Electricity subsidy reinstated, fuel tax reduced among relief measures (Update 4)

By Tom Cleaver and Elias Hazou

The government announced on Thursday the reinstatement of the electricity subsidy as part of a raft of measures aimed at helping people through the cost-of-living crisis.

The package will cost a total of €196 million.

The staggered electricity subsidy will be effective between November 1 and February 29 and will apply to residential, commercial, and industrial consumers. The subsidy rate will be based on consumption, except for ‘vulnerable’ consumers who qualify for a 100 per cent subsidy on any increases in the basic tariff.

According to material released later in the day, this measure will “cover” 429,000 households and 106,000 businesses.

A table was provided with the subsidy rates for residential consumers. For 1 to 400 kilowatt-hours (kWh) consumption, the subsidy rate is up to 85 per cent; for 401 to 600 kWh, the rate is up to 75 per cent; for 601 to 800 kWh, the rate is up to 50 per cent; and for anything above 800 kWh, the rate is zero.

The bimonthly consumption by the average household in Cyprus is estimated at around 800 kWh.

Electricity Authority of Cyprus (EAC) spokesperson Christina Papadopoulou told us that, roughly speaking, a domestic consumer with close to 800 kWh will save about €70 as a result of the subsidy. A household using up to 500 kWh would save about €65.

Other measures announced by the government include a decision to reduce the tax on fuel by 8.33 cents per litre from November until February.

They have also announced a reduction of the consumption tax on heating oil by 6.39 cents per litre from December until March.

Additionally, VAT on meat and vegetables will be scrapped between December and the end of May.

Speaking after the announcement, President Nikos Christodoulides said the government is “committed to ensuring the conditions for economic development.

“Far from populism and wishful thinking, we have ensured development, progress, security, and by extension the ability of the government to exercise effective and targeted social policy,” he said.

In other measures, child benefit has also been extended to cover children until the completion of undergraduate studies, with the child benefit allowance increased by five per cent.

In the housing market, the government announced a two per cent subsidy on the interest rate on mortgages contracted between January 2022 and the end of December this year for the purchase of first homes for families with a combined annual income of €50,000 or less.

In addition to the above measures, a number of ‘medium term’ measures have been announced with no concrete start and end date yet set.

These include rent subsidies and a one-off payment of €300 for those receiving the guaranteed minimum income.

This amount rises to €500 for those with beneficiaries with severe disabilities.

In addition, recipients of the mobility allowance for people with disabilities will receive a one-off payment of €120.

Solar panels have also been included in the government’s medium-term measures, with an initial €1,000 handed to those wishing to install solar panels in small and medium-sized houses, which will be repaid through future electricity bills.

The Cyprus Mail understands the solar panel scheme will get rolled out before the end of the year, likely sometime in December. Although the government included this in the section of ‘medium-term’ measures, it also said it will have “immediate impact” – meaning that once a PV unit has been hooked up to the grid and goes ‘live’ it will impact the billing on the next immediate electricity invoice.

A plan by the name of ‘Renovate–Rent’ has also been announced with the aim of bringing vacant and abandoned houses onto the housing market, while the government says they will “reinforce existing urban planning incentives for the construction of residential units.”

Part of those residential units will be rented out at “affordable rates.”

Meanwhile, they wish to utilise more private land, while “utilising additional tax incentives” to build residential units on private property.

Additionally, they wish to construct more social housing and offer plots of rural land to low-income families.

The one-off housing subsidy grant for young couples, aged 41 and below, has been increased from €20,000 to €50,000.

“The measures are fully costed and fall within the state’s fiscal capabilities,” Christodoulides said. “The government is driven to strengthen the social protection network of our vulnerable compatriots and supporting the middle class, in accordance with the social contract I signed with the Cypriot people.”

He said the measures had been drawn up “above all, with responsibility, persistence and a human-centred approach”.

The measures were discussed in a meeting last week under Christodoulides in the presence of the ministers of trade, finance, interior and labour, and the deputy minister of social welfare.