The coming months will be marked by a
bold and unclear
shift in the allocation of energy subsidies.
The government is about to implement a scheme that would have a significant impact on family income on the one hand and on public accounts on the other.
The decision is
to reduce subsidies to the minimum possible
and there is no way to do this without paying considerably more for the energy we consume.
This initiative is addressed
without a macroeconomic stabilization plan
and in a framework where energy policy in general is
still adrift
and tariff policy in particular is in a process of adaptation to the new schemes that are being designed.
The uncertainty, one month after its eventual application, is high.
Today there are two main obstacles, one of them self-constructed, that the Government will have to resolve in the coming months if it wants to have a chance of success in energy policy.
On the one hand, the
phenomenal tariff delay
in 2 out of every 3 homes in the country that consume more than 30% of the energy and that continue to occupy an important portion of public accounts.
And, on the other hand, even more challenging, the implementation of a new subsidy system that
is inexplicably complex
and that can bury the efforts to recompose rates.
The new subsidy scheme
The government announced a change in the schemes for allocating energy subsidies.
Instead of targeting supply massively, they will focus on demand, that is, on users.
This approach
is correct
, although it can cause problems.
The main parameters to assign them are mostly known.
To identify the users who need help,
the income and assets of some 15 million households will be taken,
but two innovative criteria are also included with the use of the
Basic Energy Basket
(CBE), which is a minimum requirement for electricity and gas. in homes, and a breakdown by bioenvironmental zone.
The government's proposed subsidy scheme is overly complex and has not yet been clearly explained, even with a public hearing.
In practice,
there will be a different subsidy for each household in the country
and, almost certainly, the population will have little knowledge about
how much they pay and how much help they receive
to meet their electricity and gas bills.
It is an
innovative
system that could have certain shortcomings in its effective implementation and that does not have significant precedents in the world.
Argentina has almost half of its households below the poverty line, is going through a marked recession and has no comprehensive stabilization plan.
In this context, the new subsidy schemes are presented.
Among the details is the use of the
“10% criterion”
as the maximum weight of energy expenditure on salary to allocate subsidies and the possibility of incorporating a direct transfer system to the user.
The first point is based on considering “energy poor” households to be those that allocate more than 10% of their income on energy goods and services.
This is a global definition and, by the way, with extensive criticism.
The second point is the possibility that the user receives a transfer into their bank account as an energy subsidy that would replace the discount on the bill and constitutes a serious risk for the provision of the service in the event that these funds are freely available. availability.
This risk is due to the high probability of
defaults.
On the other hand, in a country with high inflation, the values of the invoices are anecdotal.
However, the weight they have in income is not.
In this sense, the weight of energy expenses in the average salary was around 4.5% in the years of convertibility, when there was no subsidy.
For this reason, the fact of setting a threshold at 10% of income to calculate the subsidy reveals a no small socio-economic background and that is that in the Argentina of Vaca Muerta, with real wages falling in the last four years
, Real energy costs at the household level are increasingly difficult for its inhabitants to face.
Rate increases
In the month of February, for 2 out of 3 households,
more than 92% of the cost of residential energy was covered with contributions from the State.
On the other hand, the government decided that as of February 1, small industries and businesses will stop receiving subsidies on their electricity bills and will begin to pay the
full cost
of the service.
This implies an increase of
178% and 276%
in the price of energy for these users, which will more than have its correlation in the final bills when adding the increases in the transportation and distribution charge, if any.
In the case of residential users, the fate will be defined when it is explained which subsidy will correspond to each household.
The maximum scenario for average households
is an eleven-fold increase in the price they pay for energy
, more than 1,000%, to cover costs without receiving subsidies.
Additionally,
the process of updating gas bills is suspended until April.
For what is to come, attention should be focused on the level and not on the variation in electricity and gas bills.
Because although these services have an impact of 3.5% on the price index, their impact on inflation is moderate, but the distributional effects are not.
Experience indicates that increases in energy prices
have a greater impact on the lowest income deciles
.
That is, it affects those who have the least the most.
For this reason, even with tolerable increases, tariff adjustments will have an unequal distributive impact if this issue is not addressed in a
simple, transparent and effective way.
* Julián Rojo is an economist at the IAE and the IIEP-UBA.