Thursday 24 June 2021

Removal Of Subsidies On LPG Gas Would Affect One in Three Costa Rica Households

One third of households in Costa Rica use LPG cook with propane; industry uses it in processes.
One third of households in Costa Rica use LPG cook with propane; industry uses it in processes.

QCOSTARICA – The government’s plan to eliminate subsidies on Liquefied Petroleum Gas (LPG), also referred to as simply propane,  will affect one in three Costa Rica households.

The fuel in Costa Rica is used in kitchens in more than 451.300 (33%) of the 1.3 million households (based on the 2011 census) across the country. A quarter of these homes, some 108.000, are poor.

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For the past six years consumers have been paying less that the real price of the product, due to the subsidy created by the Autoridad Reguladora de los Servicios Públicos (Aresep) – regulating authority of public services.

An investigation by La Nacion last December, revealed how the change in the formula calculation that the Aresep has been applying since 2008, increased the price of gasoline and diesel products in favour of lowering the price of LPG, asphalt and bunker fuels.

In 2014, LPG sold ¢57 colones below cost.

Today, the Aresep is promoting a change in the methodology to correct the distortion, but omits to mention the impact it will have on consumers.

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“The new methodology should establish the transition rules. At this time, it may be premature to refer to how the transition will be applied,” said Carolina Mora, spokeswoman for the Aresep.

At Recope, Luis Carlos Solera, head of economics and Financial Studies at the State company, warns that with the new formula, the subsidized products will see a significant adjustment (higher prices), while the 1.3 million drivers will see a modest reduction in gasoline and diesel fuel prices.

The subsidy or “artificial reduction” boosted consumption for LPG, increasing the demand by 28% in the last five years, consumption going from 196 million litres in 2009 to 256 million litres last year, Solera noted, adding that consumption prior to subsidies, between 2003 and 2009, grew only 20%.

“This can create a market disorder,” said Solera, nothing that many consumers who bought a gas stove because of lower prices would be affected.

The change could also affect competitiveness in the industrial sector. Solera said that industry is the largest direct purchasers of LPG, that serve the commercial and tourism sectors.

Source: La Nacion

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