MINISTER of Finance and the Public Service Dr Nigel Clarke says the concessions on fuel and diesel oil purchased by bauxite/alumina companies operating in Jamaica are necessary to help keep them afloat.

Dr Clarke was opening a debate last week on the Bauxite and Alumina Industries (Encouragement) Act/Bauxite and Alumina and Alumina Industries (Relevant Concession Period) Order, 2023 Resolution, through which the related companies operating in Jamaica will have another five-year coverage of the legislation under which they can access cheaper fuel and diesel oil for their local operations.

The renewed order, which was introduced in 2018, will allow the companies — JISCO, Jamalco, Noranda Jamaica Bauxite Partners (Bauxite Plant), and WINDALCO — to be able to skip customs duties or other similar payment in respect of the importation into Jamaica of fuel or diesel oil, during the relevant concession period.

The minister pointed out that petroleum fuel or such oil is imported by: (1) any recognised bauxite producer, for the purpose of being used in the winning, treating, transporting in Jamaica and shipping; or (2) by any recognised alumina producer for the purpose of manufacturing, transporting in Jamaica, and shipping of alumina manufactured from bauxite won in Jamaica.

There is a relevant concession period which refers to the time described as such by the minister in the Order, subject to an affirmative resolution of the House of Representatives.

The minister encouraged support for the amendment to the Bauxite and Alumina Industries (Encouragement) (Relevant Concession Period) Order, 2023, for the purposes of Section 7 (2) of the Act, effective from July 1, 2023 to June 30, 2028.

According to him, the bauxite industry continues to make a positive impact on the economy, and the industry continues to need the concession in order to remain afloat.

Additionally, he felt that with energy being a major component in the pricing of the final product, a policy decision was taken to extend the concession for an additional five years. An amendment was therefore made to change the prescribed period to a relevant concession period expiring on June 30, 2023, he explained.

He noted that the Act allowed for the concession period to be amended simply by issuing an order — subject to affirmative resolution in Parliament — after a review of the needs of the industry, thus eliminating the need to embark upon an elaborate legislative change.

“It has been determined that the sector continues to require the support provided by the concession of fuel, except petrol, which has been in place for the past 44 years,” Clarke noted.

He said it has been determined that the sector still has the support, and the withdrawal of the benefit at this time would have grave economic implications, inclusive of potential closures.

The minister said that, based on the Government’s move to utilise cleaner energy sources for all sectors, “members are hereby given the assurance that the relevant engagements are going to encourage the bauxite and alumina sector to reduce dependence on the types of oil it utilises”.

“Given the nature of renewables we hope that, over time, the dependence on fuel oil will be reduced,” Clarke said.

However, Opposition spokesman on energy, Phillip Paulwell argued that while the matter was not contentious, the facility has been available since the 1970s, and when the encouragement was first given it was in recognition of the importance of energy to the production of bauxite and, moreso, to offset the cost of producing alumina, which became a priority to the industry.

“It wasn’t meant to be in perpetuity because [one of] the features of Jamaica’s bauxite/alumina industry has been the fact that when prices are good, they are happy and we see revenues flowing in and see maximum employment,” Paulwell stated.

“But, when prices are bad the industry goes through the doldrums. It is largely because [of] one of the features of Jamaica’s bauxite/alumina. It is largely because the industry has not been able to achieve a level of efficiency where, when the prices are bad they can still survive”.

He recalled that Jamaica has been going through periods when the industry is shut down, including the closure of Alpart for nine years. He said that the bauxite/alumina companies were not willing to give up the incentives they were receiving.

“But we have had these problems and the question is: Where are we with the commitment of the companies to improve their efficiency, primarily to reduce the high level of energy component in the production of alumina?” Paulwell asked.

He noted that Jamalco had switched to LNG, but other companies have stuck with heavy fuel oil and diesel.

“If these are benefits that are not paying duties then there must be some commitments — specific commitments — within a time frame for this transformation to happen or else Jamaica is going to continue, unfortunately, to have these cycles of bust and boom,” Paulwell stated.

The amendments were eventually affirmed by the members.