Le ministre du Commerce, Mr. Ashit Gungah, a participé aux débats lors de la séance parlementaire du 18 avril 2017 sur la motion of Disallowance déposée par Alan Ganoo.
First of all, I would like to thank Honourable Ganoo for having come up with this motion. It gives me once again the opportunity to explain and provide information on the price structure and on the calculation of the prices of mogas (l’essence) and gas oil (diesel).
I have always adopted a transparent approach. I have never missed any opportunity to explain to the population any change in prices of petroleum products, be it an increase or a decrease, through press conferences and statements. The STC also regularly issues detailed communiqués to the media. In fact, Mauritius is one of the few countries where all the details of the price structure are provided to the public.
Since assuming office as Minister in December 2014, one of my priorities has been to ensure that the public has access to mogas and gas oil continuously and at the most affordable prices.
Les membres du gouvernement et de l’opposition sont appelés aujourd’hui à débattre sur un sujet complexe et qui touche toute la population. Je vais essayer d’être le plus clair possible.
Madame la Présidente,
Avant d’entrer dans le vif du sujet, je dois souligner que depuis décembre 2014, nous avons une meilleure gestion des affaires. On prend des décisions courageuses pour amener plus de justice sociale. Des décisions réfléchies pour éviter des pertes de plusieurs milliards comme dans le cas du hedging.
Nous devons être conscients que Maurice n’a aucun contrôle sur ce qui se passe sur le plan international notamment sur le prix pratiqué par les producteurs de pétrole et aussi sur la politique des grandes puissances qui affectent l’économie mondiale. Tout changement de prix a de multiples répercussions pour la population, l’industrie et l’économie.
2- EVOLUTION OF PRICES ON WORLD MARKET
Toute hausse de prix sur le cours mondial a un effet sur le prix d’achat du carburant à Maurice. Par exemple, sur le marché mondial, de janvier 2016 à février 2017, le prix du diesel a connu une hausse de 88% (35 USD/baril en janvier 2016 à 66 USD/baril en février 2017) tandis que le prix de l’essence a connu une hausse de 40% (400 USD la tonne en janvier 2016 à 561 USD la tonne en février 2017).
En dépit de cette hausse, nous avons pu garder le prix inchangé durant cette même période en puisant plus de Rs 2 milliards du Price Stabilisation Account. Je reviendrai sur ce point un peu plus tard.
3- Automatic Pricing Mechanism and Petroleum Pricing Mechanism
Very often, we have comments and analysis in the media, newspapers and radios about the current Petroleum Pricing Mechanism. For the benefit of honorable members and the public at large, I consider it worthwhile to make a flashback on the methodology of the fixing of retail prices of petroleum products.
Until April 2004, the prices of petroleum products were fixed by the Ministry of Commerce. It is worth to note that during the financial year 1999-2000, STC incurred a loss of Rs 1.8 BILLION on petroleum products.
This is why in April 2004, Government decided to introduce the Automatic Pricing Mechanism (APM) with the objective of passing all price changes on shipments of oil products to consumers. Thereafter, almost all APM exercises raised an outcry in the public, as consumers could not reconcile actual price movements on the world market with the APM’s own price changes. The main causes of misunderstanding were the lapses between the time of arrival of tankers, time of payment for imports and time of application of new prices.
4- Petroleum Pricing Mechanism (PPM)
Consequently, in January 2011, Government introduced the Petroleum Pricing Mechanism with the main objective to mitigate the effects of world price increases on actual retail prices. Although this system en-abled prices to be maintained for a longer period, they did not always reflect the world market prices.
5- AMENDMENTS BROUGHT IN NOVEMBER 2015
To address this anomaly, I set up a technical committee in September 2015 with three main objectives:
1- To align the retail prices of mogas and gas oil with the prices on the world market;
2- To allow consumers to benefit from falling prices of mogas and gas oil on the world market; and
3- To mitigate rises in prices on the world market and to maintain stability on the local market by keeping the retail prices of mogas and gas oil at the same level over a longer period of time.
Madam Speaker, I must say that multiple scenarios and simulations were worked out in order to reconcile the reference price with the price on the world market and the retail price on the local market. It was not an easy task for the technical committee.
In November 2015, applying the recommendations of the Technical Committee, several changes were brought to the price structure and the Price Stabilisation Account. Let me highlight two of the main changes:
– The first one concerned the Reference Price used to calculate the price of mogas and gas oil.
In order to reflect more promptly changes in world market prices, the average period for the calculation of Reference Price was reviewed.
Let me give some details. Before the amendments, the reference price was calculated on an average of 12 months (i.e. 6 months actual + 6 months Future Platts Prices). Moreover, a margin of up to 4% had also to be added to this figure.
Following changes brought to the Regulations, this average was revised to 6 months (i.e. 3 months actual + 3 months Future Platts Prices), without any margin. And indeed, this new formula resulted in the local price being much nearer to the world market price.
For example, on 13 November 2015, the Platts price on the world market for mogas and gas oil were respectively 446.50 USD/MT and 55.84 USD/barrel.
