Speaking to Libyan media on Sunday, the Chairman of the National Oil Corporation (NOC), Farhat Bengdara said his entity does not have a police or security force to combat fuel smuggling.
He said it is the responsibility of others, such as security forces, to combat fuel smuggling, not the NOC.
He said the NOC is responsible for only for its ports only, and he challenge anyone who says that smuggling occurs from the ports that are under the control of the NOC. The NOC chairman was keen to deflect criticism about Libya’s costly fuel smuggling problem.
Bengdara pointed out that reducing or replacing fuel subsidies is also not within the competencies of the NOC.
He said replacing fuel subsidies can only be done legally to guarantee the citizen’s right to financial compensation or health care.
The huge GECOL fuel bill
Bengdara also pointed out that the General Electricity Company of Libya (GECOL) increased its consumption of subsidised diesel fuel enormously over the last year because GECOL added to the national electrical network 3,000 megawatts.
This has ended power cuts across the country but entailed a huge bill for the NOC and the country, including increased volume of subsidised fuel.
He said diesel fuel prices have increased significantly, and 72 percent of the NOC’s diesel bill goes to GECOL.
National debate on sustainability of huge fuel subsidies
Bengdara was speaking on the back of an increased national debate about the sustainability of fuel subsidies, including those to GECOL.
The debate has also included the barter system where the NOC is not paid in cash for its fuel supplies. This causes an accounting anomaly whereby the real cost of subsidies and the hard currency fuel import bill to the Libyan state and citizen are artificially underreported in the state budget and its deficit.
Fuel is imported using hard currency – then subsidised
Libya does not have sufficient oil processing capacity to process all its consumed fuel locally. It has a huge fuel import bill in hard currency which is then subsidised.
The irrationality of huge subsidies for imported fuel
Increasingly, Libyans are becoming aware that subsidising imported fuel, a huge amount of which is being smuggled to neighbouring states, is irrational. Opportunity costs are being discussed as Libya needs much investment on infrastructure, economic diversification, HR development, health, education etc.
Government fearful of introducing fuel subsidies
The government’s Supreme Council for Energy has been discussing various options to replace fuel subsidies – including through cash payments or set fuel quantities.
A source at the High Energy Committee told Libya Herald that the committee has been unable to agree on which option to implement, and how. He admitted that there is a political reluctance by the Tripoli based interim, unelected, government to impose fuel subsidy reform. This has been the case with all interim governments since the 2011 revolution that ended the 42-year Qaddafi regime.
Indeed, even the Qaddafi regime quickly backtracked on an increase in fuel prices before 2011 after mounting public displeasure on the move.