Colombia evaluates options to reduce the impact of the fuel price adjustment

The Colombian Government continues to evaluate options to reduce the impact of the liquid fuel price adjustment process that it is carrying out due to the deficit of the Fuel Price Stabilization Fund (FEPC), which in 2022 was 37 trillion pesos (about US$7.1 billion).

This was reported on Monday by the ministries of Finance and Mines and the state oil company Ecopetrol, which detailed in a statement that “public spending assigned to paying lower prices for fossil fuels in the domestic market is distributed to a greater extent to households with higher incomes in the country and, therefore, is inequitable”.

With the reduction of the subsidy, which started last September, the Government intends to better organize social spending, one of the priorities of the National Development Plan (PND) that was approved last week by Congress.

For this reason, the information added, the ministries of Finance and Mines and Ecopetrol will hold joint technical tables to evaluate alternatives that reduce the impact of these adjustments.

“This seeks to contribute, in a fiscally responsible manner, to the gradualness of the process hand in hand with a transparent strategy in the management of fuel subsidy prices and the opportunity cost of supplying the national market.”, added the information.

The price of a gallon of gasoline in Colombia was 9,380 pesos (about US$2.08 today) in September and with the latest increase of 600 pesos, announced last week, it reached 11,767 (about US$2.62).

Specific subsidies and other measures

With the revision in the programmed adjustment of prices, the Government intends to identify which are the consumer groups to which “some type of specific subsidy can be targeted”.

“So then, the proposals that emerge from the table will be focused on mitigating the effects on the population of the lowest income percentiles”, explained the ministries and Ecopetrol.

Similarly, to mitigate the impact of the FEPC on public finances, the Government is considering establishing “differential stabilization mechanisms”; greater control to “fuels distributed with economic and tax benefits in border areas, and regulatory reviews with all the actors involved in fuel policy to “identify efficiencies in the sector”.

“It should be remembered that the main beneficiary of the Ecopetrol Group’s profits is the Nation, through the dividends it receives from this business group. This income is fundamental for the financing of social policy and the investment of the national budget.”, added the information.

Source: EFE