The Tribune

By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

Gas station dealers are hoping the Government will either agree to a margin increase or “modernising” the industry’s structure, with a solution agreed before the 2022-2023 Budget is unveiled in just over three weeks’ time.

Vasco Bastian, the Bahamas Petroleum Dealers Association’s (BPDA) vice-president, told Tribune Business he expects either tax reductions or margin increases will occur prior to the Budget’s May 25 presentation in the House of Assembly.

He spoke after the Association and its members had a second “successful” meeting with Prime Minister Philip Davis and his economic team, including Senator Michael Halkitis, minister of economic affairs, and Simon Wilson, the Ministry of Finance’s financial secretary, last week. Mr Bastian said this had that moved dealers “closer to the goal posts” on some of their demands.

He added: “I don’t want to get into dollar amounts or percentages or any type of amount right now. All I can tell you is that the Prime Minister is working hard, and working along with the dealers in this country so we can have a better day in this country.

“I know based on our conversations, and based on the various different dialogues in the past two to three weeks, this prime minister is in tune with the economy. He understands the economy and there is hope not only for the gas station operators but also the motoring public.”

As for the potential ‘relief’ that the Government has talked about, Mr Bastian said: “I don’t know whether it’d be a margin increase or not. But I believe we might look at changing the model, modernising the model. That’s what I think what the Prime Minister intends to do is modernise the model. He understands that this model was put in place years ago and has outlived its usefulness.”

Mr Halkitis had previously ruled out increased margins for gas station operators as “a non-starter”, saying this “would lead directly” to increased gasoline prices at the pump “and that won’t happen right now”. The Association and its members had been seeking a 50 percent increase on their current margins, and shifting the basis for how it is calculated from a fixed, price-controlled sum to a percentage.

Such an increase would take retail (gas station) margins from the present 54 cents per gallon to 81 cents per gallon but, mindful of the impact this will have for transportation-dependent businesses and consumers by further hiking already-high pump prices, Mr Halkitis said the Government will not approve any such rise.

“It’s a very volatile business to be in,” he told reporters previously of the petroleum industry. “We understand that. But I can say that, too, in this environment we look at the whole picture, [and] to seek to increase margins, that would only lead to higher prices at the pump for Bahamians. It’s safe to say that’s a non-starter at this time... Raising the margins would lead directly to more increases at the pump, and that won’t happen right now.”

The last time petroleum dealers enjoyed a margin increase was in 2011, when the Hubert Ingraham-led Free National Movement (FNM) government granted a 10 cent increase per gallon of gasoline to take it from 44 cents to 54 cents. A 15 cent increase per gallon of diesel was also allowed. The Government itself currently collects over $1.60 for every gallon of gasoline sold in The Bahamas.

Mr Wilson, though, previously hinted that an alternative to margin increases/adjustments may be to alter how the industry’s Business Licence fee is calculated. The latter is based on gross turnover. While the gas station operators enjoy a “concessionary rate”, as a high turnover/low margin operation they are penalised by how it is calculated.

When oil prices soar, their turnover goes up because of higher costs incurred in purchasing the fuel they sell, but net revenues stay the same because of the fixed margins. As a result, they end up paying more in Business Licence fees but net revenues stay the same no matter what.

“It gives the impression revenues are high, but revenues are tied to the 54 cents they get,” Mr Wilson added. “There were discussions around that, there were discussions around what type of support the wholesalers can provide in this environment....

“It was an open and frank discussion. What they really wanted from the Government was to say we don’t want a band aid; we want a permanent solution. Yes, fuel prices are going to trend down eventually. But we want a permanent solution. We don’t want a band aid where we do a quick fix here and two years from now, three years from now, we’re back here trying to find out what is the right solution.”

Mr Halkitis, speaking on Friday after Thursday’s meeting, added: “We met with them about a week-and-a-half ago and we had some initial discussions. They presented a proposal to us. We had a meeting again (Thursday), and they presented some additional proposals to the Government.

“We are looking at ways, and the Prime Minister attended the meeting, and he said to them that he’s committed to bringing some relief to them, but it’s just a matter of working out how best to do it so that they can get the relief. They presented some more proposals yesterday (Thursday) and we undertook to go and study them, and to come back to them with a position, hopefully to assist them effectively before we get to the Budget in the next two weeks or so.

“We have to be mindful of the impact on the consumer when we speak about any margin increase; the impact on the consumer and the public, and so we’re trying to find a way how we can bring some relief to them without negatively impacting the Bahamian public, but I will say the spirit of the discussions was very positive.”