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Price changes for cooking gas puts heat on Gaza distributors

The Ministry of Finance in the Gaza Strip unilaterally decided to float the price of cooking gas, setting a new economic precedent.

GAZA CITY, Gaza Strip — The Ministry of Finance in the Gaza Strip has decided to float the price of cooking gas cylinders — a move that pleases consumers but angers the owners of gas stations, who will have to make up the price difference.

The ministry announced that, as of Nov. 25, the price of the 12-kilogram cylinders — which had sold at a fixed cost of 64 shekels (around $17) — would be determined based on supply and demand, not to exceed 64 shekels. No further details were given.

Only one gas station in Gaza City implemented the decision. Al-Monitor visited Daban station in the eastern Gaza neighborhood of Zaytoun. The station is selling the 12-kilogram cylinder at 51 shekels ($13.60). Other stations and fuel and gas distribution companies opposed the government's decision, describing it as unjust.

Mahmoud al-Shawa, chairman of Gaza's Petroleum and Gas Station Owners Association (PGSOA), told Al-Monitor that gas and fuel companies in Gaza buy fuel, including cooking gas, from the Palestinian Authority (PA), which is the only entity authorized to import cooking gas. The PA buys the cylinders for only 3 shekels (80 cents) and sells them to Palestinian distribution companies after taxation for 51 shekels ($13.60). In turn, these companies sell cooking gas cylinders to citizens at amounts ranging from 55 shekels ($14.70) to 64 shekels ($17).

Shawa said the only gas station that went along with the government's decision only did so to sell its gas stock and achieve liquidity as soon as possible.

“We earn only around 13 shekels [$3.50] from the sale of each gas cylinder,” he said. “Those who deliver the cylinders to citizens' houses get 5 shekels [$1.30] per cylinder, and fuel stations get 8 shekels [$2.20].”

He added, “By making this decision, the Ministry of Finance in Gaza is asking gas stations and fuel distribution companies to give up their profits. Meanwhile, the ministry is not exempting them from taxes.”

The Hamas government administers the Gaza Strip. It collects taxes from citizens and grants licenses without consulting the government of Prime Minister Rami Hamdallah in the West Bank, despite the PA's announcement that it would officially take over administration of the strip on Oct. 2, 2017.

Gas stations in the Gaza Strip pay the Hamas government an income tax on diesel sold to citizens. PGSOA accountant Sofian al-Turk explained to Al-Monitor that the Gaza government collects a 1.45 shekel lump sum on each gas cylinder and 100 shekels per ton.

He added, “Gas stations buy cooking gas from the PA after the imposition of three taxes. These are the income tax, the blue tax and the value-added tax.”

Economic expert Samir al-Daqran told Al-Monitor, “The PA imports from Israel a ton of cooking gas for 300 shekels [around $80.40] — 3 shekels per cylinder. Each ton fills 83 cylinders. Then the PA adds the blue tax imposed on fuel and gas, including cooking gas, of an average of 3 shekels per fuel liter.”

He added, “The government in Gaza collects an income tax on commodities, such as fuel and cooking gas, at a rate of 2.2% of the initial price of the commodity purchased by traders from the PA. The 12-kilogram cooking gas cylinder is already subject to the PA income tax at a rate of 100% of its initial price before being sold in the Gaza Strip. To make profits, traders are forced to raise the price of these commodities. This is how citizens end up paying high prices.”

Yahya Attar, deputy head of the General Directorate of Petroleum at the Finance Ministry in Gaza, said his directorate unilaterally made the decision to float the price, so the change only affects the Gaza Strip, which has been suffering a crisis in terms of supplying fuel and cooking gas amid the siege imposed by Israel.

“There were no cuts in the fuel or cooking gas quantities supplied to the West Bank," Attar told Al-Monitor. “Since 2012, the General Directorate of Petroleum has been implementing a contingency plan. The PA’s fuel supplied to the General Directorate in Gaza has been distributed to the gas stations according to the quota system amid a shortage in fuel quantities entering the Gaza Strip. Each of the 30 fuel stations in the Gaza Strip has a quota in line with the number of served residents. In light of the lack of competition and poor supervision by the Ministry of Finance in Gaza on fuel stations, their owners agreed to raise the price of gas cylinders to 64 shekels, similar to the price applied in the West Bank.”

Attar continued, “The General Directorate of Petroleum was concerned about the threats by gas stations owners that they would stop buying cooking gas if we decided to reduce the price of cylinders. Small quantities were entering the Gaza Strip, barely enough to cover the needs of the population. However, when the PA imported cooking gas from Egypt, [which] allowed it to enter the Gaza Strip in sufficient quantities to meet the needs of the population, the first decision by the directorate was to float the price of the gas cylinder. Citizens won’t have to pay excessively high prices."

Over the course of 12 years of the Israeli blockade of the Gaza Strip, the PA supplied gas to the Gaza Strip through Israeli crossings in limited quantities controlled by Israel. Egypt had stopped supplying Gaza with cooking gas in accordance with Israel's wishes. But in early August, Egypt allowed the entry of cooking gas to the Gaza Strip against the backdrop of truce talks between Hamas and Israel.

For his part, economic expert Moeen Rajab described the floating decision as an unprecedented economic measure.

“For the first time, the government in Gaza issued an economic decision in favor of citizens. It prohibited the sale of cooking gas cylinders at a price higher than 64 shekels. This means that it has fairly set the concerned companies’ profits and was also fair to citizens," Rajab said.

Majdi Hassan, director general of the Petroleum Authority at the PA’s Ministry of Finance in the West Bank, affirmed to Al-Monitor that his government did not instruct the Ministry of Finance in Gaza to issue any decision on floating the price of gas cylinders. “Traders pay the gas cylinder price after the PA Ministry of Finance adds all taxes imposed by the government. Then, traders can sell gas cylinders at a price that guarantees profits based on the demand and supply without the PA government requiring them to pay any [other] taxes. On the contrary, the Hamas government in Gaza is collecting additional taxes on goods that were already taxed.”

Hassan added, “The Hamas government's decision won't pose any danger to the PA’s budget, but it will bring Gaza’s government more profits and funds. The decision to float the price of the gas cylinder is an attempt by the Hamas government in Gaza to win over citizens. This is mere propaganda.”

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