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Government Throws Light On Fuel Pomp Price Review

Below is an introductory statement of Communication Minister, Issa Tchiroma Bakary during a press briefing in Yaounde Tuesday July 1, 2014.

“The Secretary General at the Ministry of Communication,

The Inspector General,

Technical Advisers,

Distinguished Inspectors,

Distinguished Directors and Head of Divisions,

Distinguished Collaborators,

Fellow Journalists,

Distinguished Guests,

Ladies and Gentlemen,

Allow me, first of all, to wish you once again, a warm welcome in this conference hall of my ministry which has become the usual venue for our exchanges. Today, I will be focusing on a burning issue, as you may certainly be all aware, relating to the increase of hydrocarbons prices at filling stations, rendered public since yesterday, 30th June 2014, and which enters into force from today, 01st July 2014.

According to the decision taken by the Government, new hydrocarbons prices at filling stations are as follows:

A litre of super steps up from FCFA 569 to FCFA 650, indicating an increase of FCFA 81;

A litre of gasoil moves from FCFA 520 to FCFA 600, indicating an increase of FCFA 80;

Regarding domestic gas, the 12 and half kg bottle increases from FCFA 6 000 to FCFA 6 500, indicating an increase of FCFA 500;

The price of the litre of kerosene, used by most underprivileged populations, remains unchanged at FCFA 350.

As a reminder, the real prices of hydrocarbons at filling stations and domestic gas, in other words, the price applicable exclusive of Government subsidy are as follows:

Fuel, FCFA 825 per litre, with a difference of FCFA 175

Gasoil, FCFA 770 per litre, with a difference of FCFA 170

Kerosene, FCFA 705 per litre, with a difference of FCFA 355

12 and half kg bottle of domestic gas, FCFA 9230, with a difference of FCFA 2730.

It is to be noted that each of these differences I just mentioned in the relation between the real price exclusive of the subsidy and the new prices to be applied, continue to be subsidized by the State to the benefit of consumers.

The State has not therefore abandoned consumers, since the subsidy to oil products prices is still there. It is simply reduced in a reasonable proportion to be easily supported by the State budget.

The different changes which relatively affect, hydrocarbons, depending on their priority uses by the different social strata, and related to their income levels, respond to the necessity, which has become a pressing need, takes into account the rising trend of the prices of crude oil on world markets within the context of the major macro-economic balance of the Nation, corroborated with the always rising costs related to the subsidy of hydrocarbons prices to the final consumption of households and different users, on the State budget.

In fact, you would probably recall that in the course of the year 2008, the Head of State, His Excellency Paul Biya, in his efforts to reduce the weight of inflation on the cost of life and the purchasing power of our populations, this inflation which was in itself due to exogenous causes related to the international financial and economic crisis, had decided, among other measures, to maintain hydrocarbons prices at filling stations, through a public subsidy directly financed from the State budget via the National Refining Company (SONARA).

This subsidy mechanism applied on the final consumption prices of oil products at filing stations has, from 2008 to 2013, cost to the State the sum of FCFA 1 200 billion. Within just the first six months of this year, subsidy paid or due by the State in this respect, amounts to FCFA 157 billion, with a cumulated amount, from 2008 to date, amounting to FCFA 1 357 billion.

From the reading of these figures, which alone represent 36% of the 2014 State budget, one clearly tackles the measure of the incidence of the subsidy to oil products prices on the capacity of the Government to use public resources for many social, educational and infrastructural projects, necessary to improve the well-being of populations and to increase our growth rate, which is a sensitive prerequisite for the realization of the emergence objectives of our country by 2035.

It is in fact worth mentioning that the cumulated amount of the Government subsidy to hydrocarbons prices at filling stations, that is FCFA 1 200 billion from 2008 to 2013, as I just mentioned it, representing 120% of the 2014 public investment budget, five times the budget of the Ministry of Public Works, four times the budget of the Ministries of Basic Education, Secondary Education and Higher Education, all three together.

This amount would have also permitted the construction of four hydroelectric dams, like Lom Pangar, six referral hospitals, or more so the construction of 2400 km of tarred roads.

