Milei’s ‘chainsaw’ slashes energy subsidies for three million households

The number of households receiving subsidies in Argentina has shrunk by around three million since December 2023, when President Javier Milei’s government took office. 

Currently, 2.1 million fewer households receive support for electricity and 900,000 fewer for piped natural gas compared with the start of the administration, according to government data. The number of users paying the full cost is now close to half of the total.

The shift reflects the impact of the La Libertad Avanza government’s economic model, which from day one promised to wield President Milei’s “chainsaw” to slash public spending. The result has been a significant reduction in subsidies, equivalent to some US$5.6 billion. Measured against GDP, spending has fallen from levels close to 1.4 percent to around 0.6 percent – in line with the official target of bringing it down to 0.5 percent in 2026.

The reduction in subsidies has translated into higher costs for households. A typical home in the Buenos Aires Metropolitan Area (AMBA) without subsidies spent an average 212,694 pesos in April on electricity, gas, water and public transport – up 49 percent year-on-year, according to the IIEP (UBA-CONICET) tariff observatory. 

The IIEP report found that utilities accounted for 12.2 percent of the average registered salary, underlining the growing drain on household budgets.

Milei’s government has executed a thorough clean-up of Argentina’s subsidy register. The Energy Secretariat identified 15,518 households in gated communities receiving subsidies, 370,000 records in the names of deceased individuals, and 1.59 million households that met the criteria for assistance but had never applied, according to government data.

Subsidies for many businesses and industrial users were also scrapped – a decision that in recent weeks has raised concerns in the sector over the potential impact of the Middle East conflict on costs. The increases form part of a broader tariff normalisation plan that envisages monthly adjustments through to 2030 under the government’s energy emergency framework, currently extended until the end of 2027.

“We are putting an end to a situation where households with high purchasing power received subsidies financed by all Argentines, while vulnerable groups were not always properly protected,” the Energy Secretariat said in a statement.

On electricity, subsidised households fell from 10.8 million in December 2023 (equivalent to 67.1 percent of the total) to nearly 9.23 million by the end of 2025 (55.8 percent). With the introduction of the government’s Targeted Energy Subsidies (SEF) scheme, that number dropped further to 8.73 million users, or 53 percent, implying a further reduction of 500,000 households.

In piped gas, the trend was similar. Users receiving assistance declined from 5.64 million in December 2023 (59.8 percent) to 5.12 million by the end of 2025 (53.4 percent). Following the implementation of SEF, the figure fell again to 4.78 million (49.8 percent), consolidating a new scenario in which the majority of users no longer receive subsidies and are therefore exposed to the full cost of energy.

Recent tariff updates illustrate the scale of the increases. In May, monthly fixed charges for residential gas users without subsidies range from around 3,976 pesos for low-consumption households in Buenos Aires City to nearly 95,000 pesos for higher-consumption categories, with per-unit costs reaching up to 426 pesos per cubic metre in some segments.

Efforts to reduce subsidies date back to 2022, when an income-based segmentation system was introduced, dividing users into ‘N1’ (high income), who paid the full tariff; ‘N2’ (low income), who received the bulk of subsidies; and ‘N3’ (middle income), who qualified for partial support.

From this year, the government has simplified the scheme, reducing it to two categories: households with subsidies and households without, defined by income, assets and consumption.

The cuts have particularly affected middle-income users, who under the previous system qualified for partial subsidies and, in many cases, have now been excluded.

The tariff adjustment has been accompanied by a sharp rise in payment compliance. According to official and distributor figures, collection rates have climbed from 48 percent to around 97 percent since the start of the administration, while arrears have fallen to close to three percent.

The improvement in payment levels has coincided with a significant increase in household spending on essential services, as tariffs move closer to covering the full cost of supply.

– TIMES/PERFIL/NA