[Why&Next] Rising Milk Prices... Energy Vouchers Are the Only Support for Vulnerable Groups

Betrayal of Oil Prices... This Year, 'Commoner's Fuel' Kerosene Prices Soar
Energy Voucher Budget Increased, but Concerns Over Support Blind Spots Remain
Project Execution Rate Fails to Keep Up with Budget Increase... 16.7 Billion Won Unused Last Year

On the 20th, at a gas station in Seoul where prices of kerosene, known as the "common people's fuel," continue to rise and are being sold at higher prices than gasoline in some areas, gasoline is sold at 1,609 KRW per liter, kerosene at 1,650 KRW, and diesel at 1,835 KRW per liter. Photo by Jinhyung Kang aymsdream@

[Asia Economy Sejong=Reporter Lee Jun-hyung] Although the budget for next year's 'Energy Voucher' project has been significantly increased after passing through the National Assembly, concerns are growing about blind spots in support. As the price of kerosene, known as the 'fuel for the common people,' soars ahead of the full-scale winter season, the heating cost burden on vulnerable groups is increasing. There are calls for the government to prepare separate support measures in addition to the Energy Voucher.

According to related ministries on the 23rd, the budget for the Energy Voucher project next year was set at 288.995 billion KRW. Initially, the government submitted a budget of 182.421 billion KRW for the Energy Voucher next year to the National Assembly. During the review process of the government budget by the National Assembly, the Energy Voucher budget was increased by 106.523 billion KRW and the number of beneficiaries was also expanded. Compared to this year's budget (230.6 billion KRW), this is an increase of 25.3%.

The National Assembly raised the Energy Voucher budget by more than 100 billion KRW based on the judgment that support for energy-vulnerable groups should be expanded. The Energy Voucher is a project that supports heating and cooling costs and electricity bills for vulnerable groups such as households receiving livelihood and medical benefits. However, as global supply chain instability intensified this year and energy prices soared, there have been continuous calls to increase the Energy Voucher budget. This is why the Yoon Suk-yeol administration increased the Energy Voucher budget by 91.7 billion KRW through the second supplementary budget in May this year.

However, despite this budget increase, there are voices saying it is insufficient to support heating costs for vulnerable groups. The price of kerosene used in oil boilers has recently surpassed gasoline prices in some regions and continues to soar. According to Korea National Oil Corporation's Opinet, as of the 21st, the average retail price of kerosene nationwide was 1,601.57 KRW per liter, up 45.9% compared to the same period last year (1,097.81 KRW). During the same period, gasoline prices decreased by about 2.5%, from 1,691.38 KRW per liter to 1,648.35 KRW.

Another problem is that the execution rate of the Energy Voucher is not keeping pace with the budget increase. The amount issued for Energy Vouchers increased by 90.4% over the past five years, from 51.1 billion KRW in 2017 to 97.3 billion KRW last year. This is the result of the government steadily increasing the Energy Voucher budget in line with rising fuel costs. However, during this period, the actual execution rate of the Energy Voucher decreased by 18 percentage points, from 90.1% to 72.1%. Last year, the unused amount of Energy Vouchers reached 16.7 billion KRW.

There is also an opinion that the individual consumption tax on kerosene should be temporarily reduced. Since kerosene is mainly used as heating fuel in rural and vulnerable areas, the sharp price increase could increase the number of 'energy-poor' households. In 2014, the government applied a flexible tax rate, lowering the basic tax rate on kerosene from 90 KRW per liter to 63 KRW per liter.

However, the government holds the view that the feasibility of reducing the individual consumption tax on kerosene is low. A government official said, "In the case of kerosene, a 30% reduction, which is the limit of the flexible tax rate, is already applied," adding, "Since gas station price decisions are practically made autonomously, lowering the tax rate further would not have a significant policy effect."