The Ministry of Finance in the Government of Montserrat on Tuesday responded to concerns raised by local gas station operators that they were not making a profit from the sale of fuel and threatened closure if the issue was not rectified.
Last week, John Osborne, who runs the Osborne Service Centre in St. Peters, said on his Facebook page that he was considering closing his business and A&F Service Centre would probably be doing the same as the government had ignored their requests for an increase on the profit margin on the sale of fuel.
The Ministry of Finance said in a statement that “The Government of Montserrat (GoM) over the course of several years has been approached by both Fuel Stations and their various owners about their limited profitability on the sale of fuel. In an effort to properly evaluate the situation on the fuel costs and the operation of the stations, two
studies were carried out on the profitability of the Stations, and the storage and measurement of their products in 2014 and 2018 respectively.
“The first study found that both A&F and at the time King’s Service Station were both making profits, albeit small profits based on the information provided; with A&F being in a better position to continue for the foreseeable future. The consultant who undertook the study had very limited and for the most part outdated financial statements to work with. This came out in the recommendations of the study where both firms were strongly encouraged to keep proper accounting records and produce yearly audited financial statements.
“Prior to 2016 the retailers’ margin was 55 cents per gallon. In 2016 Government increased the retailers’ margin by 36% to 75 cents per gallon. There has been no significant change in the cost structure for retailers over the years. Delta Petroleum Ltd. (Delta) has, however, more recently applied a 12 cent charge to the retailers which has had the effect of reducing the retailers margin to 63 cents.
“Government of Montserrat more recently received a request from the fuel retailers requesting:-
1. An eight (8%) profit margin for retailers, as opposed to a fixed margin.
2. An increase to the base cost of fuel calculated by the Ministry of Trade by twelve cents (12c) to absorb the cost charged by Delta due to GoM increasing its lease fees by fifty percent. This is an erroneous assumption by the Retailers as Government has not increased Delta’s lease fees.
3. A tax exemption on profits for a period of eight years.
“This year, the retailers were again unable to provide any proper accounting records or audited financial statements to substantiate their claim surrounding any losses being made. Government however, in consideration of their request, supported by Delta’s 2018 report and giving due consideration to the impact increased fuel prices will have on its citizens and on the economy, approved a further 39.6% increase in the retailers’ margin. This has now shifted the retailers’ margin from 63 cents per gallon to 88 cents per gallon. Between 2016 and 2019 the retailers’ margin has increased by 60% moving from 55 cents to 88 cents.
“In an environment of fluctuating fuel prices, this increase was approved with the clear intention of trying to balance the well-being of both businesses and of the residents of Montserrat. The approved increase now places Montserrat retailers’ margin of 88 cents for diesel, among the highest when compared to St. Lucia, Dominica, St. Kitts/Nevis and St. Vincent & the Grenadines’ 2018 margins of 91 cents, 65 cents, $1.00 and $0.61 respectively. The regional comparison is fairly similar for gasoline.
“In the past month, Government of Montserrat, further approved a reduction in the rate of company taxes to 5% for the retailers for a five-year period, and has committed to a review of the calculator for determining fuel prices. The Government of Montserrat will continue to do its best and meet with the relevant stakeholders to ensure reasonable fuel charges for all.