Sunday, June 23, 2024
BusinessFuel dealers demand gov’t to quintuple profit margin

Fuel dealers demand gov’t to quintuple profit margin

Gas station owners demand the government to increase profit margins to 1.20 birr per liter within a week. It is a five-fold increase from their current profit margin of 0.23 birr per liter.

Addressing the Ministry of Trade and Regional Integration, the Ethiopian Petroleum Dealers Association wrote a letter last week requesting the government to increase their profit margins. The dealers have long claimed that the meagre profits have been hurting their businesses.

Signed by Henok Mekonnen, the chairperson, the letter states that the directive approved last January to amend the profit margins has not materialized yet. The directive states that the profit margins can reach up to five percent.

“Amendment of profit margins for the dealers depends on the willingness of officials so far,” read the letter explaining how their business has been affected.

Members of the Association disclosed that the business has been unattractive to new investors or existing ones to expand their investment due to insufficient profits.

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A study conducted by the association shows the same as well, according to Ephrem Tesfaye, board member of the Association.

Ephrem claims that the low number of gas stations in the country is due to the low appetite by the private sector to engage in the business. “The study shows that an increase of profit margins to 1.20 birr per liter can contribute to the availability of gas stations in sufficient numbers,” he said.

Ethiopia now has about 1,200 gas stations but only as little as a thousand are operational. However, there are about 1,900 stations in Kenya and 2,900 in Uganda that have a smaller area of land and population compared to Ethiopia.

The profit margin adjustment will also help control the illicit trade, according to Ephrem.

There are about 40 oil companies distributing fuel products at gas stations in the country, with a profit margin of 0.18 birr per liter. The Ethiopian Petroleum Supply Enterprise shares profit margin of 0.25 birr a liter while supplying fuel to oil companies.

Over 80 of the gas stations in Ethiopia work only under five oil companies, NOC, TotalEnergies, OiLibya, Gomeju, and Yetebaberut.

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