Smart Cards On Their Way

After several delays since 2013 when it was first announced, Prime Minister Ibrahim Mehleb announced last week that the new smart card system for subsidised fuel will be implemented starting on 15 June.

Most people will be receiving their cards in a matter of days, he said.

The system will allow drivers to buy subsidised petrol and diesel fuel at petrol stations through smart cards without a ceiling on the quantities purchased. The cards will allow the government to monitor consumption patterns per vehicle and control smuggling as a result.

The new system will also help rationalise expenditure on fuel subsidies, which accounts for about 13 per cent of the current budget, by saving about LE40 billion according to many experts. This should lead to a significant decline in the country’s budget deficit, which reached LE185.9 billion in the year up to April.

The decision follows a cut in fuel subsidies last July that led to a 78 per cent increase in the prices of some fuel. Expectations of a similar decision this summer were rebuffed when the government announced last month that there would be no increase in fuel prices this year.

Ibrahim Sarhan, head of E-finance, the company responsible for issuing the smart cards, was quoted by Reuters as saying that 3.7 million cards had been issued by the beginning of May, and that 1.7 million more had since been distributed to 17 governorates.

The rest of the cards would be given out to the remaining 10 governorates by the middle of May, he said. Five million cards, the estimated number of vehicles in Egypt, was the target announced in 2013 when the project kicked off.

Those who cannot get their cards by mid-June can temporarily use ones available at petrol stations by entering their vehicle identification number and the quantity of fuel purchased.

Since the fuel cards system was announced, everyone owning a vehicle in Egypt has been able to get a card for free or have it delivered to their home for LE20. Smart cards are available either by visiting traffic department offices and filling in an application form or by visiting the website www.esp.gov.eg, thought this has not been working in recent weeks.

Because the majority of people acquired their cards through the website before it stopped working, those still trying to get them complain of “having no choice but to rush to traffic departments which tell them to wait for two months before receiving the card,” said Amin Mohamed, a car owner.

Mohamed believes the implementation of the system will be delayed again, as has already happened several times.

To prevent manipulation, the Ministry of Petroleum has announced that if a vehicle consumes “unjustifiably large amounts” of fuel at similar times, this could be considered a sign of smuggling and the vehicle’s card will be deactivated.

Should this happen, the vehicle will only be able to consume fuel at market prices, no longer benefiting from subsidies.

A test run of the system was carried out last year by using the smart cards and special machines in more than 400 petrol stations in several governorates, not including Greater Cairo. However, the large number of vehicles in Cairo and the thorny problem of traffic congestion have made some people wary of problems that might appear once implementation is generalised in mid-June.

Hossam Arafat, head of the General Division of Petroleum Products at the Federation of Chambers of Commerce, believes fuel shortages may take place as a result of people storing petroleum products ahead of 15 June, which is around the time of the wheat harvest season that requires fuel to run harvesting machines.

Long queues at gas stations could be seen, he said, especially in Cairo, because the smart cards involve entering information about each vehicle and the amount of fuel used, which takes time.

“If the system is down for any reason, the situation could get worse,” he added, saying that in his view there was no need for the smart cards because the government had already planned to reduce subsidies on fuel over a period of five years, helping to control smuggling.

Source :  Al Ahram Weekly