Dealers to set gas price by end January

ENERGY Minister Franklin Khan on Wednesday told Newsday he will initiate a free market in the retail sale of gasoline by the end of January, but not on January 1, 2021 as commonly but wrongly believed. He also promised to tell drivers the wholesale price paid by dealers for their gas so that they might make informed choices.

Newsday called Khan to reply to the concerns of Petroleum Dealers Association (PDA) president Robin Narayansingh about key steps to be taken ahead of price liberalisation and the sell-off of NP’s gas stations, as promised in the recent budget.

Narayansingh told Newsday he reckoned the Government must first pass legislation for price liberalisation, perform property valuations for each station and offer soft-financing for existing dealers to buy them.

He said the Petroleum Act says the gasoline retail price is set by the Ministers of Energy and Finance, such that any move to allow dealers to set their own prices would first require legislation to amend the act. “I think they would have to go to Parliament to change it,” he said.

Narayansingh said he had heard the Valuation Division (in the Ministry of Finance) was supposed to value each station, after which each existing franchise-holder would then make a bid saying how they would buy it.

He hoped the State could facilitate soft financing to franchise holders. “If you get a loan and have to pay interest on it, you will then have to increase your price of gas to citizens.” Narayansingh said it was crucial this pricing be done constructively, so no village was left without an effective gas station.

Khan: New laws coming next month

Khan told Newsday legislation was needed for market liberalisation.

He said in early January the Government will bring a second Finance Bill (after one a few weeks ago) to enact proposals in the budget, including altering the Petroleum Act and its regulations, plus fines for illegal quarrying and praedial larceny.

“When I speak I’ll outline in detail how the pricing formula will be structured. The Minister of Finance will also speak. The population will know how the pricing formula is based, very transparently, based on international market prices.

“We will be posting on the first day of every month the wholesale price of liquid fuel. You will know the wholesale price and each dealer selling at what retail price he so wishes. You will know the quantum of mark-up charged on the population.

“You will make your own judgement because it’s a free market. We do not tell groceries how to sell their product and by the same token we will not be telling gas station owners how to sell their fuel.

“But obviously we don’t want any cartelisation, we don’t want any price gouging, so we’ll be monitoring that very, very closely. We hope that competition and the market will keep the prices within reason.” Khan said the new pricing arrangement would be rolled out by “the end of January.”

Newsday asked about the sale of gas stations.

“For NP we are obviously still finalising in some detail the steps and procedures to take. Obviously the first item on the agenda will be evaluation of the property. NP will shortly be engaging qualified valuators to give a fair market value for each service station, based on two things.”

The valuation will mull the physical asset and its location.

“If you have a location which has a high throughput, a thoroughfare in terms of traffic, obviously that will be valued much higher than if you are on an off-road service station or some rural service station.”

Khan said stations will be offered firstly to the current operators/dealers, but if they cannot buy them for any reason they will go on to the open market.

“Beyond that we haven’t really worked out the ‘what ifs’ and ‘what ands.’”

He reckoned a hard-pressed dealer could seek concessions.

“We’ll see how best we can hold their hand, so to speak. What we would prefer is if the dealers can acquire the stations because many of them have been running those stations for generations. We’ll be sympathetic. It is an evolving process.”

Govt moving away from energy subsidies

Khan said Trinidad and Tobago governments have subsidised fuel costs for decades, reaching $6 billion in each of 2011 and 2012, but it was now hard to afford to do.

“We are gingerly slipping away from subsidies, with measured increases in the gasoline prices.”

He said the government subsidy begins when the world oil price reaches US$45 per barrel, and at present the subsidy was just “very small.” Khan said TT must now be weaned off its decades of subsidy.

He said the Government biggest subsidy in energy retail was $200 million per year for LPG or cooking gas. He said a 20 pound cylinder sells for $100 in Jamaica but only $20 in TT. Asked if people would be weaned off LPG, he said with oil and gas as a depleting resource, the population should share in the country’s bounty. Electricity was also a subsidised cost, he said, by way of cheap natural gas to T&TEC.

“So it’s a whole new transformation but we are always conscious of what would be the social impact of some of these policies and we are very, very sensitive to them.”