Private sector calls on gov’t to intervene to lower fuel prices

The Private Sector Commission, the Guyana Manufacturing and Services Association and the Georgetown Chamber of Commerce and Industry yesterday called for the government to cut excise taxes to lower the cost of fuel.

In a joint statement, the three private sector organisations noted the constant increases in fuel prices over the past few weeks.

They pointed out that in the past when there was a reduction in crude oil market price to US$44 per barrel in 2015, government intervened to slash the retail price per litre from $219 to $153. However, they said although the world market price dipped below US$30 per barrel in 2016, the retail price per litre at the state-owned pumps was $190, which was then reduced to $170 due to advocacy by the private sector for government to intervene.

“As the world market price for oil recovers, the local private sector has noted similar increases at retail outlets per litre of gasoline and diesel; from $180 in June, 2016 to $230 more recently in July, 2018. While this is commensurate with the rising price of oil on the world market, there are ways in which our Government could stem the impact of the price increase on the local economy, in order to manage the foreseeable uptick in inflation and reduced economic activity,” they said, while noting that there is much that could be done by adjusting the excise tax so that businesses could remain competitive.

The organisations underscored the economic implications of higher oil prices, by pointing out that when gasoline prices increase, a larger share of households’ income is likely to be spent on it, which leaves less to be spent on other goods and services.

“The same goes for businesses, whose goods must be shipped from place to place. The manufacturing sector that uses diesel and Bunker C for self-generation of power and steam are finding it difficult to cope with the increased cost as it has a negative impact on profits. The alternative is to increase prices of goods produced which is difficult to do in a competitive market,” they said, while noting that fuel costs account for a significant part of overall operational costs in distribution and transportation businesses.

“We, therefore call upon our Government to intervene and adjust excise taxes to reduce the fuel price and negate the harmful impact on Guyana’s economy,” they added.

The call by the organisations came almost two weeks after Minister of Finance Winston Jordan said Cabinet has discussed the increased fuel prices and was considering options carefully to avoid future negative effects on the country’s balance of payments.

He was reported as saying by the Department of Public Information (DPI) that while the previous administration was able to forego taxes to maintain fuel prices in the past, the conditions were different.

“They say they had a formula in place where they used to reduce the excise tax so that people used to buy gas at the same price they used to buy before. I’m aware that indeed they had such a formula, but this is not only about whether government will still get the same amount of revenues that they had budgeted. It also has that external side… the side that has to do with finding the foreign currency to buy the same quantity of gas that you were consuming when the prices were low,” Jordan said.

Jordan had previously said the earlier arrangements were made possible because of favourable conditions of purchase once obtained from Venezuela through the nowdefunct PetroCaribe agreement.

“How did the last government do it? Well in large measure because they had access to the PetroCaribe arrangement. That arrangement with Venezuela allowed the government to import expensive fuel from Venezuela, but only pay Venezuela a small part of what is owed to them and the rest rolled over into a long-term concessional financing. So, at any one time, the last government didn’t have to face the proposition that we have right now which is we have to find 100 percent of the cost of the fuel and pay for it immediately. When you have an arrangement such as the PetroCaribe it doesn’t affect your balance of payment significantly,” Jordan was quoted as saying.