Govt plans complete elimination of subsidies

Sunday, November 20, 2011

The Argentine government is planning a gradual and complete elimination of subsidies on gas, electricity and water for industry, service and commerical companies, paper La Nacion reported, citing government sources.

President Cristina Fernández is overseeing the process and will decide on the timing for the elimination of subsidies, according to the sources.

The government will carry out an exhaustive revision of sectors and companies and will eliminate subsidies on a case-by-case basis to avoid affecting general consumer prices, the paper said.

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The process is being coordinated by the ministries of economy and planning, trade and industry.

The government is also evaluating suspending subsidies for passenger and cargo transport, according to the report.

On November 16, the government announced a further 3.98bn pesos (US$933mn) in annual utility subsidy cuts in addition to the 600mn pesos announced on November 2.

Of the total gas, power and water subsidies to be cut, 3.48bn pesos will come from the industrial sector and around 500mn pesos from domestic users.

Big business will see subsidy cuts rolled out from December 1, when 40 of the country's highest grossing companies will have 100% of subsidies cut.

Fuel refining companies will see some 462mn pesos in subsidy cuts, gas processing firms will see 1.49bn-peso cut, the biofuel and oil for export sector will lose 745mn pesos and agrochemical businesses 758mn pesos.

Domestic users will initially be able to opt out of subsidies, while the second phase will be a personalization of subsidies where users will have to make a declaration of necessity.

Cuts will initially be introduced in the Puerto Madero and Barrio Parque areas of capital Buenos Aires and in all of the gated communities of the country, affecting some 232,000 customers.