NEWS | Wednesday, 02 March 2008

Diesel price-hike to rock the market – Reggie Fava

David Darmanin

Six months after government signed a voluntary agreement with individual importers on product pricing, the agreed period stabilising consumer prices elapsed on Monday.
This has inevitably sprouted a level of concern among industrialists, claiming that the market will soon be witnessing a general price-hike, especially now that Enemalta announced a surge in the price of diesel.
“The latest increase in the price of diesel announced yesterday will set the example for others to follow suit,” pharmaceutical importer and former Chamber of Commerce president Reginald Fava warned.
“But this is what happens when you suppress prices for a period of time – instead of seeing a gradual increase in prices over the past six months we will now end up faced with a sudden price-hike. This is a natural reaction.”
When interviewed on TVM programme Reporter last November, Fava was highly critical of the voluntary price stability agreements signed with government, describing them as “unacceptable” and warning that such initiatives will only lead to “an explosion in prices” once the agreed price-stability period elapses.
Contacted by Business Today, yesterday Fava explained that in a free market economy “price-hikes are never capricious, as it is competition that sets them – but prices for certain products will have to go up. Malta depends on importation, so really and truly there is nothing we can do about the situation.”

Describing the problem as one that is strongly affected by external forces, Fava reiterated his position on price stability agreements by mentioning that the consumer will now be shocked with sudden surges, especially with food prices. “Prices on food are bound to augment, and this cannot be controlled due to the situation with rises in the cost of energy. Still, consumers will obviously look at such sudden increases unfavourably.”
Adding that medicinal product importers did not form part of any such agreements, Fava claimed that: “the price of medicine over the past months reflected a real situation of the market.”
Fava also admitted that he was worried about payrolls now that “the price index threatens to be rocked, and this will of course make a difference in salary structures. Every time fuel price increases, everything else does. Again, it is a simple natural reaction.”
On his part, GRTU spokesman Carlo Cini agreed with Fava, telling this newspaper that the surge in the price of diesel will mean that transport costs will increase, “and therefore everything else will.”
Cini however claimed that Malta is still among the countries in Europe where diesel is relatively cheap. “In Italy diesel is sold at €1.38 per litre, whereas in Malta it costs €1.10.”
Asked whether the increase in fuel prices is a matter that should be taken lightly, Cini said: “When fuel cost rises, it is never pleasant for anyone. Even when it comes to consumption, fuel stations tend to suffer as consumers are more likely to ask for €10 or €20 of fuel rather than its equivalent in litres.”