Jordan gets premium on its petrol with 25% price hike

Jordan gets premium on its petrol with 25% price hike
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Published May 29th, 2012 - 14:00 GMT via

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Electricity tariffs for major mining firms, telecommunications companies, hotels and banks have also been raised
Electricity tariffs for major mining firms, telecommunications companies, hotels and banks have also been raised
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Industrial companies in Jordan have warned they risk being pushed to the wall by a rise in prices of fuel and electricity as the government seeks to stave off a fiscal crisis.

The government yesterday raised the price of premium petrol by about 25 percent, as well as prices of diesel, kerosene and fuel oil, the state-run Petra news agency reported.

Electricity tariffs for major mining firms, telecommunications companies, hotels and banks have also been raised. The moves are designed to help to narrow a budget deficit that is forecast to widen to US$4 billion (Dh14.6bn) this year. Officials also want to show a commitment to austerity measures to gain IMF support for a loan. But raising fuel costs might "kill a lot of companies that were profitable", said Hashim Mohamed Ibrahim Momani, the general manager of General Mining, which operates six mines across Jordan.

"I will suffer as it's raising the cost of my overheads. We can't compete with cheap products coming in from the Gulf, where companies have access to cheap fuel," said Mr Momani, whose firm produces gypsum, used in the manufacture of cement, and other materials used in the ceramics industry.

General Mining's estimated $300,000 annual fuel bill would be likely to rise by 10 or 15 percent, he said. The firm is reliant on electricity for lighting and air conditioning for its mines and diesel to run its excavators and bulldozers.

The government decided against raising the cost of lower-grade petrol in a bid to appease poorer consumers. But the move is still expected to stir controversy. Opposition Islamists have said the measures are "very dangerous" and likely to trigger political turmoil.

"We reject imposing more and more burdens on Jordanians," the Islamic Action Front, the political arm of Jordan's Muslim Brotherhood, was quoted as saying by Agence France-Presse. "The government instead should restore stolen money and find an effective way to cut its own spending."

Alarm at rising living costs brought Jordanians on to the streets at the start of last year as unrest erupted in parts of the Arab world.

Since then, the Jordanian government has pledged to lift social spending. It had even promised not to raise fuel prices, but pressures from higher international energy prices have forced officials into a rethink. The bill for energy subsidies rose to more than $1.8bn last year from $350 million in 2010.

Khaled Irani, a former minister of energy and environment in Jordan, said he hoped the latest measure was a first step towards a gradual removal of all energy subsidies.

"We cannot live with an economy that is benefiting large consumers rather than the poor," said Mr Irani, who is now chief executive of E2E, a clean-energy investment firm. "Jordan imports 96 percent of its energy, and it's not sustainable to continue subsidies."

In an effort to help Jordan to meet its funding needs, the government is reported to have applied to the IMF for assistance. In return, the fund is likely to demand fiscal reforms, including an unwinding of subsidies, and the imposition of higher taxes.

An IMF team warned officials last month that the nation's economic future was bleak unless it curbed public-sector wage bills and scaled back social spending.

External funding needs for the year were expected to reach $3bn including a $2bn current-account deficit and $1bn of maturing debt, according to Capital Economics.

In another move that could prove unpopular with businesses, the government is considering raising taxes. Mr Momani said he expected taxes on mining companies to rise from 15 to 25 percent.


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