Transcript FOSSIL FUEL TAXATION AND SUBSIDY POLICY

FOSSIL FUEL TAXATION AND
SUBSIDY POLICY
Mr BERA Arsonina
Director of Pollution Management
Ministry of Environment , Ecology and Forests
Madagascar
Madagascar`s General Information
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Big Island in eastern africa , inbetween Indian Ocean and Mozambique Channel at
400km from Maputo Mozambique (nearest distance from african continent) :
590,000sqkm
Population:23,201,926 (july 2014 est.)
GDP :8.7 billion USD (2010)
GDP per capta: 478 USD per annum whereas power purchasing parity (PPP:1,000USD )
2013 est.
GDP Composition by sector in 2013 est. Based: 27.3% (agricul);
16.4%(industry);56.3%(services)
Unemployment rate:3.8 compared to active population (2010)
Inflation rate:10% annually (2012)
Population below poverty:poor household:76.5%; extreme poor people: 56.5% (2012)
Gini co-efficient:0.365(2005) to 0.403 (2010)
Fresh water consumption : 16.5 cuKm per year (2005) whereas domestic:2%; industry:
1% ; agricul:97%; Per capta : 1,010cumetre per year.
FOSSIL FUEL TAXATION
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Pass-through between end-2003 and mid-2008, Madagascar itself possesses the following data ( source:IMF 2010):
– On average , such an increase in fuel price results in decline in household real income.Otherwise the wealfare should
be widely impacted from fuel price increases even in small amount of USD per litre in fuel price is substantial. The
impact might be direct or indirect
– Madagascar underwent average tax rate about :
• 0.02 USD(end-2003) rather than huge tax about 0.42USD per litre in mid-2008
• Pass-through (end 2003 to mid-2008) and price increase
– Gasoline 161%
– Diesel 146%
– Kerosene 101%
Average :140%
• Fiscal cost compared to GDP : -2.5% of GDP
•In fact , retail price increses end 2003 to mid-2008 (USD per litre)
•Gasoline :0.97
•Diesel : 1.09
•Kerosene:0.75
Average : 0.98
Adjustment Factor by fuel Product
•Gasoline : 0.27
•Kerosene:0.42
•Diesel : 0.32
•LPG :
0.30
•Pass-through of international price changes (2004-2008) in percent
•228(2004), 138 (2005); 183(2006); 146(2007); 140(mid-2008)
Subsidy policy
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Government facing different difficulties to institute reforms to fossil fuel
subsidies
 Meeting with resistance resulting in quick policy reversal
 With risen price, popular protests requiring policy-makers to take
measures to solve the the increase in the cost of living
 Being scare of social unrest and political instability
 As rapid solution, subsidies are tangible way to deliver services in
return for political and social peace as bargaining tool. So when it is
introduced , population is already used to it they do not accept the
change into subsidy removal because few people have little
confidence that the money saved from subsidies suppression will be
wisely in the profit of the poor group
 Sustainably, phasing out in line with pathway to clean renewable
energy should be an opportunity for Madagascar because of 80% of
total energy is used by rural population as cooking wood based.
Subsidy policy contd.
• Some imported photovoltaic materials as solar
pannels , underwent tax free to encourage people to
comme up popularising little bit the use of
alternative energy (solar energy) because of
electricity price getting higher and higher due to
fossil fuel –based international market
• Low electricity consumption bubble operation with
price subsidised by government to be sold at national
electricity distribution facilities
• And so forth.
OK
• Thank you for your attention