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DISY moves to keep 100% fuel subsidy

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Main opposition party DISY is attempting to keep a state subsidy on fuel prices at the pumps by tweaking a Finance Ministry bill aiming to halve it in May.

In April, the government decided to continue subsidising fuel prices at the pumps by extending a reduction on consumption tax until the end of June but halving the subsidy.

The reduced rates were initially introduced in March last year by the DISY-backed Nicos Anastasiades administration to alleviate the cost-of-living crisis, powered by the war in Ukraine and sanctions on invading Russia.

It was initially valid until June 2022 but extended, with a reduction of 7 cents per litre on petrol, 8.3 cents for diesel and 6.4 cents for heating oil.

The newly elected government decided to halve the subsidy, as fuel prices reached their lowest ebb for a year, and inflationary dipped from a 10.9% record high in July.

The annual inflation rate in Cyprus was 6.1% in March, down from 6.7% in February, according to data published by Eurostat.

MPs will be called on Thursday to vote on the Finance Ministry’s bill, with changes to be implemented as of May 5.

In an accompanying note, the government justified its decision to slash the reduction, arguing there is an international stabilisation in the price of petrol and a slight drop in the price of diesel and heating oil.

Should the government’s decision be applied, the subsidy will be reduced to 4.16 cents per litre for petrol and diesel and 3.19 cents for heating oil.

The ministry said the loss of revenue from the consumption tax and VAT from the two-month extension is estimated at €5.96 mln.

The tax freeze has cost the state €100 mln in lost revenue but offered drivers a respite from hiking prices.

DISY argues that the government’s decision will increase pressures on households, noting that despite inflationary pressures subsiding, the cost of living is still rising.

DISY MPs will meet other opposition parties to get them on board to change the proposal submitted by the minority government.

Passing the amendment would need 29 votes, while parties supporting Christodoulides, centrist DIKO and DIPA, and social democrat EDEK only have 16.

If the amendment passes, the government is expected to veto the House intervention, claiming it unconstitutional as it interferes with state revenue.