Barbados government to discontinue public service vehicles fuel subsidy

The cash-strapped Barbados government Friday said it would discontinue a fuel subsidy to the public service vehicles (PSV) and the Transport Board that has been in effect for the past six years.  A statement from the Ministry of Energy said that the subsidy which was introduced as a price offset and excise tax waiver would be discontinued from April 1 this year.

The diesel subsidy included a waiver of excise tax and a price offset of BDS$7.906 (One Barbados dollar =US$0.50 cents) per litre, which took effect from June 1, 2008.  It was then decided that a price offset of BDS$23.180¢ per litre should also be given to manufacturers, farmers and fishermen.

The government said since the introduction of the price offset and the excise tax waiver for the transport sector, bus fare has increased from BDS$1.50 to BDS$2.00 per trip.  The Ministry of Energy said in addition to removing the subsidy, the Transport Board will no longer be used as a fueling facility for PSVs.

On Monday, Finance and Economic Affairs Minister Chris Sinckler told legislators that in the period 2005-6, subsidies and transfers were estimated at BDS$782.1 million increasing to as much as BDS$1.137 billion by 2007-8. He said the figure increased by another one billion during the 2009-10 period.

“This shows that . . . expenditure has been growing, whilst the revenue has been shrinking. These things began from around 2005 to show up structural problems in the government finances. It is popular for the other sides and others to give the impression that it was due to government’s fiscal indiscipline and all of these things to give the impression that this entire story can be told from the beginning of January 2008.”

Sinckler said that the situation does not “square with the facts” and “if we are to correct these issues, we have to be honest and fair up front, recognize that government is a continuum. History did not begin in 2008, but a build-up of challenges over many years”.  The Ministry of Energy said that the excise tax waiver, which is applicable to manufacturers, farmers and fishermen will remain in place.

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