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According to the announcement made by MoTI, the
subsidy should be put in place for diesel at least
for the coming three months as it is time that the
agricultural products are brought to the market.
An economist, who works for a private consultancy
firm, contends that the government should not engage
in subsidising oil indefinitely.
“It has to stop at a certain point as it eats at
foreign currency reserves,” he told Fortune.
“However, the government has to first find a
sustainable solution because the losers will be the
low income group.”
An official at the Ministry of Finance and Economic
Development (MoFED) argues that the government has
two options to deal with this escalating price hike;
short and long term solutions.
At present, upgrading stock capacity while working
to develop alternative sources of energy locally is
the answer, says the official.
According to him, the country would be in a
precarious condition if blockage of inland
infrastructure or transportation from the ports,
complications with ports and further hike in oil
prices happen as it does not have sufficient
reserves locally.
The current stock can only sustain the country for
90 days. To upgrade this capacity, the Ethiopian
Fuel Stock Depots Administration under the Ministry
of Mines and Energy (MoME) is constructing depots.
The other ambitious project embarked upon by the
government is shifting to the consumption of
bio-fuel instead of fossil fuel.
The council of ministers in September 2007 endorsed
a bio-fuel development and utilisation strategy that
focuses on the development of jatropa, castor seed,
palm oil and ethanol, a by-product of sugar
production.
The strategic document states that the government is
conducting studies and explorations of oil in
Ethiopia to partially alleviate the cost of
transportation in addition to installing road
infrastructure.
This budget year, the government has allocated 6.5
billion Br, to install roads all over the country,
the largest allowance.
The increase in road networks coupled with the
international hike in prices has swiftly increased
the country’s demand for oil. Currently, Ethiopia
spends 87pc of the value of its exports to procure
the product. This is why switching to bio-fuel has
been considered an indispensable move forward.
Ethiopia has 23.3 million hectares considered
suitable for growing jatropa. Including the Saudi
tycoon, Sheik Mohammed Hussein Ali Al-Amoudi, close
to 25 investors have or are joining the bio-fuel
sector. The investors require 50,000hct on average
to cultivate plans in large scale agriculture.
There is also 700,000hct of land suitable for the
plantation of sugarcane in Ethiopia. Currently,
Wonji Shoa, Metehara and Finchaa as well as the
latest sugar factory under construction, Tendaho,
hold 150,000hct.
Following the decision passed by the Council of
Ministers to utilise blended fuel, MoTI has recently
instructed all oil supplying companies to distribute
blended fuel.
“Ethiopia will register a remarkable growth when it
begins to utilise ethanol and bio-fuel,” the
economist commented.
Poor city residents like Kassech wonder when this
bright day will come. |
