N Touch
Sunday 26 January 2020
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Editorial

The Unipet challenge

Unipet, the company created as a commercial alternative to the state-run NP service station network, will face closure if the government continues to play hardball with its fuel supply.

On Tuesday, Paria Fuel, which purchases and distributes bulk fuel to both NP and Unipet, stopped supplying tankers from the company. Unipet is dry. Paria said that Unipet has failed to renegotiate its supply agreement since April 2019. After Unipet declined to sign a monthly terms and conditions letter in November, the decision was taken to halt supply.

Of the three parties involved, Unipet is also the only private sector player. The $100 million debt mentioned by Finance Minister Colm Imbert as the inflection point for Paria represents roughly two months’ supply of fuel to Unipet.

At the pump, a full tank of gas nets service stations a fistful of dollars per sale after payment to the fuel supplier and taxes are subtracted. These problems are also issues for NP and its franchise owners, but as the final step in a state-managed and subsidised fuel supply chain, they aren’t exposed to market forces in quite the same way. NP lost money in its last fiscal year despite receiving $300 million in grants from the state.

Two critical issues have eroded Unipet’s slim margins. The company has accused Paria Fuel of not applying Standard Temperature Accounting to the bulk fuel transfer of its product, which is loaded at a higher temperature and offloaded into underground tanks at a lower temperature.

Unipet claims that it has been overcharged by 5 million litres on annual transfers of 300,000,000 litres of fuel. The company further notes that it is owed VAT and fuel subsidy payments in the hundreds of millions of dollars by the government.

Unipet, from its very first operating station, rocked a service industry that had been hallmarked by surly employees, filthy facilities and minimalistic ancillary service with a determined business focus. At the best Unipet stations, gas is what brings customers into the concession, but it is not a growth business. NP has a network of 117 service stations to Unipet’s 24, but that math only holds up on the most basic level.

If TT is to envision a future in which free market forces exert an inspirational and aspirational role in national development, private sector efforts must be acknowledged and supported with greater transparency and enthusiasm. Is it better to have 24 Unipet stations operating on free market principles in the sector or 141 NP stations operating under state control?

A country that is serious about diversification and developing a strong private sector capable of handling more public sector activities would encourage more entrepreneurship in all sectors of the economy.

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