Filenews 16 February 2024 - by Eleftheria Paizanou
The continuation of the electricity price subsidy should be taken for granted, as the cost of electricity is largely burning households and businesses in Cyprus and there are no prospects of improvement in the situation.
Although the prices of the raw material (crude oil) are well below those in force in July 2022 when the subsidy measure first entered into force, distortions in the electricity market and the lack of sufficient storage facilities for energy produced from renewable energy sources, require the continuation of the measure, according to the Ministry of Finance.
From the existing information, it is likely that the electricity subsidy measure will be extended for another three months, until June, since the validity of the previous relevant decision of the Ministry expires on February 29, 2024 (effective from November 2023).
This measure is considered targeted by the government, as it is applied on a staggered basis (depending on consumption), which is in line with the recommendations of the European Commission. Next Wednesday, the 21st of the month, the proposal of the Ministry of Finance will be submitted for approval to the Council of Ministers.
With the continuation of the subsidy, the measure will cover residential, commercial and industrial consumers on a staggered basis. For vulnerable consumers, the subsidy will be significantly higher.
Based on the tiered subsidy in force, for bimonthly consumption from 1 to 400 kWh (kilowatt hours) the average subsidy rate will be up to 85%, for consumption from 401-600 kWh the subsidy will be 75% and for consumption from 601-800 kWh the subsidy will be up to 50% of the increase in the charge compared to the reference price of June 2022. No subsidy will be given for consumption over 800 kWh.
For commercial consumers, for consumption from 1-500 kWh the subsidy is 85%, from 501 to 750 kWh it is 75% and from 751 to 1500 kWh the subsidy is up to 50%. For industrial consumers the graduated subsidy is as follows: for consumption up to 750 kWh 85% of the tariff increase is subsidized, for consumption 751 to 100 kWh the subsidy will be 75% and from 1001 to 1500 the subsidy is 50%.
The budgetary cost of continuing the electricity subsidy will amount to €45 million, as is the impact of the measure for the period that will be in force, until the end of February.
In statements yesterday, Finance Minister Makis Keravnos said that no particular differences are expected from the costs currently borne by the state for the same purpose. As he said, the planning and implementation of economic measures is within the framework of the fiscal discipline of the economy. According to Mr. Keravnos, the big problem facing our country is the high cost of electricity, stressing that alleviating this problem is the first priority of the Government.
Alternative scenarios of targeted fuel assistance
On the other hand, things may be dark for fuel consumers, since the continuation of the consumption tax reduction has not yet been decided by the Ministry of Finance, as its technocrats are still considering it. The tax cut expires on March 3.
The evaluations carried out so far have shown, according to government sources, that today fuel prices are lower than those of 2022, when the measure was first implemented. Also, another parameter that may be an inhibiting factor for the continuation of the reduction is the fact that the measure is horizontal. The finance minister noted that the focus is on targeted measures, but did not rule out the possibility of implementing a horizontal measure.
The competent ministry is considering alternative ways to reduce the cost of consumers or a portion of consumers for motor fuels.
Before the announcement last October of new consumer support measures, the possibility of the fuel subsidy being given through a card had been studied, as was done in Greece, but the idea was rejected, as in Cyprus there is no infrastructure to implement the measure.
