Fuel price hike : Towards a common protest ?

Since last Friday, the price of petrol has risen to Rs 44.90 and that of diesel to Rs 35.35, following a meeting of the Petroleum Pricing Committee. The State Trading Corporation justifies the price hike, claiming it has made severe losses during the past few months when prices have remained unchanged. However, a street protest march is being planned today, Friday.

The last time fuel prices were raised was in February 2017. Before that, prices remained unchanged for nearly eleven months. Despite relatively stable global price of oil, the State Trading Corporation says the recent fuel price increase is fully justified because the organisation has been making losses on fuel consignments during the past few months. Losses to the tune of Rs 216 million have been registered. Thus, the increase in prices will help absorb the losses. However, the price rise also includes a rise in the margin of petroleum companies and of retail filling stations. Petroleum companies now benefit from an additional 11 cents per litre of mogas and 10 cents on each litre of diesel. On their side, retailers are now entitled to an additional  cents on each litre of both fuels.

Various contributions

It must be noted that gasoline costs only Rs 14.77 (C.I.F price) while diesel costs Rs 14.21; various levies and contributions are then added to the price. The highest levy is that of excise duty, which is nearly 100%on gasoline (Rs 14.80) and about 50% on diesel (Rs 7.30). Consumers also contribute Rs 1.85 and Rs 1.75 respectively on each litre of mogas and diesel towards the Road Development Authority. An additional levy of Rs 2.70 is meant for meeting the cost of government subsidy on rice, flour and cooking gas. The final price is further inflated when Value Added Tax is applied to the gross figure (i.e inclusive of all levies and contribution).

Impact on prices

The fuel price hike is likely to impact on the prices of other products and services. Diesel is a raw material in production units that involve machinery and diesel is also largely consumed by delivery vehicles as well as in public transportation. Many manufacturers will need to find ways to absorb this additional cost of production in order to remain competitive. Public buses are also likely to face increased operating costs.A bus owner told this paper that its fuel bill has risen by about Rs 500 daily, and this will seriously impact its monthly revenue. “Semi-Low Floor buses will be more affected as these buses consume on average more fuel than traditional buses.

Bus operators do benefit from a form of subsidy on diesel but this will not be sufficient,” he explains. Some bus owners are already demanding a rise in bus fares to sustain their operations, but the ministry of public infrastructure and land transport has many times ruled out any fare hike. Taxi owners are also highly concerned at the recent fuel price increase. However, it is not known yet whether they intend to raise their fares. Other sectors likely to bear the brunt of the fuel hike include the construction sector, which makes use of heavy equipment highly dependent on diesel, such as excavators, heavy trucks, etc. The Association of School Bus Owners is also considering increasing its fees, but the new price will probably be in force next year, in order not to put a burden on parents during the remaining few months of the current school year.

Protest

Various social and political groups are contemplating mass protests. The ‘Association des Consommateurs de l’île Maurice’ (ACIM) does not agree with the price increase. Secretary General Jayen Chellum says he is totally against the ‘unjustified’ rise, but he is more alarmed at the demands of manufacturers for price rise. “It is unacceptable when fuel prices are lowered, businesses do not adjust the price of their products and services accordingly. Prices have been low for quite some time in the past, but consumers do not benefit from a reduction in price in products, but when fuel price rises, everyone wants their price to also rise.”

The consumer watchdog says it has calculated that between August 2014 and February 2016, there have been frequent price cuts in fuel, totalling Rs 16 spread over about 18 months, and this must have benefited businesses. “I believe we should look at the structure of prices for each product first.” Some political parties, on the other hand, are planning a street protest march this Friday 11 march in Port Louis. However, it will be an apolitical march, with no party colours or flags. Social groups are also likely to participate, as well as some trade unions.

Suttyhudeo Tengur : “APEC is against the price increase”

Suttyhudeo Tengur, of the Association for the Protection of the Environment and of Consumers (APEC) says he is against the recent price rise and he does not agree with the calculations. However, he does not intend to join any protest group because he believes the protesters’ arguments are not based on facts and figures but rather on frustration. APEC will show its disagreement at the right time.

Arvind Nilmadhub : “No to double taxation on fuel”

Economist Arvind Nilmadhub is of the view that the recent price hike is completely unjustified because the global oil price has seen a downward trend between may and July and in August there has been a slight rise, which does not alone justify our price increase. “The STC says it has made severe losses. I wonder how it can make losses when fuel prices were going down. I also heard that it made a miscalculation. If that is true, then this is serious as how can we entrust the management of fuel pricing to an organization which miscalculates?” Arvind Nilmadhub further explains that, based on Purchasing Power Parity, the price of fuel is very high compared to other countries, and is a huge burden on the population. “We must also reconsider the excise duty rate and the various levies and contributions. I believe there is double taxation on fuel because we pay VAT even on the excise duty! Furthermore, we pay double Road Tax, one to the National Transport Authority and another to the Road Development Authority. We cannot continue with such a mechanism that is against consumers’ interest.”

Gavin Ng Lung Kit : “The Pricing System needs revisiting”

Gavin Ng Lung Kit, Analyst, believes that the petroleum Pricing Mechanism should be reviewed. “We have seen in the past how a high price was maintained for long, then we saw how a low price was maintained over several months, and then suddenly the price goes up by a huge amount. Instead, this quantum could have been spread over several months. The new prices could lead to inflationary pressure.”

Price trend

During the past six years, fuel prices were the highest during the period from March 2013 to August 2014. The peak price reached was Rs 52.25 for gasoline and 43.95 for diesel and maintained for about 17 months.

Comparative fuel prices in selected countries (Rupee equivalent)