Devaluation and Vat boost fuel prices

  • 19th April 2011
  • 2011
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Consumers in Fiji would have been paying 22.5% less for fuel had the Fiji dollar not been devalued by 20% and VAT not increased to 15% from January this year.

This would have meant a current fuel price of $1.94c per litre for motor spirit (gasoline) instead of the $2.50 per litre announced today – almost a quarter less than the new increased price.

Motorists will be paying $2.50 per litre for motor spirit from next week, $2.28 per litre for diesel, 2.47 per litre for pre-mix and $1.88 for a litre of kerosene. Kerosene has seen the biggest hike, up 20c a litre.

The hike will further fuel inflation which currently stands at a high of 7%, as the cost of goods and services go up correspondingly. The price of locally manufactured consumer items will rise in due course. Increases in transportation cost will see further hikes in market produce and a wide range of supermarket goods. The cost of carting cane to the mills is likely to go up and so may the cost of services in general.

Nor can one rule out the possibility of further hikes in the cost of electricity, such is the far-reaching multiplier effect of any increase in fuel costs.

Generally cost increases are passed on to the consumer – this is even more likely in the current highly depressed business climate with companies working on very tight margins.

The worst impact of the 12% increase in fuel prices will be on lower paid workers and the poor and needy. They are already struggling under the devastating impact of increases in prices of all goods and services since the devaluation of the Fiji dollar in April 2009 and 15% VAT from January this year.

Announcing the fuel price increase yesterday, Commerce Minister Aiyaz Sayed Khaiyyum, called on people to consume energy wisely. With electricity charges at a premium of 35c per unit, it is hardly conceivable that people will not already be economising on their electricity usage.

One wonders, however, whether similar constraints are being exercised by those in the higher echelons of public office, and in the use of State owned vehicles.

LR Vayeshnoi