In June the removal of subsidies for low and medium incomes begins

The Minister of Economy, Luis Caputo, decided that starting in June a gradual removal of electricity and gas subsidies will begin for the low and middle income segments, which represent 7 out of every 10 residential users in Argentina. The increases in rates that will arrive from next month will have an impact on the most vulnerable population, who paid on average only 5% of the “real” cost of energy.

Specifically, a more focused, or restrictive, subsidy scheme than the current one will be launched as a transition to the application of the Basic Energy Basket (CBE), as Infobae had anticipated. That is to say, the total reduction that the Government intended will hardly be carried out this year.

The measure was made official this Tuesday through Decree 465/2024 published in the Official Gazette with the signature of Caputo. There, a transition period is foreseen that will last from June to November, with the possibility of extending it for six more months, until the application of the CBE.

The segmentation of subsidies for residential users that the Government of Alberto Fernández had applied, in force until now, contemplated three universes of users: those with high incomes (N1), those with low incomes (N2) and those with medium incomes (N3). . Currently the N1 do not have subsidies on their energy bills, while, for example, the N2 and N3 pay on average only 5% of the cost of energy. The rest is covered with contributions made by the National Treasury through Cammesa to the generating companies.

The strong increases in the first quarter were not reflected in a reduction in subsidies. There was even a growth in the assistance received by the ballots above the levels left by Fernández and Sergio Massa, since it is concentrated on the costs of generation and the increases in these months occurred in transportation and distribution, which are, in addition to the taxes, other items that make up the bills that reach homes.

Now the Energy Secretariat led by Eduardo Rodríguez Chirillo will increase what N2 and N3 users pay in the price of energy, as Infobae was able to confirm with official sources. The magnitude in which it will be carried out and the final impact for users was not specified by the Government.

What Decree 465/2024 does anticipate is that there will be a reduction in the subsidized consumption block of the N3, which is currently between 400 kwh and 650 kwh per month based on the province in which the station is already located. anus. The current segmentation scheme provided that users would pay in full for the surplus.

For its part, N2 consumption is fully subsidized regardless of how much electricity or gas they use. They hope to implement a system of consumption caps with state assistance, but greater than that of the N3.

Another important point is that the increases will no longer have a cap tied to the salary variation coefficient (CVS), published by Indec, from the previous year. The CVS grew 152.7% last year, well below the 211.4% inflation rate for the period. This caught the attention of analysts, who point out that in any case the increases that have occurred so far exceeded that threshold.

The segmentation that Fernández launched in 2022 contemplated that the increase in rates for the N2 could not exceed 40% of the CVS of the previous year and for the N3 the limit was 80% of what the variation of the indicator would show.

Regarding this, we will seek to avoid the overlap of other subsidies such as the social rate, benefits for cold zones, jugs, among others. There will also be new exclusion criteria that will be more restrictive than the current one, such as car ownership, prepaid bills or the purchase of dollars.

Chirillo’s aspiration was to resolve this front with the implementation of a new subsidy allocation scheme based on the CBE. It was first going to be applied in April, it went to May, then to June and now it was postponed to November. Meanwhile, progress will be made in this “transition scheme.”

The Treasury Palace’s roadmap provided for a cut of 0.5 points of GDP this year in the expenditure of fare subsidies, to which another 0.2 points of GDP would be added for AMBA transportation. The bill is between USD 2,500 and USD 3,000 million. But the worsening social situation made Caputo seek a different calibration in adjustment.

SOURCE: Infobae

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