Fuel issue: the HAT threatens to impose its prices and its law

A crisis is unveiled between the HAT and oil companies.  On Thursday 02nd and Friday July 03rd, 2010, some unilateral fuel consumer price increase operated by oil companies developed a second to none tension between the private sector and the ruling power. It is indeed the first time that the government has so much lost its grip on the situation to that the ministry is being compelled to play hard game. As a first reconciliation attempt failed by the end of week, minister Mamy Ratovomalala attacked…  

…And led a genuine frontal attack against oil companies.  On Monday by noon, the minister gave them a three hours long ultimatum,180 minutes to restore the previous fuel consumer price, as a condition required by Mamy Ratovomalala to the resumption of any negotiation between the government and the companies. Otherwise, “the state is going to take its responsibilities “, he threatened. The threat was not held lightly by the distributors which, however, refrained from fully complying. The rise is still effective, but at a lower extent: +90 ariary against +250 ariary per fuel liter compared to the former price dealt in mid 2009.  

According to the HAT government, conditions for a price increase are not gathered.  “Since this year’s May, the international market courses lowered have decreased up to  71 dollars and yet the consumer price increased from plus 8 to plus 13% “, explained the minister. Mamy Ratovomalala conceded that the ariary’s value drop might be an increasingly relevant factor for the rise. However, he held the unilateral price increase imposed by the companies as “unbearable” for the Malagasy population.  

Minister Ratovomalala engaged negotiations with oil suppliers in order to restore the former prices and join a table to debate the situation further more. Dead duck! “We called upon the companies to join the negotiation table and talks, although, they imposed the rise anyway”, he regretted. The issue is now become political. “There were some meetings with the HAT leader and the Prime minister “. The minister was allowed to play it hard even if it leads to frightening the private sector. “No one can tolerate that four oil companies are blackmailing whole of Madagascar’s population and the national economy”, he argued. 

How can the HAT government order private companies to lower prices when the law recommends price liberalism? Fuel suppliers have already been granted a discount of over various taxes by the beginning of the year 2010. They equally pulled advantages from a stationary exchange rate which protected them from side effects generated by the US dollar’s value fluctuation. This privilege has been reconsidered, so was this important rise’s incentive. The Finance Ministry does not rule out further fiscal advantages could the dialogue be renewed with the oil suppliers.  

Mamy Ratovomalala has raised the stakes as Hery Rajaonarimampianina never dared to. The HAT minister addressed a potential alteration of the law in order to let the state recover the upper hand in price imposition, merely a matter of a simple order for the current regime. A small order without any democratic debate is enough. When he was on his way to reverse the ousted president, Andry Rajoelina promised to significantly lower fuel price to below 2000 ariary per liter, namely thanks to some alleged close links with Saudi Arabia. The time for promises is over, one has to deal with the political crisis as well as with the economic downturn, in which oil companies might play the role of scapegoats.