Consumer to pay RS 4.7 bn hedging loss
16 June 2011
The population will have to pay hedging losses amounting to Rs 4.7 billion in addition to the accrued interest of about Rs 250 million.
It is only then that the hedging surcharge of Rs 3 per litre will be removed, said minister of Business, Enterprise, Commerce and Consumer Protection Michael Sik Yuen in reply to a private notice question from Opposition leader Paul Bérenger.
The decrease in the surcharge in March this year was a temporary measure to contain inflation caused by the general increase in prices of basic commodities worldwide.
“In the event of a significant drop in petroleum prices intervening, the recoupment of hedging loss at the rate of Rs 3 per litre will resume. Consumers will have to pay amount,” said Sik Tuen.
The hedging surcharge was originally expected to terminate in April 2012. However because the surcharge had been temporarily reduced to Rs 1.25 per litre on mogas and Rs 1 per litre on gasoil in March , the period of losses recovery was accordingly extended.
The government will install two storage tanks for Mogas of capacity 7,500 MT each and one storage tank of 10,000 MT capacity for Gas oil. The installation would comprise the building of control rooms, administrative offices, loading bays for delivery to trucks.
The estimated cost of the project is Rs 750 million, exclusive of one or more dedicated pipelines and will take 18 to 24 months. It will be implemented as an integrated strategy for the next 30 years.
Regarding contamination of petroleum products he said that the STC was insured against contamination since 2010, subsequently the loss recovery in previous cases had been referred to the London Court of International Arbitration and was yet to be thrashed out.
“In 2009 there had been three cases of contamination on fuel oil products which amounted to about Rs 110 million. Contamination of 954 MT of jet A1 in the slop tank on board and MT Wawasan Celeste was detected by STC surveyors and the cargo was not allowed to be unloaded. The rest of the consignment of 14,900 MT was however not contaminated. A claim for the amount insured is being processed by STC’s insurer,” said Sik Yuen.
The cost of the STC insurance amounted to “less than one cent per litre.” Regarding the STC’s restructuration, the minister said “The findings will be studied and any restructuration of the corporation will be carried out after committee recommendations.