THE FUEL PRICE INCREASE CONTROVERSY REVERBERATES

The political repercussions for the Government following announcement by the Minister of Finance last week of a steep rise in prices of the two types of fuel sold at petrol stations, continues to reverberate. This newspaper has learnt that at least one person has resigned from the Central Committee of the SPPF in protest at the Government’s decision.

The economic repercussions, however, are still playing out. While the black market rates of foreign exchange as well as the creeping depreciation of the official rates of exchange of the currency by the Central Bank are causing the prices of imported goods to increase virtually with each shipment arriving, the cost of some services has already started to go up. This combination of factors is bound to increase the cost of living, creating serious problems, especially for the lower paid and the pensioners. The increased costs of doing business will be passed on to other businesses and consumers.

FUEL IMPORTS IN THE LAST SIX YEARS

	Petrol			Diesel
Year	Litres	Value	landed cost/litre	Litres	Value	landed cost/litre
2002	21,117,321	22,347,893	1.06	222,942,286	221,105,763	0.99
2003	16,436,526	20,664,837	1.26	204,389,625	224,740,020	1.10
2004	41,846,311	70,289,047	1.68	298,315,099	475,046,764	1.59
2005	18,182,930	41,622,041	2.29	283,306,181	621,590,748	2.19
2006	10,014,326	36,279,217	3.62	255,194,448	805,226,787	3.16
2007	11,981,981	34,343,022	2.87	78,875,029	240,114,803	3.04

The table shows the real import cost of fuel in Seychelles. The figures were provided by the National Statistics Bureau (NSB), which collated them from the bills of entry provided by Customs. The figures for 2007 date up to June 30^th. It shows that so far this year the average landed cost of both fuels are lower than it was last year, despite the “devaluation” of the rupee against the dollar, which is the currency we buy our fuel from refineries. It also shows that in 2002 the landed cost of one litre of diesel was less than one rupee while it was being sold at SR5.50 at the petrol station.

What the government wanted you to see
	old price	new price		old price	new price
CIF + Tax	6.39	8.00	CIF + Tax	4.63	8.00
GST	0.85	1.00	GST	0.60	1.00
Handling fee	0.40	0.80	Handling fee	0.20	0.80
Retail mark-up	0.21	0.20	retail mark-up	0.12	0.20
pump price	7.50	10.00	pump price	5.60	10.00

The presentation of the Ministry of Finance about the price structure of fuel on SBC was designed to be very economical with the truth. In its presentation, the Principal Secretary of Finance lumped together the CIF value of a litre of fuel with the trades’ tax SEPEC had to pay on that declared value to cover up the extent of the trades tax imposed by the Government. The next day the above chart was published in Seychelles Nation. Although the increase in the price of fuel was the singular event in country, Seychelles Nation – which is published by the Government, played down the significance of the price increase, burying the chart on page two.

What the government did not want you to know
Actual CIF	2.87	2.87	Actual CIF	3.04	3.04
Trades tax	3.52	5.13	Trades tax	1.59	4.96
GST	0.85	1.00	GST	0.60	1.00
Handling fee	0.40	0.80	Handling fee	0.20	0.20
Retailer mark-up	0.21	0.20	Retailer mark-up	0.12	0.12
Pump price	7.85	10.00	Pump price	5.60	10.00

Armed with detailed statistics on importation, we were able to break down the government figures to reveal the extent of the trades’ tax government levied on the CIF cost of fuel. This turned out to be greater than the CIF costs of petrol, despite the higher price due to increase in the world price of oil.

The table above also shows that the government has reduced the mark up allowed to the petrol station concessionaires while at the same time doubling the handling fee of SEPEC for petrol. The volume of sale of petrol at the pump is much greater than that of diesel. In effect, the exercise is designed to give SEPEC and Government more money at the expense of the petrol stations.