Palace rejects calls for power subsidy

MANILA, Philippines - The Aquino administration has thumbed down calls to subsidize the high cost of power in the country even with the prevailing power crunch in three existing grids.

“It’s not an option of the government,” Budget Secretary Florencio Abad told The STAR in an interview during the World Economic Forum on East Asia last week, when asked if the administration would consider subsidizing power.

In one of the sessions during the forum, businessman Manuel V. Pangilinan said the cost of power in the Philippines is high because there is no government subsidy unlike in other countries.

In the same session, Marife Zamora, chairman of Convergys Philippines said businesses would do better if power is subsidized.

“If there is some assistance in that area, that would be good. If the government can do it, why not?” Zamora pointed out.

However, Abad said subsidizing power would put a huge dent on state coffers.

“It’s a lot of drain on the fiscal position. Subsidizing power also leads to subsidizing even the wealthy, which is not a good idea,” Abad said.

Furthermore, he said that if the Aquino administration starts subsidizing the high cost of power, it would be difficult for succeeding administrations to remove such subsidy once it is in place.

“It’s going to be political. It’s going to be very difficult for any government to remove that subsidy,” Abad said.

Instead of directly subsidizing power, he said the administration has been implementing the conditional cash transfer (CCT) program, which is a general subsidy for indigents.

“It’s better to have subsidies directly to the poor such as the conditional cash transfer. You provide health services. That’s the better way of managing subsidies,” he said.

The government’s CCT program provides modest cash grants so that poor households could invest in the education and health of their children from infancy to 18 years.

As of April, the program has covered close to four million poor household beneficiaries or about 20 million people nationwide.

The National Statistical Coordination Board (NSCB) said in a report last year that electricity rates in the Philippines are among the highest in the region.

“Data from the Asean (Association of Southeast Asian Nations) Center for Energy show that among the 10 countries in Southeast Asia in 2007, the country ranks as having the third highest residential electricity tariffs, fifth highest for commercial, and fourth highest in terms of industrial electricity tariffs,” NSCB said.

NSCB said that a study conducted by the Perth-based consultancy firm International Energy Consultants (IEC) placed the rates in Luzon as having the ninth highest electricity tariffs of the 44 countries surveyed.

One of the main reasons for this is the absence of government subsidies for electricity unlike in Indonesia, Thailand, and Malaysia where the government subsidizes electricity costs.

“These subsidies eat up a large chunk of public budget. In Indonesia, for example energy subsidies account for 24 percent of the 2013 public expenditure plan,” the NSCB paper said.

It also said that generation costs make up the biggest component of the electricity cost accounting for 65 percent of what customers pay for.