Transportation, fuel costs lead to price hike in construction materials
- gov’t meets with stakeholders
While the cost of sand and cement has remained fairly stable, the price for steel has skyrocketed due to increasing product and freight costs.
This was the general sentiment expressed by stakeholders of the construction sector during a meeting with Minister of Tourism, Industry and Commerce, Oneidge Walrond, and Senior minister with responsibilities for finance under the Office of the President, Dr Ashni Singh.
The meeting took place at the Arthur Chung Convention Centre on Monday. In outlining the purpose for the meeting, Minister Walrond noted that the engagement was to deal with the price increases reported for the cost of some construction materials.
She explained that the government wanted to meet with stakeholders to better understand the factors responsible for the rise in the cost of these materials.
“We decided to meet with you and hear from the people who are directly involved in the sector before we make any decision or determination,” Minister Walrond told the meeting.
As part of the Emergency Budget in 2020, the government announced the removal of VAT on building and construction materials. However, consumers and contractors have been complaining about the steadily increasing cost of materials.
These increases are also a concern to Dr Ashni Singh, who warned that it is illegal to charge VAT on zero-rated materials. The minister’s caution was based on complaints by some stakeholders, that some hardware stores have maintained the price of materials, even though VAT is no longer applicable.
He encouraged citizens to report cases where stores continue to charge VAT on zero-rated items.
“We have been paying close attention to developments in the market for key construction materials, not only because the government is a large consumer and purchaser of construction materials, but also because we recognise that construction is going to be an important driver of the economy going forward,” Dr Singh stressed.
The Senior Minister of Finance expects that there will be a boom in the construction sector, pivoted by the housing initiative of the President; the construction of several branded hotels, new office spaces, and other buildings by the private sector.
“We have been getting reports of some price movement, and so we are very interested in understanding how prices have moved and what might be contributing to the price movement,” Dr Singh added.
In sharing his perspective for the increase in prices, Chairman of the Region Three Tourism Committee, Halim Khan, also said transportation cost was the main driver of the costs for the items. He suggested that a lower cost of fuel should result in a reduction in the cost of materials.
Briony Tiwarie supported this view and surmised that the increase in fuel prices has directly impacted the cost of materials because of increased transportation costs. Meanwhile, Mohamed Raffik of Central Corentyne confirmed that there has been an increase in the cost of materials. He noted that the cost of materials from China has been increasing steadily.
Raffik stressed that the genesis of the price increase is the international market and has nothing to do with the Government of Guyana. Also contributing to the meeting via Zoom, was Christopher Persaud of David Persaud Investments. He reported that the price of steel has increased by more than 20%, and the material remains in short supply.
He further explained that shipping rates have also increased by over 400%. In response, Minister Singh noted that the government has moved away from fixed prices and a regulated market to a more open and competitive environment. He added that the world market largely dictates fuel prices and while the government can intervene by lowering taxes, that move would have limited effects on the overall cost of fuel.
Dr. Singh promised to examine the legal and administrative implications of adjusting taxes associated with shipping costs. Meanwhile, Minister Walrond committed to engaging agencies under her supervision, such as the Competition and Consumer Affairs Commission and the Guyana National Bureau of Standards to safeguard against unscrupulous business practices and to ensure quality. (Modified press release from Ministry of Tourism, Industry and Commerce)