natural gas prices have been squeezing manufacturers, who make their payments in USD, since the currency was floated back in November 2016. Lobby and industry groups had also tried at various points in time to pressure the government into repricing the cost of natural gas for industry to help them cope with rising expenses, to no avail. EGAS had introduced an incentive package back in February that offers manufacturers lower fines and easier payment terms on gas supply contracts.

…and everyone else: A number of House representatives have also requested to send a letter to Prime Minister Mostafa Madbouly and Oil Minister Tarek El Molla to explain the reasoning behind the price increases, Rep. Amr El Gohary tells Al Mal. El Gohary says parliamentarians are incensed that prices were raised despite Egypt approaching natural gas self-sufficiency. Meanwhile, bakers of subsidized bread want to get more out the government as a result of the move, according to Al Mal.

El Sisi urges patience with reforms: The day after the price hikes, President Abdel Fattah El Sisi stressed that the state is pressing ahead with reforms while working to shield the most vulnerable citizens from the burden of the reform program, in a speech on Sunday. He said that the difficult times Egyptians are facing due to economic reforms are understandable but “causing chaos and destroying the state” are not justified.

Rumors spreading discontent are the greatest danger to Egypt’s stability, says El Sisi: Egypt’s stability is most threatened by rumors attempting to spread discontent and frustration among the people, El Sisi said. According to the president, the government has tallied some 21,000 “false rumors” over the past three months, which he said, along with terror attacks, are part of a “network” aimed at instilling a sense of frustration among Egyptians.

The foreign press’ take: The move — which follows a c. 50% hike in fuel prices in June, as well as increases to the costs of electricity, pipe water, and transportation — “is likely to further fan the flames of popular discontent, especially among poor and middle-class Egyptians who have borne the brunt of the government’s economic reform program,” says the Associated Press.

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