The admonition to taxi drivers by Finance Minister Colm Imbert that they would be "unpatriotic" if they were to raise their fares was a very harsh statement to make to anyone who runs a business. The President of the Route 2 (Red Band) Maxi Taxi Association, Linus Phillip, responded as follows to the minister's fuel price increase after his association met on the issue:
"I think commuters can rest assured at this time that there is no plan to increase the fares on Route 2. However, the association will closely monitor where the business sector is going to go with the increase but if they start increasing costs on us we will have no other choice." (Guardian, April 13, 2016, p A7).
In the fuel sector, the real patriots must be the petroleum dealers themselves who operate gas stations across the country. The reality is that these dealers have seen their profit margins evaporate. When super gas was at $2.70 per litre up to last October, their profit margin was 17 cents on every litre sold. When the minister raised the price to $3.11 per litre, their profit margin remained at 17 cents on every litre sold. Two Fridays ago, he raised the price to $3.58 per litre and the profit margin for the dealers remained at 17 cents per litre.
That is a very large decline in their actual profit margin (from 17 cents out of $2.70 to 17 cents out of $3.58) in a business that does not have the luxury of adjusting profit margins to suit price increases owing to the existence of state control of the pricing of fuel. Added to that, the dealers also have a 0.9 per cent business levy to pay which puts their slim profit margin under further pressure. Additional pressure on the same profit margin will also come whenever a customer uses a credit or debit card as there are handling charges involved.
It is quite possible that many gas stations may have to reduce their opening and closing hours in order to eliminate operating different shifts because this will become more of a labour issue owing to the fact that jobs are involved alongside very slim profit margins.
The reality is that the country is not going to come anywhere near to the free-market style of operation of gas stations in other countries where the price can fluctuate between one day and the next. That would require a lurch in the direction of removing the duopoly of gas stations that is currently confined to NP and Unipet to allow other private sector providers into the marketplace. Also, it would be necessary to have another provider competing with Petrotrin as an alternative source supplier of fuel to the marketplace for real price competition to take place.
We are nowhere near that kind of free-market thinking, yet the whole fuel subsidy debate is being couched in a manner that would suggest that once we remove the subsidy then the forces of the marketplace will take over. That is not true. How it should work is that when the price of oil goes down, so too will the cost of fuel at the pump and when the price of oil goes up, so too will the cost of fuel at the pump. What we have is the minister fixing the price of gas at the pump, full stop.
The minister stated that the paradigm has changed and these are different times. Unfortunately, there has been no philosophical position articulated that can guide the nation. Are we using a free-market approach, a state-control approach, a mixed-market approach or a make-it-up-as you go approach?
There are divisions inside of the Economic Advisory Board led by Dr Terrence Farrell which are apparent on the outside when one listens to the public commentaries of trade unionist/politician David Abdulah who is also a member of the same board. Abdulah's latest comment on the measures announced by Finance Minister Colm Imbert was:
"There has been no significant–if any at all–consultation or engagement of citizens, or of stakeholders with respect to the state of the economy and proposals going forward...We do not count individual conversations a minister or prime minister may have had with a businessman or representatives of a firm as representing proper consultation or stakeholder engagement." (Guardian, April 11, 2016, p A7).
As if that evidence of division was not enough, the philosophical contrast between himself and Imbert's policy of divestment was best observed in the same article:
"Everything is wrong with the sale of Clico and with the sale of Republic Bank and therefore we are opposing it and the MSJ will campaign strenuously against that sale."
Imbert announced that the shares in these companies will be vested in the State before they are put on the open market for sale. In the interest of transparency and good corporate governance, all of the directors of these companies should be required to declare their assets and liabilities to the Integrity Commission before the sale because these entities would have become state enterprises.