ICCC addresses concerns

The increased fees and levies on agriculture production has raised concern among farmers and it was brought to the attention of Independent Consumer Competition Commission. Business Reporter CLARISSA MOI discusses with ICCC commissioner and chief executive officer PAULUS AIN on its role in regulating fees and charges.

FARMERS are concerned about the increasing number of fees and levies they have to shoulder as agriculture production has seen a slump in recent years.
Although the fees and levies are for the various sectors, farmers know that the cost will be passed down to them and consumers at the end of the value chain.
Therefore, the Farmers and Settlers Association has requested the Independent Consumer and Competition Commission (ICCC) to look into the various fees and charges.
They include the research and extensions service fees by various commodity boards (agriculture sector), tonnage and wharfage fees, factory and warehouse fees, and diesel fees (carbon levies on petroleum products).

Q: Is the ICCC aware of the various fees, levies and charges mentioned by the farmers?
AIN: The ICCC is only aware of changes in some of the fees and charges, especially in relation to the industries that we regulate such as the new carbon levies imposed on the petroleum industry by the Climate Change and Development Authority (CCDA) and Finance Department.
Carbon levies will also be applied on fertiliser used by farmers hence it will also significantly affect the agriculture sector.
While the CCDA has the mandate to impose fees and charges, the process requires it, under Section 38 of the CCDA Act, to consult the Department of Treasury first.
In regard to the price of diesel, the ICCC currently regulates the fuel pump prices for petrol, diesel and kerosene sold at the retail level.
We do not regulate prices for fuel sold to commercial customers because they have negotiating power.
The retail pump prices for fuel is set based on project agreement between the State and Puma Energy PNG Ltd.
The ICCC is not a party to the Napa Napa project agreement, hence, we only ensure that retail prices for fuel sold at service stations comply with the project agreement.
The project agreement states that the retail price for fuel should be set based on Import Parity Pricing (IPP) which means that despite some fuel being produced locally, the price is based on the landed cost in PNG of fuel produced and sold in Singapore.
When sold at our service stations, the retail price for fuel includes the IPP which constitutes about 60 per cent of the retail price followed by the wholesale and retail margin represents, freight charges and Government charges which includes the excise tax and goods and services tax (GST).
The carbon levies will be an additional Government charge on fuel in addition to the excise and goods and services tax (GST).
This will result in an increase of the fuel prices further going forward.
The ICCC is responsible for setting the wholesale and retail margins.
In setting the margins, the ICCC conducts pricings reviews to ensure businesses earn an adequate return and consumers are not paying too much for fuel in the country.
The current pricing determinations commenced in 2020 and will expire in 2024.
It was set by the ICCC based on the transparent pricing review conducted in 2019.
The price of fuel in the country is primarily driven by world market prices for crude oil and the Papua New Guinea Kina to US dollar exchange rate.
When the world market price of crude oil increases or the Kina depreciates against the US dollar, it drives up the price of fuel in the country.
When the world market prices for crude oil decrease and the exchange appreciates, the prices of fuel also decline.

Is the ICCC planning to carry out investigations?
We are currently working with all stakeholders to ensure our concerns are addressed, especially in relation to the legal process used to introduce these new levies.
They include the Department Treasury, Department of Finance and CCDA. We have requested CCDA to cease the collection of the levies until proper processes are followed to introduce the carbon levies as required under Section 38 of the CCDA Act.

Are there any steps you can take to address these concerns?
Yes.
The ICCC has decided that we will not include the new levies in the retail prices for fuel until the Department of Treasury provides its feedback on this matter and CCDA follows the proper process required under the CCDA Act to introduce these new levies.
The Department of Treasury’s feedback on this matter is important from a policy front given the significant impact fuel prices have on all sectors of the economy, on the doing business and on the price of goods and services in the country.

Do you have further comments on the other fees being charged?
The ICCC does not have powers to intervene over the regulatory functions of other regulatory bodies.
In regard to the carbon levies, we are mostly concern about the process used to introduce the levies given our regulatory oversight over fuel prices at the retail level.
On factory and warehouse fees, the ICCC does not have the power over these fees.
They are commercial arrangements negotiated between businesses.
On the tonnage and wharf fees, we do set essential port services charges (wharfage, berthage and berthage reservations) and stevedoring access for PNG Ports Corporation Ltd but not the other port charges.
These essential port services fees are charged on all the declared 16 ports in the country.
They have been calculated to enable the entity to earn a return for their investment as well as enabling the entity to provide reliable service to the port users.
For any new charges especially in the international terminal ports (Motukea and Lae), the ICCC has no jurisdiction.
It is between PNG Ports and the International Container Terminal Services Inc (ICTSI) as there is a commercial arrangement currently in place.