Saudi Arabia to raise energy prices, pay cash to poorer citizens

RIYADH (Reuters) - Saudi Arabia has approved a new round of energy price hikes and a cash handout system for low- and middle-income citizens to offset the impact of the changes, fresh steps in a year-old austerity program amid low crude prices.

The cabinet approved the “gradual correction of pricing for some energy products”, including electricity tariffs, state news agency SPA said on Tuesday.

The kingdom will announce increases in the domestic prices of gasoline, jet fuel and diesel in the first quarter of next year, bringing prices up into line with global benchmarks, the energy ministry said on Tuesday.

The electricity regulator said new tariffs for households and commercial establishments would be applied from Jan. 1. Tariffs for all but the largest residential users will more than triple, albeit from a very low base.

Tariffs would not change for industrial and government users, the regulator said.

The government also approved the outlines for a system of financial allowances to help low- and middle-income households cope with the costs of its economic reforms, which was first announced last year and is set to launch on Dec 21.

In a presentation of the program, the Citizens Account, labor ministry officials said about 3.7 million households signed up, representing some 13 million total beneficiaries, but that not all would be approved for eligibility.

Ministry officials declined to answer questions on how much the overall program would cost, how much compensation the beneficiaries would get or what portion of applicants would be approved.

This kingdom first raised the price of 95 octane gasoline to 0.90 riyals ($0.24) per liter from 0.60 riyals in December 2015.

Industry sources told Reuters in March that Saudi Arabia may increase its domestic gasoline prices by 30 percent starting from the summer, but the move was apparently delayed.

Reforms such as fuel price hikes and changes to public- sector salaries and allowances have reduced the disposable incomes of many households.

Reporting by Katie Paul, Maha El Dahan and Reem Shamseddine; editing by Larry King