Moreover, SONARA, through which the State intervenes to subsidy hydrocarbons prices at filling stations, is today threaten in its survival, by the pressure exercised on its economic and financial balance through the weight of its intervention in the process of implementing this subsidy.

In fact, the SONARA refinery, with a present capacity of 2 million tons of refined products per year, is technically capable of meeting the demand as expressed today, of up to 1.85 million tons per year.

Conscious of the rapid increase of the national consumption of oil products, which is now at almost 9% per year for super and gasoil, SONARA started in 2009, a major project to extend and modernize its production facility, to increase its treatment capacity to 3.5 million tons of refined products per year, to increase the treatment of Cameroonian crude oil and by so doing improve on its profitability and competitiveness.

Regarding the SONARA capacity to refine the Cameroonian crude oil, it is important to immediately note here that, at the origin, the refinery was conceived to treat mostly with light crude oil whose presence is still rare in the oil production of our country.

The reason is that, at its inception in 1981, the real production of Cameroon, being still particularly weak, and it was only made up of light crude, namely the so called “crude kolé”, the profitability of the refinery imposed an import of other light crude from big producers such as Nigeria, Gabon or even Angola. But the more oil searches were improving intensively, the more Cameroonian production acknowledged a sensitive increase, but in heavy crude oil, for which SONARA were not properly equipped to refine.

The consequence is that, SONARA stands today in a situation which obliges it to import light crude oil for which it is well equipped to refine, in other to meet the local demand, even if it is true that the proportion of these crude oil in the national production begins to experience a certain increase, namely with the exploitation of the Ebome deposits at the Kribi sea.

Despite the original option which had been taken for the technological design of the SONARA, by specializing it mostly in refining light crude oil, the global project of setting up this industrial unit of first plan, had foreseen a progressive increase towards the treatment of heavy crude oil, which still characterizes today the large majority of the Cameroonian oil production.

The first part of this project, expected to be completed by September 2014, is estimated at almost FCFA 220 billion.

The second part, whose public contract has just been awarded, is on its part estimated at FCFA 350 billion, with a total cost of FCFA 570 billion for all the projects.

Meanwhile, because of the always increasing financial weight which the level of subsidy is pressing on State finances, the State is more and more facing difficulties in meeting, its obligations vis-à-vis SONARA on time.

In terms of illustration, for this 2014 financial year, FCFA 220 billion have been estimated to fill SONARA benefit gap as a result of the subsidized hydrocarbons prices at filling stations. As it is today, while we are just mid-way to the financial year, FCFA 100 billion have already been spent, representing more than the forecasts and the projections for the end of the year are estimated to reach FCFA 450 billion, instead of the initially estimated FCFA 220 billion.

Regarding the payments due by the State to SONARA within the framework of this subsidy policy, there are to date estimated at around FCFA 300 billion, whereas the total SONARA unpaid bills vis-à-vis its partners and other suppliers, amount to FCFA 550 billion.

In such a context, SONARA situation is at the verge of reaching a serious critical point.

Its treasury does no longer permit it to obtain credit lines, which are necessary to purchase sufficient crude oil to satisfy internal market demand, to the extent where SONARA is obliged to drop its production capacity from 340 cubic meters per hour to 200 cubic meters per hour, to avoid a total stop of its production units.

The production deficit which resulted thereof compelled the State to sometimes recourse to importation of finished products, which directly expose the internal market to fluctuations of world prices.

Against this backdrop of affairs, which is really urgent and serious, the Government has decided to increase fuel prices as I indicated to you earlier, to avoid the weighing down of the system as well as to comply with national oil markets throughout the world.

Nevertheless, the increase of hydrocarbon prices does not put an end to the government subsidy principle.

This increase simply aims at bringing back the said subsidy to affordable levels by the State finances.