On the same day, the PPC met and applying the new system, the reference prices for mogas and gas oil were respectively 485.52 USD/MT and 58.19 USD/barrel.
Had the PPC applied the previous system, the reference prices on that date would have been 532.24 USD/MT for mogas and 60.78 USD/barrel for gas oil respectively. This shows clearly that the new system is more beneficial to our population as it has resulted in the local prices reflecting more fully the prices on the world market.
– The second change concerned the Price Stabilisation Account which is a fund to maintain the price on the local market over a long period of time. As at 31 October 2015, an amount of Rs 2.1 BILLION was accumulated in the PSA due to falling prices on the world market. Since there was no provision in the Regulations to allow funds in the PSA to be used to reduce retail prices, amendments were made in the Regulations to that effect.
A ceiling of Rs 1.5 Billion (Rs 600 M for mogas and Rs 900 M for gas oil) was set to mitigate future rises in the prices of petroleum products on the world market.
Any amount exceeding Rs 1.5 BILLION has to be passed on to consumers in terms of price reduction and not to be kept in the PSA as in the previous system.
6- DECREASE IN PRICES OF MOGAS AND GAS OIL
Madam Speaker, allow me to recall that it is only due to these changes that consumers benefitted from two successive price decreases.
– First, in November 2015, when the retail price of mogas was decreased by Rs 4.60 per litre and that of gas oil by Rs 2.75 per litre.
– Second, in February 2016, when the retail price of mogas was decreased by Rs 2.50 per litre and the price of gas oil by Rs 3.25 per litre.
As such, since the application of the new formula in November 2015, consumers have benefitted from a total reduction of Rs 7.10 per litre for Mogas and Rs 6.00 per litre for Gas Oil.
It is good to note that had amendments not been brought to the Regulations in November 2015, the price of Mogas and Gas Oil would have increased by 10% since April 2016.
Madame la Présidente,
En puisant un montant de Rs 2.1 milliard du PSA, la nouvelle formule nous a donc permis de réduire et stabiliser les prix pendant une année.
Toutefois, le ‘Price Stabilisation Account’ a des limites. Avec la constante hausse sur le cours mondial depuis plusieurs mois, le fonds a été substantiellement réduit. De ce fait, le 14 février dernier, le Petroleum Pricing Committee n’avait d’autre choix que de recommander une augmentation maximale de 10% du prix de l’essence et du diesel comme stipulée dans les règlements.
7 – AMENDMENTS BROUGHT IN FEBRUARY 2017
Questions have been raised on the importance of having a minimum balance of Rs 100 M in the PSA. Let me give some explanations. Before the amendments brought in the Regulations in February 2017, the funds in the PSA were being utilized till depletion and there was thus the risk that it becomes ‘déficitaire’.
I have been advised by the STC that, to date, maximum loss for one product have reached up to Rs 96 M for one consignment. With the increasing trend and volatility in the prices of petroleum products on the world market, there is a risk of the PSA becoming negative. In order to avoid such situation, as a responsible government, we have to be “prévoyant”. This is why Regulations were amended in February 2017 to introduce a minimum balance of Rs 100 M in the PSA for both mogas and gas oil.
Cela nous permet d’avoir une marge de manœuvre pour mieux gérer des situations quand le prix du carburant flambe sur le cours mondial.
8 – REVIEW OF PRICE STRUCTURE – EXPLANATION ON COMPONENTS
Let me now elaborate on the components in the price structure. Prior to 2011, the price structure comprised a lump sum consisting of CIF, excise duty, Maurice Ile Durable Levy and Provision for hedging. In addition, the item ‘Expenses incurred by STC’ included ‘Contribution for subsidy’.
Since January 2011, each item appears on its own in the price structure. Furthermore, the whole structure is published in the newspapers and on the website of the STC for the sake of transparency.
9- BUILD MAURITIUS FUND
Madam Speaker, much has been said on the Build Mauritius Fund.
This fund was introduced in January 2014 in the price structure. The objects of the fund are to contribute to the financing of:
(a) the Mauritius Light Rail Transit (MLRT) Project;
(b) other infrastructure projects or development schemes aiming at more fluid traffic flows and improving the quality of the land transport system and service;
(c) consultancy, preparatory or advisory services in relation to Mauritius Light Rail Transit and land transport projects, and
(d) such other infrastructure project or development scheme related to the Build Mauritius Plan, which focuses on
(1) Regular supply of water and electricity at competitive prices;
(2) Efficient and safe public transport;
(3) More fluid traffic flows, and
(4) Infrastructure for greater connectivity with the rest of the world.
Initially, a contribution of Re 1 per litre on Mogas and Gas oil was charged to provide bus operators with a subsidy of Rs 1 M per bus to purchase semi-low floor buses and renew the fleet of buses under the Bus Replacement Scheme. The contribution of Re 1 per litre on the price of mogas and gas oil generates around Rs 450 M in a year. Such amount is not sufficient to meet the costs of these projects; hence the need for an increase in the contribution of that item in the price structure. In January 2015, the contribution was therefore increased by Rs 3 per litre to cater for the other objectives of the Fund, principally for improvements to the water network and distribution system.
