The fuel industry is regulated and companies that operate within it must do so on fixed margins set by government legislation. The margins under which the industry operates are very narrow and since the 2015 budget increases to the Green Fund and Business Levy, the margins have further eroded, making the industry uncompetitive. In particular, the peddler industry is hurting from the stifled margins which have not been equally adjusted to ensure profitability.
If you are looking out of the window while in traffic, you will notice tankers carrying fuel. What you probably don’t know is that these tankers also supply fuel to commercial customers, and this is known as peddling.
The official name for the tanker is a Road Tanker Wagon (RTW). If ever these RTW’s stopped delivering fuel, the entire country will feel the effects. This industry plays a vital role in keeping the Trinidad and Tobago economy going. Without them supplying fuel on a scheduled basis, hospitals, transportation, sanitation and energy support companies will become idle, unable to manufacture or produce anything.
One supplier worked out that for every $100 of product he sells, he is only allowed to retain $4 from which he still has to pay Business and Green Fund Levy before he can pay his drivers and lorry men, maintain and purchase trucks, ensure compliance with health, safety and environment (HSE) and other standards, keep his premises tidy and safe and a range of other activities which are necessary to keep the fuel flowing.
To be a peddler in a modern environment, requires significant investment which begins with ensuring that the RTWs are all maintained according to the highest standards. The typical peddling RTW carries 4,000 gallons of fuel and requires compliance with the highest safety standards. In order to satisfy the OSH requirements, fuel compartments and metres must be calibrated, wagons must be frequently inspected, drivers must be frequently trained and tested and storage facilities must be safe. Each of these activities has a cost attached and that’s where the peddlers are feeling the pressure. These factors continue to climb and contribute to continuous cash erosion of the businesses.
This industry has been struggling for a long time and the owners have been operating at a loss or even using retained earnings to subsidise their losses. This has become even more challenging over the past six months with the recent increase in the Green Fund and Business Levy by 200%. Under normal circumstances, businesses are able to simply pass on increased taxes to the consumer but this industry is different because the government decides the retail price and the cost.
An unintended consequence of this increase by the government is that some peddlers will go out of business. The only solution to keep RTWs on the road and avoid social collapse is for the Ministry of Energy and Energy Industries to revise the margins being applied to this industry. A decent return on investment is their basic requirement.