Megh Pillay, the CEO of the State Trading Corporation (STC) of Mauritius, told AfricaMoney that over 98% of households in Mauritius depend on LPG for their cooking and water heating needs. However, our economic expert forecast 0% growth in LPG in Mauritius this year, as a result of Government incentives to use solar water heaters under Maurice Ile Durable.
- Mauritius sought the supply of over 65,000 metric tons of liquefied petroleum gas (LPG) in the year to June 2013. What is the estimated supply for the year to June 2014?
Last year, STC imported around 67,000-68,000 tonnes of LPG, which is the source of energy for water heating and cooking for 98% of Mauritian households. With respect to cooking, LPG is following a natural upwards trend of 1-2% yearly. On the other hand, in line with Government’s initiatives under Maurice Ile Durable to prioritise renewable energy through solar water heaters, LPG for water heating is in lower demand. Overall, this year we are expecting the same quantity of LPG to be delivered – essentially a situation of 0% growth in LPG sales.
- STC imports petroleum products, cement, wheat flour and rice. What is the relative mix of products in STC’s portfolio?
Petroleum products comprise 96% of our portfolio. In fact, it would not be wrong to call us the Petroleum Corporation! (Laughs) In 2013, we handled 1.2 million tonnes of petroleum products comprising seven grades and 68,000 tonnes LPG. Yet, though wheat flour and rice comprise only 4% of our turnover, these commodities are critical from an economic perspective as we provide for nearly 100% of the wheat flour and as much as 20% of the rice being traded in Mauritius. Moreover, we deal in small batches of sugar from time to time.
- What about cement? While cement continues to be an important pillar of the infrastructure sector, why did STC decide to disengage from it?
Historically, when only one supplier operated in the cement market, increases in world cement prices severely impacted local consumers despite Government’s efforts to fix prices. In that monopoly situation, it was also difficult to compel the local supplier to follow world prices when the latter trended downwards. Despite the arrival of a second supplier, there was no major improvement. At that stage, STC was called upon to step in for consumers’ benefit in terms of price stability and continuity of supply. Subsequently, the setting up of the Competition Commission provided the comfort that consumers’ interests would be safeguarded, and accordingly, STC’s intervention was no longer needed, as in fact we then recommended to Government.
Incidentally, STC was involved in cement trade for three years from mid-2008 to mid-2011, coinciding with the global financial crisis when international prices was going down in response to low demand for real estate. We exited the market when the CCM was firmly in place, but concurrently the global recovery also saw demand for property development reassert itself and so, the demand for cement increased too, causing prices to rise. Accordingly, at that time, there was some perception that STC had brought prices down, but disengaged at a time when consumers needed its involvement the most.
[blockquote style=”2″]Even in a remote situation when MRPL could be unable to meet its commitments, Oil and Natural Gas Corporation guarantees that our contract will be honoured.[/blockquote]
However, the hard facts are that despite gradual price increases over time, it is only in 2014 that cement prices have reached the same level as in 2008. So, with that understanding, the STC is no longer held responsible indirectly for the ‘high’ prices of cement. As a concrete check of the STC’s impact on cement prices, we floated two tenders and noted that prices were stable and following normal trends of demand and supply.
With the announced merger of Lafarge and Holcim, there is now need to review the whole matter jointly with the Competition Commission. In any case, the STC has been kept in standby mode should it be deemed necessary to intervene afresh on the cement market in the interest of the domestic market.
- Could you comment on the basmati rice recently introduced by the STC?
With the proliferation of various brands of rice which did not conform to basmati quality, consumers were constantly at risk of paying the higher price of basmati rice but getting lower quality product. Since last January, we introduced two types of basmati rice in response to consumers’ preference for this variety of rice, with the objectives of protecting consumers’ interest and serving as a reference to identify basmati rice. We have pegged our prices close to the lowest cost basmati rice in the market to bring basmati rice within all consumers’ reach, but ours are of noticeably superior quality.
- STC recently renewed an agreement to source petroleum products from Indian oil refiner Mangalore Refinery and Petrochemicals Ltd (MRPL). Can you comment on the specifics of the agreement?
Our agreement with MRPL is a standard supply agreement covering quality, quantity, delivery schedule and quality control parameters. For the past eight years, we have worked together and we are satisfied with this arrangement thanks to which we obtain all seven grades of petroleum products from the same refiner.
Although our total annual demand for 1.2 million tonnes may look large, it consists of many small shipments over the annual period and the seven grades of product. This translates into small quantities, which is unviable for the larger Middle-East oil suppliers. MRPL has been very flexible, taking into consideration our storage constraints and keeping its supply in sync with our low-volume and high frequency demand.
Moreover, the fact that MRPL is a subsidiary of ONGC (Oil and Natural Gas Corporation) which is one of India’s largest oil refiners, is a big source of comfort to STC. Even in a remote situation when MRPL could be unable to meet its commitments, ONGC guarantees that our contract will be honoured.
Unfortunately, certain media blew out of proportion one instance of natural emergency near Mangalore last year when priority was given to the water needs of the population, but suffice it to say that our business relationship is absolutely normal.
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