Government is profiteering? Of course, not!

Government is profiteering?  Of course, not!

Just now in Parliament, MP Er Lee Bee Wah commented on coffee shops profiteering by raising beer prices well above the increased excise duty. This is a fair point.

However, she wandered off by asking if Government was also profiteering when it raised the granite stockpile price from $30 to $50 per tonne. Of course, not!

articlesThe Government did not set up the granite stockpile as a business. The issue of profit is not a relevant consideration because the motive in setting up such a stockpile is to help the industry cope with sudden shortages in granite. Release of the stock-pile is a contingency measure to help the industry cope while they contract and import from alternative sources of supply. The stockpile cannot be a convenient permanent alternative source of supply for the industry.

We import granite mainly from our immediate neighbours, as well as from other regional sources. Recently, there was a sudden, hopefully temporary, disruption in supply from Indonesia. We decided to release the stockpile at $30 per tonne to help industry tide over the disruption.

As it is not clear if the disruption was temporary or permanent, we urged the industry to ramp up supply from sources further afield. As these sources would be more costly, we served notice to the industry in early February by indicating that the stockpile price would be raised after one month. In this way, we ensured continuous operation for the industry for one month with pricing stability at $30 per tonne, while they start to make arrangements to ramp up supply from other sources.

In setting the stock-pile price, the consideration is not about profit margins but about ensuring the industry is incentivised to actively source for alternative supply sources. If the stockpile price is set too low, there will be no reason for importers to go for other (more costly) sources. And if they do not do so, we will rapidly deplete our stockpile and there will be no buffer to help the industry should a similar disruption of another supply source occur.

The new stockpile price is not to profiteer but to incentivise importers to procure and buy from distant sources, to ensure that our construction industry can continue seamlessly, despite the Indonesian disruption. The industry should fully understand this as we have made it clear from the outset when the granite stockpile was released to assist them in the transition to ramping up supply from distant sources.

Please visit the MND Facebook to leave a comment.

Advertisements

Comments are closed.

%d bloggers like this: