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Fed spent 11.3bln on subsidies in past six months

Regulators have scraped close to three quarters of the country’s transport providers out of the targeted fuel subsidy scheme barely a year and a half into the programme, data from the Ministry of Transport and Logistics reveals.

A performance report covering the six months beginning July 2023 shows that out of nearly 244,000 vehicles registered in the fuel subsidy scheme, only a little over 70,000 are actively receiving subsidies.

Information obtained by The Reporter reveals that over 173,000 transport vehicles have been blocked out of the subsidies entirely, while hundreds more have been suspended.

The federal government began a gradual lifting of fuel subsidies in July 2022. While privately-owned vehicles and those registered to private businesses have seen their allotted year of piecemeal subsidy removal run out, transport providers still have more than three years to go before they are paying full price for fuel at pumping stations.

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However, officials at the Transport Ministry have already pushed nearly 75 percent of transport service providers out of the subsidy scheme entirely, on the basis of allegations that the providers were abusing the scheme by imposing additional tariffs on commuters.

Transport providers have thus far seen fuel prices rise on four separate occasions since the government launched the scheme, with prices changing every few months on average. The most recent adjustment was last week, when the government cut subsidies by as much as half for minibus taxis and three-wheeled rickshaws (commonly known as bajaj). Cross-country and city buses saw fuel prices rise by a smaller amount.

For the coming three months, taxis and bajaj will only receive a little over six birr a liter in the form of subsidies, down from 13 birr. The latest change goes against regulators’ initial schedule for subsidy cuts every six months.

Cross-country and city buses saw subsidies fall from 23 birr a liter to 19 birr last week.

A liter of benzene goes for 77.65 birr at gas stations, while a liter of diesel costs 79.75 birr.

Besides the subsidy cuts, the government seems to have found another way to minimize its expenditures on fuel subsidies.

Data from the Transport Ministry shows that of the 146,447 three-wheeled vehicles initially enrolled in the targeted fuel subsidy scheme, only 25,863 are still beneficiaries. More than 120,000 of them have been scrapped from the scheme.

Only around 2,600 of the 12,500 taxis registered in regional states are still receiving subsidies, while a little more than half of the 14,000 taxis in the capital are beneficiaries.

Only the 465 buses operated by the Public Service are still receiving subsidies at full capacity.

The federal government has spent more than 28 billion birr on fuel subsidies since it introduced plans to lift them in July 2022. The expenditure over the last six months sits at 11.3 billion birr.

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