Egyptian industry should switch from fossil fuels to natural gas in order to increase its cost-effectiveness, the Federation of Egyptian Industries (FEI) recommended in its eighth board meeting.

In a statement on Monday, the FEI said Egypt’s long-standing “no-limit energy subsidy” policy has led to widespread misuse of the country’s resources, with low prices encouraging wastefulness.

The FEI went on to recommend the gradual removal of energy subsidies over the next five to seven years.

FEI’s findings follows a recent decision by Egypt’s interim government to cut by a third energy subsidies provided to heavy industry.

The plan, announced on 2 January, aims to shave LE20 billion from the country’s budget deficit.

Energy subsidies, which amount to some LE100 billion ($16.6 billion) represent about 20 per cent of total government spending. Economists say slashing them is one of the few realistic options for Egypt to cut its deficit. 

Finance minister Momtaz El-Said said in January that the higher rates will be applied to steel, cement and ceramics industries. This decision led steel and cement producers to raise the selling price of their final products by around LE100 per tonne to compensate.

Steel prices now average around LE4,560 per tonne ($760) on the local market after the LE100 price rise, while cement now retails for around LE400 per tonne.

Source: Ahram Online