Wednesday, May 22, 2024
BusinessGov’t ponders profit margin adjustment for petroleum dealers

Gov’t ponders profit margin adjustment for petroleum dealers

Officials at the Petroleum and Energy Authority start undertaking a study to adjust profit margin of petroleum dealers.

The dealers have been making a series of requests to the Ministry of Trade and Regional Integration, urging authorities to improve their profit margin, which they claim is low given the expenses they have to incur while retailing oil products.

In a letter sent to the Ethiopia Petroleum Dealers Association, the Authority requested the Association to submit an audited financial report of nine gas stations from the 2020/21 tax season as an input for the study.

Complaining about the meager profit margin that stands at 0.23 birr a liter, the dealers have been requesting the government for a revision through their Association. A few months ago, a new directive was approved to adjust profit margins of the industry players, dealers and oil companies.

In the directive, it was stated that the profit margins for the dealers would go as high as five percent of the retail price, but there had not been any change since then. Last June, the Association wrote a letter to the Trade Ministry to increase their profit margin to 1.20 birr a liter, five folds up from their current profit margin.

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The directive further commands a study to undergo and collect data from the gas stations, but extends the time to complete it until December of this year, according to Ephrem Tesfaye, a gas station owner and board member of the Association.

“A team was formed from the government and we have previously been in discussion with them. They are collecting data from oil companies as well,” he said.

The nine gas stations are to be selected from three oil companies; National Oil Company (NOC), TotalEnergies, Oilibiya, three from each. Selection will be based on their performance; top seller, middle one and another one with low sales volume.

Signed by Sahrela Abdullahi, director general of the Authority and addressed to the dealers’ Association on August 18, 2022, the letter orders the Association to present the requested audit report by licensed auditors within five days.  

On the other hand, the government is also working on studies with oil companies to increase their profit margins.  One of the main reasons for the small number of operational gas stations in Ethiopia, about a thousand, is claimed to be the small profit margin.

For Ephrem, the price adjustment would initiate several investors make their way into the business, which he believes would create competition and better service at the stations.

“The more the gas stations are in the business, the more accessibility people would have to the gas products,” he said. Ephrem adds that creating a favorable environment to encourage the opening of more gas stations in the business would also help the country on gas storage.

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