We are all aware that our water reticulation system is obsolete and needs a major overhaul. In this context, the government has identified a number of priority projects which require high investment. As stated by the Honourable Prime Minister, last Tuesday, in his reply to PQ B/163 on the Build Mauritius Fund, actions have already been initiated by the Ministry of Energy and Public Utilities and the Central Water Authority.
10 – CONTRIBUTION FOR THE CONSTRUCTION OF STORAGE TANKS
Let me now comment on the item “Contribution for the construction of storage tanks”. This item was introduced in the price structure in November 2015 to provide for the collection of 10 cents per litre on the sale of both mogas and gas oil for the construction of storage facilities for petroleum products. With the increase in our economic activities and in the fleet of vehicles, the demand has gone up and there is a real necessity to increase our storage capacity. In this context, my ministry, the STC and the oil companies have embarked on a project for the construction of additional storage tanks of the capacity of 25,000 tons. Our current storage capacity caters for only 25 days for mogas and 30 days for gas oil. This will bring our storage capacity for mogas to 60 days and 50 days for gas oil. The construction is expected to be completed by the end of this year.
11- CONTRIBUTION FOR SUBSIDY – RICE, FLOUR, LPG
As the House is aware, the retail prices for ration rice, flour and cooking gas are subsidized to provide these basic and essential commodities at affordable prices to our population.
In July 2006, the retail price of ration rice was fixed at Rs 5.40 per half kg. In December 2008, the retail price of flour was fixed at Rs 5.85 per half kg.
These retail prices have been maintained since those dates, despite increase in the world prices of rice and flour and in the exchange rate. From July 2006 to April 2017, the exchange rate for 1 USD has increased from Rs 31.50 to Rs 36.50. This has caused an average yearly deficit of more than Rs 450 M on the item of subsidy in the accounts of the STC over the period 2011-2015.
This has necessitated an increase in the item ‘Contribution for subsidy’ from Rs 1.50 to Rs 2.70 in November 2015.
The evolution of the prices of these commodities will be monitored and should there be leeway to review the contribution, we will do so.
12- CONTRIBUTION TO RODRIGUES
The socio-economic development of Rodrigues stands high on this government’s agenda. The population in Rodrigues needs to have the same facilities and benefits with regard to commodities such as rice, flour, petroleum products and cooking gas. In order to keep the price of these products at par with those of Mauritius, the contribution has had to be increased from 16 cents to 41 cents on each litre of mogas and gas oil in November 2015.
13 – MARGINS
Madam Speaker, we should not focus only on the selling price of mogas and gas oil, levies and taxes. There are also key stakeholders in the supply and distribution chain, namely the oil majors and owners/operators of petrol service stations.
The price structures of mogas and gas oil include the operating expenses and wholesale margin payable to the oil companies and retail margin payable to owners/operators of petrol service stations. The present Operating expenses and wholesale margin is Rs 1.82 per litre for mogas and Rs 1.66 per litre for gas oil. The retail margin is presently Rs 1.814 per litre for mogas and Rs 1.778 per litre for gas oil.
On a regular basis, representations are made to my ministry for review of the margins from oil majors and retailers. Such requests are considered and when found justified are acceded to. Thus, in November 2015, there was a need to increase the margin for oil majors by 10 cents for mogas and 9 cents for gas oil and 4 cents per litre for both products for retailers.
14– OPERATIONAL EXPENSES
The item ‘STC’s operational expenses’ in the price structure amounts to 35 cents for mogas and 40 cents for gas oil. This caters for salaries and pension of STC employees, warehousing costs, rental of sheds, maintenance and renewal of equipment, charges in respect of offloading of tankers, financing of line of credits for procurement of petroleum products, cost of purchasing foreign currency and administrative expenses, among others.
Anyone following what is happening around the world would realize that we are living in a more and more uncertain world. Recent events are already having an impact on prices of petroleum products which are on the rise once again. The consequences will have to be dealt with.
Le gouvernement a fait un énorme effort afin de soulager la population, qui, pendant une année, a bénéficié d’une baisse de Rs 7,10 par litre sur l’essence et Rs 6 sur le prix d’un litre du diesel. Cette baisse a aussi été favorable aux opérateurs économiques. En sus de cela, le gouvernement a apporté une baisse de Rs 60 sur la bonbonne de gaz ménager de 12 kilos, ce qui a été aussi bénéfique pour l’ensemble de la population.
Nous avons pris un engagement d’améliorer le système de distribution d’eau. Et nous prenons les mesures qu’il faut en ce sens. Comme je l’ai affirmé plus tôt, le gouvernement fait des efforts afin que les produits de base soient accessibles à un prix abordable à toute la population. Il nous faut aussi trouver les moyens afin de financer les projets de développement.
To conclude Madam Speaker, I have endeavoured to answer the queries and issues raised by the Hon Ganoo. In so doing, I have also shared a lot of information on this complex matter to members of the House and to the population at large.
I have explained the necessity to introduce a minimum level of Rs 100M in respect of both mogas and gas oil in the PSA and for the rise in the retail price of these two products in February 2017.
We, thus, cannot support the motion of Hon. Ganoo.