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CUT OUT THE MIDDLE-MEN!

Apr 26, 2021 Features / Columnists, Peeping Tom

Kaieteur News – Problems with fuel importation began when the PPP/C started to issue licences to companies other than the Big Four – Esso, Texaco, Shell and GUYOIL – to import quantities. The oligopoly held by these four firms did not result in any of the price-scheming plans which we are witnessing being hatched today.
Fuel and lubricants constitute a significant chunk of Guyana’s total imports. In 2018, fuel and lubricants imported amounted to US$513M or more than 20 percent of the country’s total imports. This was US$118M more than the previous year of which such imports was almost a quarter of total imports. In 2019, petroleum imports amounted to US$524M.
High market share and high taxes tend to attract problems. In order to avoid such problems, the government in the past allowed the fuel imports to be controlled by the Big Four.
However, vested interests were knocking at the doors. There were interests who wanted to import their own fuel rather than buy from local suppliers. These interests wanted the right to import and store fuel for their own use.
The PPP/C originally was opposed to this. But after years of resistance, the PPP/C allowed for the Trawlers Association of Guyana to import its own fuel. The Trawlers Association invested in its own bulk storage facilities.
The PPP/C also granted an import licence to another business which operates a gas station. This set a dangerous precedent and opened the floodgates for private individuals to apply for fuel import licences when the APNU+AFC took office.
A mere five weeks after gaining office, the APNU+AFC granted a fuel licence to a company which was only registered three months prior to the May 11, 2015 general elections. The grant of another licence months later, ignited a stinging rebuke from the Mirror newspaper which pointed to the speed with which these licences were granted considering that an importer is normally required to have bulk storage tanks, obtain an environmental impact assessment and at least four other permits concerned with storage, transportation, safety and importation.
Among the new entrants as fuel imports were United Petroleum Inc., Atlantic Fuels, China Zhonghao Inc., SBF Petroleum and KB Enterprise.
Now the PPP/C is back and embroiled in another controversy concerning the importation of fuel, this time involving the Guyana Oil Company. Reports indicate that the Auditor General has been called in to investigate this matter which also involves a private firm which claims that it has an oral agreement to sell fuel to the state-owned entity.
Another section of the media is reporting that the private company does not have a licence to import fuel. But that is irrelevant. The company is not prohibited from selling to an importing company. This means it can sell and GUYOIL can import.
GUYOIL needs to explain why it was buying fuel from a middle man rather than from an established supplier. The APNU+AFC had switched to buying fuel from Trinidad after it soured relations with Venezuela and it had experienced supply problems with Curacao. But after the Trinidad government closed PETROTRIN, Guyana had to scamper to guarantee regular supplies of petrol. This may have led it to buy from middle-men.
The present controversy therefore is part of the wider issue of sourcing fuel supplies. The state-owned GUYOIL should revert to the old arrangements of buying directly from the refineries or their agents, rather than sourcing fuel through middle-men.
Government cannot control who private licencees buy from. But it can certainly determine from whom the state-owned company procures its supplies. Fuel is highly competitive business. Sales tend to be high volume and low margins.
If GUYOIL is to compete and act as buffer against price-fixing, it needs to be able to source the best prices. It should therefore, seek to do so directly from source rather than through middle-men.
As much as attention is being paid, at present, to whether there was any demand for kickbacks in the present controversy, the wider issue should not be ignored. GUYOIL needs a reliable supplier which would allow it to compete with the many other fuel importers which have been licenced to import fuel.
(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)

 

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