Gasoline subsidy elimination announced following agreement with public transport companies

After reaching an agreement with taxi and passenger van companies, the government late Monday announced details of its plan to eliminate subsidies for Extra and Ecopaís brands of gasoline. Prices will increase in two phases, the first coming at the end of June.

Details of the plan to eliminate gasoline subsidies was announced Monday following an agreement with the taxi and passenger van union.

Economic Minister Zaida Rovira said the elimination of the subsidies “will allow the government to apply additional resources to those who need it most,” adding that beneficiaries of the Human Development Bonus, referred to as the “poor bonus,” will see an increase in monthly payments.

Monday night, Jorge Calderón, president of the National Federation of Taxi Transport Operators, said his members were satisfied with the compensation the government is offering transport companies and independent operators. “Because of the payments, we have agreed to not raise our fares to passengers,” he said.

In addition to taxis and mixed-service passenger vans, the government agreed to compensate motorized tricycles that operate primarily in coastal areas.

In the first price hike, June 30, the per gallon cost to consumers will increase 26 cents, from $2.46 to $2.72. Beginning in August, prices will increase up to 10% on a monthly basis until the end of year, or until they meet market rates, Rovira said. “This process will minimize the impact on vehicle owners,” she said. “In the event market prices fall, the cost to consumers will also drop by up to 10% a month.”

Even with the increase, she said, prices will be well below the $4.69 price per gallon average in neighboring countries, explaining that inefficiencies at the national petroleum company Petroecuador will be eliminated.

Rovira estimated that savings to the government will amount to at least $600 million annually. In the last 14 years, she said, the government has paid $13.4 billion for the subsidy.

Although passenger transport interests say they are satisfied with the plan, the National Chamber of Fuel Distributors complained that they were not included in the agreement. “We expect to engage the government in talks next week, before prices increase,” a spokesman for the chamber said.

In its agreement with the transport sector, the government agreed to provide 156 gallons of subsidized gasoline for each taxi, 90 gallons for motor-tricycles and 145 gallons for passenger vans.

The government estimates there will be approximately 84,000 transportation beneficiaries of the new system, which will cost $35 million through the end of year. On an annual basis, the government’s cost is estimated to be $70 million.

Calderón said his transport federation will inform its customers that they are satisfied with the agreement and that they will not face higher fares. “There have been concerns that the elimination of the subsidy would mean higher prices for the public but, with this agreement, this will not happen,” he said. “We will spread the word that we believe the new system is fair to all parties.”