Uncertainty over compensation for gas and fuel price surge

Speaking after a three-hour-long meeting of the Malta Council for Economic and Social Development where social partners met with government to discuss the recent gas and fuel price hikes, Fenech said that the compensation would be considered in the light of the report’s findings.

Speaking of the meeting, Fenech said it was a positive one and that all social partners were happy with its outcome as their recommendations were taken on board by government.

He said that compensation to offset the price hikes of gas and fuel will be considered and discussed as well as a revision for the COLA mechanism. He said that the compensation issue will be discussed within the MCESD in March, following the reparation, presentation and discussion of an inflation evaluation report.

This report, he said, could determine whether a compensation is warranted or not, and how much the compensation should be – if any. Fenech was unwilling to commit himself on whether it is likely that compensation is on the cards, affirming that only the report can shed light on the issue.

“Compensation is not a magic wand,” Fenech cautioned. “We cannot burden businesses and industry, especially since we want to protect competition and employment.”

“Where the compensation will be financed from is something that also remains to be seen,” Fenech said.

During the same press conference, Parliamentary Secretary for Social Dialogue and Competition Chris Said announced that the recent milk price hikes will be investigated by the Consumer Authority as “the operator could be enjoying a dominant position in the market.”

The consumer authority will be investigating whether its recent price increases are “justified” Said added.

Fenech reiterated that unleaded fuel in Malta is relatively cheap when compared to other EU countries. He said that, over the past year, unleaded prices in Malta had gone up by 13 per cent while diesel had gone up by 17 pre cent.

He pointed out that despite these increases, Malta’s unleaded price is 11^th lowest in the EU, “meaning that 16 countries have higher unleaded fuel prices,” Fenech said. Malta, he added, “also has diesel prices that the 5^th lowest in the EU.”

“The impact of local fuel price increases were contained, compared to those in other countries,” Fenech said.

Fenech added that during the MCESD meeting, the Malta Resources Authority (MRA) had presented its calculations and methodology when it came to determining the price increases – something that “nobody in the MCESD contested.”

“The government had already given indications in the last budget that prices were likely to increase,” Fenech said, due to the growth in the global economy, demand for resources such as fuel and cereals was likely to increase.

He said that this was the reason behind government’s establishment of a €400,000 fund to ensure price stability for animal feed – intended to safeguard the local agricultural sector from price shifts and to ensure that it is in a position to remain competitive with foreign produce.

Referring specifically to the contentious gas price hikes, Fenech said that energy benefit that was given out last year to families in need was not given out this year because it is included in the social mechanism. “Families will be receiving this benefit automatically.”

He remarked how this was not mentioned during the budget speech in October was not the time to repeat what one has already done, but to look ahead and refer to what government’s plans are for the future.

Referring to calls for government to revise the COLA mechanism, Fenech maintained that the COLA ‘increase’ is not determined by government, and any such increases are ultimately paid out by the private sector (employers), save for the public service.

He said that “nobody in the MCESD had called for an additional increase, adding that we should not go away with the idea that everything is going well abroad and that there are no problems anywhere.”

“The last three years were the hardest yet,” Fenech said, maintaining that “we shouldn’t waste public funds on unproductive and unprofitable subsidies.”

Replying to concerns by social partners that last year’s COLA has all but vanished in the face of the gas and fuel price hikes, Fenech said that the point of the COLA is not to attempt to predict inflation and off-set it, but to look back over a past year’s increases and make good for them.

He reiterated that government is willing to consider providing compensation to those hardest hit by the gas and fuel price hikes, “but needs an official assessment of inflation.” He said that if “any extraordinary inflation increases are registered, then these will be discussed at the MCESD and a way forward will be determined.”

Asked about the national protest announced by the Labour Party and whether they had any reaction following the MCESD meeting, Fenech jocularly remarked that “if the Labour Party were protesting before the doors of the OPEC (Organization of the Petroleum Exporting Countries), I’d be joining them.”

Since it is not the case, Fenech added, “the Labour Party is being irresponsible in calling for the protest because it is implying that someone has to ‘pay’ for the situation.” He added that even if government were to subsidies fuel and gas, it would still be the taxpayer who ultimately had to shoulder the cost.

Asked about criticisms by social parents that the MRA is failing in its role as a regulator of the gas sector by publishing price ‘limits’ that operators Liquigas and Easygast were able to ‘undercut’, Said said that the MRA had presented its workings and that nobody in the MCESD had contested them at the time.

A spokesperson for the MRA present at the meeting confirmed that when gas operators dipped below the maximum prices established and approved by the MRA, they were eating into their own profit margin – set at 3.28% on every 12kg cylinder, and 3.43% on every 25Kg cylinder.

See table with MRA calculations below.