Following announcements that fossil-fuel subsidies will be phased out, from the G-20, the Asian-Pacific Economic Cooperation (APEC) and a number of independent countries, including Iran, Nigeria and Bahrain, Subsidy Watchhas decided each month to highlight important news stories that touch on this theme … 

1 February  U.S. President Barack Obama's 2011 budget is announced, promising to provide billions of dollars of support to clean energy at the same time as cutting fossil-fuel subsidies, reports The New York Times. The subsidies are currently transferred in the form of tax cuts to oil, gas and coal companies, reported to be worth US$ 40 billion over ten years. The U.S. budget in 2011 alone is worth US$ 3.834 trillion.

3 February  The Kirit Parikh Committee report, commissioned to draft a new fuel-pricing policy for India, is submitted to government officials according to moneycontrol.com. A review by the Business Standard later in the month explains its recommendations.  According to the article, the proposed changes would largely liberalize prices, although as world oil prices rise, an increasing percentage of price increases would absorbed by oil companies. Had support been structured in this manner in 2008, it would have cut costs for one oil-marketing company by over two thirds, almost doubling its profits. The committee also recommends an incremental crude-oil taxation system that would keep the government share of the subsidy around Rs 20,000 crore (US$ 4.4 billion). Share prices of Indian state-owned oil companies are said to have risen following the release of the report.

9 February  Egyptian fuel subsidies will rise to 66 billion Egyptian pounds (US$ 12 billion) by the end of the fiscal year, reports Reuters. Minister of Petroleum Sameh Fahmy, discussing the issue at an American Chamber of Commerce event, stated that although Egypt had no announcements to make at the time, "for the long term we have a strategy". According to the article, subsidy programs represented more than one third of government spending in 2008/09.

12 February  Spain passes a law to boost power generated by domestically produced coal, reportsPoint Carbon. The step is said to have been taken because of strong competition from Spain's renewable energy sector, also supported by subsidies, and the desire to protect Spain's miners and to exploit a 10 million tonne stockpile of coal. Spain has committed to rationalize and phase out fossil fuel-subsidies in the medium-term.

13 February  According to Maclean's, a Canadian current-affairs magazine, Iran should still expect controversy over its proposed subsidy reforms, which includes reforming subsidies to fossil fuels. It reports that the Iranian parliament's research wing, the Majlis Research Center, has estimated that the inflation rate will rise to 60 per cent as a result of the cuts, which are to take place by the end of Iran’s next five-year economic plan, 2015. Given protest over previous reform attempts, the article suggests that the policy will face significant popular opposition.

17 February  India's fossil-fuel subsidies are an unsustainable burden on its oil companies, argues P.M.S. Prasad, Executive Director of Reliance Industries Limited, in The Economic Times. According to his op-ed, it is Indian oil companies who bear the cost of keeping volatile prices stable, a task that has become increasingly difficult with the increasing world oil price, and losses due to a national refining overcapacity.  He argues that reform would not hurt consumers because other policies could more effectively support agriculture, and that transport costs are only 1.5 per cent of the total price of goods in India. Reliance Industries Limited is a Fortune Global 500 company whose activities include fossil-fuel exploration, production, refining, marketing and the sale of petrochemicals.

21 February  According to automotive information and news source Paul Tan, details about Malaysia's new MyKad system to allocate fuel subsidies are to be published in March 2010, two months before the program’s implementation in May. At this time, it is thought that qualification for the subsidy will be dependent on Malaysian nationality, socio-economic factors and vehicle engine capacity.

26 February  Indian Finance Minister Pranab Mukherjee announces his intention in India's budget speech to make fuel subsidies more transparent by granting all aid to oil companies in cash. Previously, special government bonds called ‘oil bonds’ have been given to oil companies in compensation for the losses, which guarantee a rate of interest, and can be sold on in financial markets. Due to India’s accounting rules, this form of debt stays off-budget. Minister Mukherjee also committed to reinstating customs duties on crude petroleum and refined oil products, originally suspended during high world oil prices in June 2008.

26 February  The International Monetary Foundation (IMF) releases a report recommending that governments reform their fossil-fuel subsidies and estimating global fiscal losses on such subsidies in 2010 to be either US$ 250 or $US 740 billion. It notes the potential for reform to contribute towards reductions in countries' budget deficits. For more information, see the 'Studies' section of this issue of Subsidy Watch, or go directly to the report itself.

27 February  According to the Daily Times, Pakistan is set to radically cut its spending on subsidies from Rs 199 billion to Rs 104 billion (US$ 2.3 billion to US$ 1.2 billion) in 2010-11. This includes a cut of Rs 73 billion (US$ 840 million) in energy subsidies, which the paper reports as made up of 'power and fuel subsidies' to the Pakistan Electric Power Company (PEPCO), Karachi Electric Supply Company (KESC) and oil refineries.

28 February  The Jakarta Globe reports that Indonesia's government has decided to increase energy subsidies in the 2010 budget to Rp 143 trillion (US$ 15.5 billion). This amount is slightly less than reported in January, when spending was expected to be increased to Rp 150 trillion. However, the new spending still represents a Rp 37 trillion (US$ 3.95 billion) increase in energy subsidies which, along with additional subsidies to fertiliser and food, is predicted to increase the 2010 budget deficit from 1.6 per cent of GDP to 2.1 per cent of GDP. The decision has still to be approved by the House of Representatives.

For readers interested in keeping track of fuel-pricing developments worldwide, GTZ's monthly Fuel Price News is an invaluable resource that announces publications and events, and major fuel-pricing news stories in different regions of the world. For more information see: http://www.gtz.de/en/themen/29957.htm