The industrial energy pricing committee will meet today to decide on the percentage increase in the prices of natural gas and electricity for the coming fiscal year.
Amr Assal, head of the committee and of the Industrial Development Authority, said the committee will make a final decision that takes into consideration both the interests of the factories and the imperatives of the government to de-subsidize the price of energy.
The Supreme Council of Energy had decided in 2008 to raise the price of natural gas for non-energy intensive industries from US$1.25 per million thermal unit to US$2.65. The plan was to be implemented in three phases, with a 46 cent increase at each stage.
The first phase was implemented in 2008, but the government decided to postpone the implementation of the following phase due to the international financial crisis. The intention is to resume implementation in the second half of 2010. Non-energy intensive factories currently purchase natural gas at US$ 1.7 per million thermal unit.
A senior official on the energy pricing committee said the committee–formed of representatives from the Ministries of Petroleum, Electricity, Finance, Industry, and Investment–will most likely approve a proposal by the industrial sector to increase prices by only 10 percent.
One of the members of the committee said that since the industries affected are non-energy intensive, the price hike will not increase their costs of production significantly. He added that the fears expressed by those factories is slowing down the implementation of the plan.
Reham el-Dessouqi, a senior economic analyst at Belton Financial Bank, said that the increase in the prices of energy supplied to non-energy intensive industries is unlikely to reduce the budget deficit, especially since those industries receive only a limited percentage of total energy subsidies.
El-Dessouqi added that a study conducted by her bank has revealed that increasing the prices of energy will only raise the costs of factories by 0.1 to 4.6 percent, and cut their profits by a maximum of 3 percent.
Translated from the Arabic Edition.
