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Miller: Fuel wholesaler’s margin request ‘unjustified’

Former minister of trade and industry suggests profit margin is already ‘exorbitant’
  • Alejandro Sanin.

Guardian Business Editor

Published: Oct 15, 2013

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A former Cabinet minister has reacted with fury over comments from a multinational fuel wholesaler in The Bahamas calling for the government to loosen price controls on fuel sales to compensate for the planned increase in business license fees on the price-controlled fuel sector.

Characteristically colorful and forceful in his statements, Leslie Miller, member of Parliament for Tall Pines and current executive chairman of the Bahamas Electricity Corporation, argued on Friday that the mark-up which fuel wholesalers are permitted on a gallon of fuel is already “exorbitant” and the taxes and fees paid overall by multinationals in The Bahamas would be minimal in comparison to other jurisdictions.

Suggesting that a foreign company should never have been allowed to buy the assets of Chevron in The Bahamas to begin with, Miller said: “If he can’t operate on 33 cents per gallon, I have a few words for him: Get out of here.  I’ll give him a ride to the airport!”

The comments from the former minister of trade and industry came in response to arguments put forward by Alejandro Sanin, managing director for Western Caribbean operations for French multinational Rubis.

On Tuesday, Sanin said that the government’s decision to increase from 0.5 percent to 1.75 percent the business license fee beginning January 2014 would impose a more than 30 percent profit loss on the company, which entered the market in 2012, buying Chevron’s assets under the Texaco brand in The Bahamas.

Sanin said the cost increase was not anticipated by the company when it undertook its analysis that led it to enter The Bahamas.

The managing director revealed that the company had initiated discussions with the government to explore the possibility of a phased business license fee increase, and/or an upward adjustment of the margins that the company can collect on fuel sold, all being possible solutions placed on the table.

At present, fuel wholesalers are permitted to collect a fixed 33 cents per gallon of fuel sold, notwithstanding the cost of the fuel.  The fixed nature of their mark-up means they are more sensitive than most sectors to cost increases eating into their bottom line as they cannot pass on the additional cost.

Sanin said he was “optimistic” the company’s concerns could be resolved, and had found the government “positive” and “proactive” on the matter.

Miller told Guardian Business there is no way that the government of which he is a part should entertain any possibility of an increase in the profit margin for fuel.

While Guardian Business was unable to confirm this, Miller said that the margin permitted in this country is among the highest in the region.

“I don’t see why the Government of The Bahamas would have to entertain him just because they happened to buy this company, when they know elsewhere they operate they have to pay VAT, they’ve got income tax, they’ve got capital gains tax but now they want everything for nothing.  There’s something fundamentally wrong with that.

“So I don’t know where the hell he’s coming from asking for this increase; it’s unjustified, and just another burden on the backs of the Bahamian people.  An increase on fuel goes across the board, it affects all of our lives in a negative way.  If you can’t handle (the fee increase), I’m sure Bahamians would be happy to buy (the company).”

Miller went as far as to suggest a decrease in the margins afforded to fuel wholesalers and retailers should be considered by the government, arguing that if he was still in charge, this would be the case.

Meanwhile, the BEC executive chairman and former minister said costs are further driven up in light of what he deemed the particularly high fees that service station operators must pay to the fuel dealers that own them – another figure which he suggested places The Bahamas in “the top tier in the region” in this regard.

He called for the government to require fuel dealers, such as Rubis, Esso and Shell, to divest themselves of these stations.

Sanin has suggested that the decision of the government to increase the business license fee so significantly, to 1.75 from 0.5 percent of revenues, was a significant challenge faced by the company just over a year into its time in the Bahamian market, with the decision upsetting the stability of the regulatory framework in place.

Nonetheless, he also stated that The Bahamas offers a variety of “big opportunities” for the company, such as further expansion into the Family Islands and the aviation fuel business.

The difference of opinion comes as the government is considering whether to approve the sale of Esso’s assets in The Bahamas to Simpson Oil Limited (SOL), a Caribbean company owned by Barbadian businessman Sir Kyffin Simpson.

To date, the government has said it is not happy with the proposed sale, and that it would like to give Bahamians “first right of refusal” in any potential sale of Esso’s assets.

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