Thus, it is a less than 50% average proportion of this subsidy which is reduced today, with a new structure, which is nowadays as follows:

The adjustment multiplier which decreases from FCFA 57,47 per litre to FCFA 36,68 per litre for fuel and from FCFA 65,21 per litre to FCFA 39,22 per litre for gasoil;

The subsidy for shipping, in other words, the transport of oil products from the maritime coast over to Atlantic Ocean to the port over the Wouri between Limbé and Douala, decreases from FCFA 7,92 per litre to FCFA 5,42 per litre for fuel, and from FCFA 8,23 per litre to FCFA 5,73 per litre for gasoil;

The port taxes, which decreases from FCFA 2,38 per litre to FCFA 1 per litre for fuel, and from FCFA 2,72 per litre to FCFA 1,34 per litre for gasoil;

The transit deposit, which decreases from FCFA 12,45 per litre to FCFA 6 per litre for fuel and gasoil;

The fund for the fight against fraud, which decreases from FCFA 0,21 per litre to FCFA 0 per litre for fuel, from FCFA 0,16 to FCFA 0 per litre for gasoil and from FCFA 1,87 per litre to FCFA 0 for kerosene; it is then cancelled for all the three hydrocarbons.

The special tax on oil products (in its French acronym TSPP), decreases from FCFA 120 per litre to FCFA 80 per litre for fuel, and from FCFA 65 per litre to FCFA 60 per litre for gasoil;

The liberalized posts, which decrease from FCFA 55,24 per litre to FCFA 52,24 per litre for fuel, and from FCFA 44,64 per litre to FCFA 41,64 per litre for gasoil.

Nevertheless, I underline that, despite the reduction of this subsidy which results in the increase of hydrocarbon prices at filling stations, the average of these prices in Cameroon still remains far under the average applied in countries with the same level of development with our country.

Moreover, to accompany socio-professional strata, likely to be the most affected by this increase of prices, the Head of State has decided that the following accompanying measures will be taken without any delay:

First, the maintenance of the litre of kerosene to its actual price, namely FCFA 350, as indicated below;

Secondly, the reduction to 50% of the amount of the withholding tax applicable to populations with low income.

A 50% reduction of the parking tax;

A 50% reduction of the axle tax;

The increase of civil servants salaries;

And, kick-start negotiations to revalorize the guaranteed minimum wage.

Regarding the increase of civil servants salaries, the Minister of Finance is already proceeding with studies and simulations thereof, to forward them to higher authorities.

Regarding the guaranteed minimum wage, it would be submitted, in the days ahead, to the scrutiny of the National Labour Consultative Commission, competent in that issue. The Minister of Labour and Social Security has, in this effect, addressed invitations to the members of the said Commission.

Ladies and Gentlemen, Fellow Journalists,

I have just given you the in and out underpinning the decision which the Government has just taken.

Let me, on behalf of the Government, use this opportunity to call on our populations to welcome these price increases with responsibility, understanding and civic-mindedness, not to give in, at any moment, to any guided manipulation manoeuver, and whose sole goal would be to jeopardize peace and stability in our country.

I call on our populations to well understand that such measure negatively affect the progress of our entire nation, the revitalization of our investment policy, which guarantee the move of Cameroon towards emergence by 2035.

I appeal on them to understand that such a measure, even if it could appear, at the surface, like stressful for their purchasing power, is in fact necessary for the improvement of the global balance of our economy, and therefore, for the improvement of our well-being and social development.

We should all keep in mind that the development and the safety of each Nation calls for, in a given period, some sacrifices to which we must be ready for.

Cameroon could have not escaped from this constraint.

I mentioned above some realisations which could have been achieved between 2008 and 2013, if this heavy subsidy on the State budget had not existed, a subsidy which oblige us to recourse to loans, generally from foreign financial backers.

These loans must be paid back. May be not by ourselves as natural persons, but for sure, those who will take over from us tomorrow in the existence of our country, in other word our off-springs and our youths of today.

Meanwhile, is it not every parent’s desire to hand over a profitable and reliable legacy to his off-springs?

Such willingness therefore requires nowadays, that we should pay the price.

I then call on our compatriots to adhere to this imperative, which was no longer neither an option nor a choice, but was a necessity, in responsibility, citizenship and patriotism, conscious of the support these populations have always brought to the Head of State, His Excellency Paul Biya, in his permanent quest for the improvement of the collective well-being and the fight against any form of discrimination, of whichever nature and from whichever destination.

Let me now call on you media practitioners, to fully play the role expected from you by the entire nation in terms of building citizenship awareness, social mediation, for the safeguard of our country’s fundamental values of national peace, unity and solidarity.

Thank you very much for your kind attention.”

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