Jan 26, 2016 News
– warns of cheaper costs of imported products
Businesses are calling for Government to seriously consider lowering fuel prices and electricity tariffs. Yesterday they said that imports could become cheaper than local products.
According to the Private Sector Commission (PSC), it remains concerned that fuel prices in Guyana are not reflective of the global trends where prices are low.
PSC “fears that the competitiveness of local manufacturers, farmers and service providers will be lost if urgent action is not taken. If these trends continue, imports will be cheaper on the local markets and certain local production will diminish whilst exports will be more expensive.”
The business body, which has membership including banks, manufacturing companies, argued that with record lows in oil prices being translated into low prices at the pump in most countries, Guyanese consumers and manufacturers are still paying US$4.50 ($900) per gallon of gasoline which is almost double the price in some developed economies.
It also wants considerations that will see electricity rates being adjusted downwards to benefit consumers.
“The Private Sector Commission calls upon Government to review the prices of fuel, in particular at the State owned Guyana Oil Company, and consider a reduction in electricity rates so that the benefit of the lower oil prices can provide relief to consumers who are suffering from reduced disposable income.”
The business body noted that at this time when the economy is still reeling from the effects of the elections-induced slowdown in 2015, lowering the cost of fuel and electricity would provide a much needed stimulus to the recovery of the sluggish economy.
Guyana plants bananas, rice and a host of other crops. With fuel one of the main inputs, it is not a far stretch to think of bananas being imported and sold cheaper than locally grown ones.
Government officials have not been too enthusiastic about the lowering of gas prices now, which on the world market slid by two-thirds from more than US$100 per barrel to now US$30.
With world’s commodity prices taking a beating, the country’s main exports of rice, sugar and gold have been recording falling revenues.
This in turn has negatively affected earnings for Government from the taxes and royalties.
With other sectors underperforming, at least one senior Government official last week hinted that a drop in fuel prices is not likely to happen anytime soon.
This was after world prices for oil dropped below US$28 per barrel on July 18, its lowest in 13 years, leaving a number of big producing countries reeling.
Prices are hovering around US$30 now and predictions are that it will not deviate much in at least six months.
Currently, Government is collecting up to 50 percent Excise Tax on every barrel of gasoline and diesel coming in– monies that Government says it can ill-afford to lose now because of its under-performing key sectors.
That Excise Tax is the highest since last year when prices started sliding on the world market. It had stood then at 45 percent. A decision was reportedly taken to hike the tax to 50 percent in the last quarter.
At the GuyOil gas station on Regent Street, gas was retailing yesterday for $190 per litre, not much different from other service stations.
Just over a week ago, some US states were retailing under a US$1 per gallon. Yesterday, the retail price was US$1.98 per gallon.
Leader of the Alliance For Change (AFC), Khemraj Ramjattan, said that it is unlikely that local fuel prices will be lowered soon.
Ramjattan, who is the current Vice President/Minister of Public Security, said it is unlikely, insisted that with little revenues from elsewhere, the argument will forever be made that revenues will have to be taken in somehow, to carry them out.
The AFC leader said that because of poor world prices for rice, sugar and even gold, the shortfall in revenue is being felt.
“And so it might not be the (best) time to carry that down. I can see an argument and I can make the argument as to why we just can’t carry it down, especially in the context of our three primary products… the current prices on the world market.”
It is always desirable, Ramjattan argued, that as the world prices go down, that the country benefits with a few extra dollars “here or there”.
Robert Badal, owner of Pegasus Hotel and Guyana Stockfeeds, had joined calls for Government to fuel prices indexed to world market price, and publish a weekly advisory in the local media without further delay.
“Since the last half of 2014, international crude oil prices have plunged to more than a third to under US$30 from over $100 per barrel. This has done a great deal economically in oil importing countries all over the world,” Badal noted.
Sadly, he said, this is not the case in Guyana. “When oil prices were over US$100 per barrel and increasing, the local oil cartel was adjusting prices every week even though they were not having weekly shipments. Now that those prices are a third of what they were in 2014 those companies have all held on to high prices.”
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