KINGSTON: Petrol retailers are worried that sales may drop as motorists brace for higher price increases at the pumps as a result of the $7.00 hike per litre in the tax on gasolene, which is set to take effect.
Even more worrisome for the dealers, is the estimated $40 million in total working capital that they will have to come up with to absorb the immediate upfront costs required to replace their inventory.
“They will have to find that up front to replace their cost, so to that extent some dealers will not be able to replace the usual inventory or they will have to seek additional funding to meet the requirements for the new capital outlay, so that is the major issue for retailers,” head of the Jamaica Gasolene Retailers Association Leonard Green told the Jamaica Observer yesterday.
Green, however, was not able to say how much more on average motorists should expect to pay per litre for petrol, but made it clear that the full increase will be passed on.
But Green said the association had cautioned dealers not to unduly mark up prices. “The dealers have been advised by the JGRA not to capitalise on the new increase or additional margin. They are to maintain their usual margin,” he stated.
Green said while some initial “potential tremors” are anticipated, the dealers are hopeful that the positive arguments that the Government put forward in announcing the increase last week will bear fruit.
“In terms of fluctuation stability, we have been assured that a significant portion of the tax is to fund a hedging strategy where if the prices have any sharp movement upwards the Government will be offered, through an insurance scheme, to protect the gain in the new fiscal model as expressed by the Ministry of Finance,” he said.
Green said the JGRA would be pressing for the details of the insurance scheme.
“We have in fact asked to get further and better particulars so that we will be in a better position to evaluate the Government on its objectives. We are not satisfied that we have been able to get the full information because, as we have been advised, the hedge insurance has not been placed as yet so we have not been able to get the kind of details we would have liked. We don’t know what band of protection we will get if there is a limit to the amount of movement either way, particularly on the upward trend. This means the limit that we will get protection for if the fuel was to move by a certain amount per barrel, or out of a particular band,” he elaborated.
The revenue tax on is expected to put $6.4 billion into the government’s coffers this year.
