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Newsday Reporter
The TT Chamber of Industry and Commerce (TT Chamber) has called for a phased approach to any increase in natural gas prices to the business community, forewarning the risks could not only lead to increase in consumer prices but impact companies’ abilities to operate and the competitiveness of exports.
The chamber’s appeal to government comes as the National Gas Company has imposed a 77 per cent increase on gas prices for commercial and industrial customers.
Already, a leading stakeholder in the construction sector, Trinidad Cement Ltd has warned of looming increases in cement prices.
In a release on January 29, the TT Chamber said it is assessing how the gas price hike will impact the business costs of its members and possible “fallout effects.”
The TT Chamber said it knows manufacturers have benefitted from natural gas pricing arrangements to facilitate economic diversification. In anticipation of adjustments on other pricing arrangements, the TT Chamber said electricity and water subsidies remain “critical” to competitiveness in the local, regional and international landscape.
It advised that the subsidy arrangements is also critical to the government’s revitalisation plan for economic growth and further diversification “which calls on public-private partnership as part of the stimulus to make it a reality.”
“The country is confronting a broader and unavoidable structural adjustment challenge in a historically subsidised economy, which should be managed carefully,” the chamber advised.
It said while reform is necessary “any recalibration of energy and utility pricing should be approached holistically, transparently, and through national dialogue, with the clear objective of ensuring that economic returns ultimately rebound to the benefit of all citizens, while safeguarding competitiveness, employment, and export-led growth.”
The chamber said it was understood that the manufacturing sector used 1.5 per cent of the total of gas production by NGC. It said more than 100 manufacturers employed thousands of people.
“We understand the government’s need to increase its revenue base but it must be taken into consideration the impact that a natural gas price increase will have on the end consumer in terms of increased pricing and the competitiveness of our products for export.”
The TT Chamber also it expected increased state revenues from measures such as the natural gas price increase would result in improved productivity and efficiency of local government and state enterprises.
It called for “a coordinated framework to policy options such as tiered pricing for natural gas based on consumption levels and industry classification, progressive metering for electricity and water that protects vulnerable households while discouraging excessive use, and a phased, rules-based approach to subsidy adjustment informed by market conditions, including fluctuations in global energy prices.”
Such policies would allow business to consider its future investment decisions.
The TT Chamber said it remained open to “continuous dialogue with all key stakeholders and is committed to working towards finding a measurable solution that will result in the least economic strain on the national economy and business community.
“We acknowledge that change is necessary, and we remain committed to ensuring that any measure adopted safeguards the best interests of our members, who are mainly SMEs and the wider national community. Measurable solutions that will result in the least economic strain on the population are what we hope can be achieved.
In a media statement on January 26, TCL general manager Gonzalo Rueda Castillo said natural gas is a critical input in cement manufacturing. He added that the company is awaiting the final determination of the NGC’s proposed gas hike expected on January 31.
“If the proposed gas price increase is confirmed, TCL will be required to adjust its cement price increase shortly after to account for this significant effect to ensure the continuity and sustainability of our business,” the statement said.
“Maintaining operational viability is essential to sustaining these contributions and ensuring uninterrupted supply to the market.”
The statement said over recent months, TCL experienced significant increases in manufacturing costs, including raw materials, packaging, and general inflationary pressures.
It added that these cost escalations have materially impacted the company’s production costs.
“TCL does not support the gas price increase and continues to actively engage with relevant stakeholders in pursuit of a more balanced outcome,” the statement said.
“However, based on the official information communicated to date, the expected increase represents a material and unavoidable cost impact that requires a corresponding revision to our pricing.”