June 25, 2008
Maldives Again Hikes Fuel Prices
Text of report by Sri Lankan-based independent Maldivian Minivan News website on 25 June
[by Judith Evans in Male]24 June: The State Trading Organization (STO) has raised diesel prices from Rf 15.50 (US $1.21) to RF 17.50 (US $1.37) per litre and petrol prices from Rf 13.25 (US $1.03) to Rf 15.25 (US $1.19), in the second major fuel price hike in under two months.
The STO, an almost entirely government-owned company which imports 80 per cent of the country's oil, has also raised kerosene prices from Rf 11.50 (US $0.89) to Rf 13.25 (US $1.03).
Assistant managing director Adam Saleem blamed soaring global oil prices for the rise, saying the company risked an annual loss of Rf 7 million (US $546,875) if it did not increase prices.
Including its subsidiaries - such as Fuel Supplies Maldives, through which it retails oil - the STO made a net profit of Rf 141 million (US $11 million) in 2007, according to its annual report, released this month.
It imports oil, all in refined form, from Emirates National Oil Company of Dubai and Singapore Petroleum Company, at a profit margin Saleem describes as "small". But annual supply contracts are not put out to open tender, with three to four selected parties instead invited to bid.
Over the past year, retail diesel prices have risen by over 100 per cent and petrol prices by 58 per cent, according to STO figures.
President of the Maldives Association of Construction Industry (MACI) Mohamed Ali Janah said escalating fuel prices were having "terrible consequences" for construction, the country's third largest industry.
They affect "every area" of construction, Janah added, "especially in the Maldives", where domestic transport costs often exceed the cost of initially importing materials.
MACI is in discussions with government over incorporating price escalations into construction contracts, plus other "long term solutions" such as bulk buying of materials.
Meanwhile fuel price rises also sparked small-scale protests from Gaaf Dhaal fishermen this month.
Fisheries minister Hussein Hilmy said in March the industry faced a "vicious circle" of reduced tuna catch and high fuel prices, for which a Rf 100m (US $17.8m) fuel subsidy allocated to fishermen in the 2008 state budget could "never be the ultimate solution".
The STO imports 80 per cent of the country's fuel, with the remainder brought in by Villa Shipping and Trading Company, part of finance minister Gasim Ibrahim's Villa Group, and Asian Gas & Oil.
But there is "no entry barrier" to the market, according to Saleem, with companies deterred simply because "the investment cost is too high".
160,000 metric tonnes of diesel are imported each year through the STO, plus 20,000 metric tons of petrol and a "minimal" quantity of kerosene.
It retails oil through subsidiary company Fuel Supplies Maldives, as well as direct to state electricity company STELCO for power generation.
Overall inflation in Maldives reached a yearly 9 per cent in April, whilst global crude oil prices have now topped US $138 per barrel.
Originally published by Minivan News website, Colombo, in English 25 Jun 08.
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