President Leonel Fernandez has said that he considers it “prudent and opportune” to retain the government’s subsidy on propane gas for the time being. Speaking to the nation on the government television station CERTV, Fernandez provided a sigh of relief for many households. At the current price of RD$25 per gallon, propane is subject to a government subsidy of RD$17.29 under the Hydrocarbon Law.
The President, however, put his finger on one of the public’s major complaints when he said that “the propane subsidy as used by the public transportation sector (“publicos”) is not reflected in the fares paid by passengers, since the drivers are applying the fares as if they were consuming any of the other, more expensive, fuels.” This reality, he said, is what has pushed many people to propose the removal of the subsidy for use in taxis and other public transport vehicles. Taxi unions have held demonstrations demanding that the subsidy be maintained.
The President told the nation that his government and the IMF had been exchanging ideas and opinions, in “frank and open talks”, in relation to the propane issues. Fernandez said that his team had told the IMF that while “it was true that the elimination of the subsidy would improve the government’s fiscal situation, it was no less true that the elimination would be a heavy blow for the fragile Dominican middle class economy.”
Fernandez explained that the IMF has gradually become convinced about the impact on the middle class, but the public transport sector issue was still on the table. Some estimates show that 40% of the propane is used by the country’s 40,000 taxis and publicos, those small cars that travel fixed routes. In an amazing statistic, Fernandez said that the subsidy saves the drivers RD$774 million per year or RD$19,350 per driver.
A key point for the President was the fact that his government recognizes the convenience of using LPG (propane = Liquid Petroleum Gas) as a fuel for public transport as is done in many places around the world, including developed countries. As well as being cheaper, LPG is cleaner, and its emissions less toxic. One final point made by Fernandez was that if the subsidy on propane for transport were removed, there would be a serious economic issue because of the need to create new propane stations just for taxis and publicos.
The President did point out that large industrial propane consumers are no longer eligible for the subsidy and this has allowed the government to save around RD$260 million each month.