Social partners demand explanation on fuel prices

The social partners are demanding an explanation from the government as to whether the electricity surcharge imposed in the budget was truly reflective of an increase in international oil prices.

In his budget speech last week, Prime Minister Lawrence Gonzi blamed international oil prices, which had soared over $50 a barrel in previous months, for a 17 per cent electricity surcharge the government imposed on households and businesses as from January 1, 2005.

Dr Gonzi said Enemalta would lose an additional Lm16 million in 2005 due to a hike in international oil prices. The corporation would absorb Lm8.3 million while the remaining Lm7.7 million would be collected from consumers through the 17 per cent surcharge on the electricity bills. The rate would be revised to reflect oil prices every six months.

But in the light of media reports that the government had confused the stable prices of fuel oil (the kind which is burnt by Enemalta) with the soaring prices of crude oil, the Union Haddiema Maghqudin, supported by other social partners, has written to the chairman of the Malta Council of Economic and Social Development, Victor Scicluna, asking for a meeting on the issue.

Contacted, UHM general secretary Gejtu Vella said it was fit to seek clarification from the government, explaining that the surcharge had a great impact on workers and their families and pensioners.

A Maltatoday report last Sunday said that refined medium and high sulphur fuel oil, constituting about 60 per cent of oil burnt at the Marsa and Delimara power stations, had not experienced any significant fluctuation in the international market despite the increase in the price of crude oil which Malta does not use.

The report quoted the November oil bulletin published by the European Commission showing that the international price of fuel oil for November 2004 was at par if not lower than what fuel oil cost in November 2003, even though Brent Crude had soared above $55 in the same period.

The Information Technology and Investments Ministry rebutted the item and published a report compiled by Pricewaterhouse Coopers which was presented to the MCESD days before the budget.

Pointing out that the additional loss Enemalta would carry due to a soar in fuel prices in 2005 was in the Lm6 million region, and not Lm16 million, PWC indicated the Lm16 million figure which the Prime Minister later mentioned in the budget related to additional costs the corporation will be carrying in 2005 when compared to 1999, to reflect Enemalta's fuel costs and operational losses over the past six years.

At a business breakfast last Wednesday, a journalist asked (Finance) Parliamentary Secretary Tonio Fenech to clarify whether the government still insisted electricity bills had been raised because of a rise in fuel oil prices when the PWC report indicated that this year Enemalta would be paying Lm2.5 million less than 2003 for low sulphur fuel oil it burns.

"Enemalta has not raised the prices since 1999 and a review of electricity prices was needed," Mr Fenech said, explaining the surcharge would gradually make up for losses incurred by Enemalta over the past six years.

That an electricity surcharge was directly caused by a rise in oil prices in 2004 was also the reason championed by the government at the MCESD.

The Times asked MCESD members whether the government had linked the increasing international oil prices to the surcharge even at MCESD level and whether a distinction between crude oil and fuel oil had been made when the surcharge was discussed at the council.

The General Workers' Union's general secretary, Tony Zarb, said everyone had understood that the surcharge was directly linked to fluctuating oil prices. "The government owes us an explanation," Mr Zarb said, adding that the distinction between fuel oil and crude oil as it had emerged lately was not made at the meeting.

The Malta Employers' Association's director general, Joseph Farrugia, said the social partners had preferred a surcharge on electricity because the government promised it would be revised depending on international oil prices. "The minister was rather clear on the issue. He said a surcharge would be introduced to reflect the price hike in oil prices this year," Mr Farrugia said, adding that the social partners made it clear that Enemalta's losses incurred because of inefficiency should not be borne by the population.

Anton Borg, president of the Federation of Industry, said no distinction had been made between crude oil and fuel oil.

Vince Farrugia, director general of the Malta Chamber of Small and Medium Enterprise (GRTU), said that during the only discussion when the surcharge proposals were presented to the social partners, nobody had the time to check whether the government's data was correct. "It was too much of a short time and the government's approach appeared convincing," Mr Farrugia said.

He said it was very valid to open up such an argument when the surcharge had such a dramatic effect on business. "But we consider the argument as passé. The measures have been introduced and there's no turning back. We are trying to deal with the new problems brought about by bureaucrats who were ignorant of how the measures would affect business," Mr Farrugia said.