Subsidising the commercial sector

When we introduced the surcharge four years ago, we introduced a ceiling on bills to manufacturing companies and hotels to ensure that these heavy users and heavy payers have time to adjust to new realities.

Basically, this means that these companies pay only €50,000 as surcharge and any higher amount is paid for them by everyone else - all of us. Today, we have 87 qualifying companies that collectively benefit some €15 million yearly. If we were not paying the cap for these companies, the surcharge in September would have been 75 per cent not 95 per cent.

The problem arises because Enemalta sells a unit of electricity to these companies at €0.08c7 when it costs Enemalta €0.18c to generate it. This unit cost excludes any inefficiences that have been audited and sliced out of the estimates. And, in any case, most of the 18c (81 per cent to be exact) is the pure cost of imported, unburnt oil.

We are proposing to sell electricity to these companies at cost - no profit, no margin for re-investment, no recovery for inefficiencies. And if they consume more than one million units, we propose to charge them 14.5 euro cents - the naked cost of oil - no salaries, no charge for distribution, no charge for services, no charge for safety. Is that fair? I think it is as good as it gets from the point of view of industries but, obviously, the present beneficiaries will say it is still an enormous burden on them. No doubt it is. So why is capping being removed after I was one of those who championed it in the first place?

From a government financial perspective, capping is revenue neutral so it could very easily have remained. It basically needs to be removed because of challenges to its legality, which make it impossible to retain. The Chamber of Small and Medium Enterprises - GRTU will tell me: " I told you so" and they are right. The only thing I can say in my defence is that the big companies had a four year breather to adjust and invest. The holiday is well and truly over.

Benefiting companies are complaining that subsidies should remain because they protect employment and exports. All true but so did other commercial activities, which we (and I include all employer organisations) have always said should not be subsidised.

If you extend the "protection" argument, subsidising the shipyards till kingdom come would have protected the jobs of people working there but few thought that was justified.

And for all that is fair, banks, shopping centres, service companies, all these are major employers and none of them ever benefitted from the protection of capping.

As far as I am aware, the declared policy of the government and of all employer organisations is not to subsidise commercial operations and to move away from operational aid into investment aid.

So what are we doing wrong, at least on principle, when we remove this temporary measure, which also removes discrimination and achieves social justice? Why should a rule we agree on become wrong when we are the ones being asked to live by it?

There is then the complaint that this is too sudden for the very big users. If we agree with the principle that everyone, except those in real need, should pay for the electricity one consumes, then I see no reason why we cannot find some system to help the big consumers make the move, provided they are ready to invest in energy-efficient technologies.

Tomorrow: Between a rock and a hard place.

Dr Gatt is Minister for Infrastructure, Transport and Communications.