Paulwell pushes for removal of Common External Tariff on gasoline
At a regional meeting of the Council for Trade and Economic Development (COTED) on January 13 – held by video conference — Minister of Science Technology and Energy (MSTEM) Phillip Paulwell pressed the case for the alteration of the Common External Tariff (CET) on gasoline and heavy fuel oil (HFO) in the region, stating that this would go a far way in improving the macroeconomic environment within Caricom and enhance competiveness.
During the meeting, the minister outlined the case of oil-dependent Jamaica and its challenges in securing “continuous and reliable supplies of energy at the lowest possible cost, while fostering social and economic development”, as outlined in his speaking notes.
Paulwell noted that energy costs domestically continue to suppress the viability of businesses. The minister said that in 2014, Jamaica consumed 19.4 million barrels of petroleum – 30 per cent was consumed for road transportation and 28 per cent for electricity generation. The mining sector accounted for 17 per cent of total consumption. These three activities combined account for 75 per cent of petroleum consumption – primarily from gasoline and heavy fuel oil use.
Post meeting, Paulwell told the Jamaica Observer that having made his case, all countries represented were in agreement — except Trinidad and Tobago. The issue, he said, was referred to the April 2016 meeting of COTED.
The Council for Trade and Economic Development (COTED) is already poised to authorise Caricom member states to suspend the CET on items and apply higher, lower, or zero tariff, based on economic necessity.
Last year, Jamaica became a signatory to a new protocol amending article 83 of the Revised Treaty of Chaguaramas, which relates to the CET.
The amendments enable the Caribbean Community (Caricom) member states to adjust the facility’s regime in their respective jurisdictions, based on economic and socio-economic circumstances, as well as regional and global developments.
These include: a shortfall in Government revenue; issues of rising cost of living deemed necessary to be addressed as urgent priorities; the need for critical industry support; the need for products of strategic importance for economic development, and items critical to safeguarding the environment.
Before this the tariff could only be adjusted if the product is not produced in Caricom; the product quantity does not satisfy demand within the region; and the quality is below stipulated regional standards.
Arising from COTED discussions, several petroleum products were placed on List C of the Revised Tariff where minimum rates were established. In the case of diesel oil, kerosene and LPG, the minimum rate was set at zero. The minimum rate set for gasoline and HFO was 10 per cent.
Petrojam indicated on Monday that the amount of petroleum products imported into the island ranges from 12 to 35 per cent of market needs depending on the individual product. Its own market share for products sold to the local market ranges between 65 and 88 per cent.
The MSTEM head said the amendments to Article 83 allowing for new considerations are timely.
Paulwell highlighted to fellow ministers the “inconsistency of supplies by Petrotrin for four years – and the “onerous process of obtaining CET”, pointing out the “additional burden of having to purchase gasoline on spot market at short notice and foreign exchange losses incurred”.
In Jamaica, he outlined, energy users were affected by the rising cost of living which especially impacted low-income earners and small- and medium-sized enterprises. “Electricity prices are not subsidised and therefore increases in the price of oil are passed directly to the consumer via a tariff formula that immediately adjusts the electricity rates,” he outlined.
Paulwell told fellow ministers that although each country continued to target transformation of the energy sector, this was a long-term process, and each must “remain focused on the priority areas which represent urgent need and present opportunities for rapid progress”.