Egypt will start implementing the ‘smart card’ system to sell subsidised petrol on government vehicles in May 2013 and on private cars in July, Planning Minister Ashraf El-Araby said Monday.
Under the new system, vehicles with smaller engines (1,600cc or smaller) will be assigned an annual 1,800 litres at the subsidised price. If consumption exceeds this amount, motorists will have to buy petrol at market prices, El-Araby was quoted as saying by state owned news agency MENA.
Cars with larger engine sizes will not be eligible for any subsidies. The final market prices for petrol have not been announced yet; nor has the price at which petrol will be sold to commercial vehicles.
Egypt aims to slash its extensive subsidy bill in a quest to curb its budget deficit, expected to edge above LE200 billion ($30 billion) in the current fiscal year. Fuel subsidies make up approximately half of the total subsidies allocated in the budget.
The amount spent on fuel subsidies is planned to reach LE70 billion in 2012/13, down from LE95 billion in the previous year. Such cuts, however, are seen as highly ambitious and hard to achieve.
Petrol makes up some 20 percent of this amount, most of which goes to subsidise low-grade octane 80 petrol.
The Egyptian government has already raised the prices of fuel on industrial companies that use mazut, a low quality fuel oil used for production, by 130 per cent.
Below is a table detailing the structure of fuel subsidies as presented in the state budget for 2012/13.