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Cross subsidies are the focus of a new study by the Ministry of Economy

Fiscal policy

Energy Development Account has 95.6% of the budget financed by consumers of electricity

Cross-subsidized (or private) subsidies - those financed by consumers in a particular market, in favor of another segment to be benefited - are in the focus of the most recent study, Energy Development Account: public subsidies and crusaders? , published by the Secretariat of Evaluation, Planning, Energy and Lottery (Secap) of the Ministry of Economy. 

According to the secretary of the portfolio, Alexandre Manoel Silva, the bulletin sought to clarify the difference between this modality and public subsidies - which are financed by the taxpayer, by means of a revenue or expense waiver.

"In this study, we deepened our analysis of the Energy Development Account (CDE), a sectoral fund that contains both public and cross-subsidized subsidies," said the secretary, stating that the budget forecast for the CDE in 2019 is R $ 20.2 95.6% (R $ 19.3 billion) in the form of private or cross-subsidy (covered by electricity consumers) and the remainder in the form of public subsidy (4.4% or R $ 914 million). 

Alexandre Manoel points out that, since cross-subsidies do not directly affect the Union's expenses and revenues, there are still some legal instruments to stop attempts to expand them, such as the Fiscal Responsibility Law or the Ceiling of Expenditure in public accounts. Unlike the waiver of taxes, where it is necessary to indicate the source of compensation within the Budget, in the light bill the government does not have a line of defense. "The only restriction is the Congress," he explained, stressing the need to increase the transparency of this modality. 

Change in policy

The Secap study shows that, unlike today, between 2013 and 2014 public subsidies financed more than 2/3 of the CDE. "At that time, the government worked to ensure that tariffs were not excessively increased, incorporating other programs into the account, such as tariff discounts for rural consumers," said Silva. 

The bulletin points out that important factors for the formulation of a public policy were not observed in the tariff policy employed during those years, such as the absence of quantitative indicators to monitor and evaluate the results. Faced with fiscal constraints evident from 2015, public subsidies reduced their participation, but the CDE continued to fund the same subsidies through sector charges. 

The main beneficiaries are the isolated systems, via the Fuel Consumption Account, and the generators and consumers of energy sources (small hydropower projects, wind power, solar, etc.), covering 46% of the subsidies. Small distributors, coal, and socially recognized programs, such as Luz para todos and low-income consumers, accounted for 24% of the benefits. 

However, not all the beneficiaries of the policies financed through the CDE are members of the electricity sector: the remaining 30% are directed to rural beneficiaries, to irrigation and aquaculture, and to consumers in the water, sewage and sanitation sector. 


The recent debate on the structural reduction of CDE expenditures, especially due to the command given by Law 13.360 / 2016, highlights the need for improvements regarding governance, design, effectiveness, term, among others in this important subsidy, whether in its public or private. 

"In this regard, Secap will contribute recommendations for enhancement to the policies funded through CDE, through an evaluation to be carried out in 2019, considering their inclusion in the assessment agenda of the Committee on Monitoring and Evaluation of Union Grants (CMAS)," ends the secretary.