Dubai's RTA hikes taxi fares to offset high fuel prices

Move follows Emarat request for bank loans, analysts warn some fuel retailers may not survive
Dubai's RTA hikes taxi fares to offset high fuel prices
TAXI FARE: Dubai’s Roads and Transport Authority (RTA) is to increase taxi fares in the emirate to offset the increased cost of fuel (ITP Images)
By Ed Attwood
Sun 16 Jan 2011 04:17 PM

Dubai’s Roads and Transport Authority (RTA) is to increase taxi fares in the emirate to offset the increased cost of fuel, it said on Sunday.

"Despite the fact that fuel prices have continued to rise over the past years, the tariff remained fixed,” said Public Transport Agency CEO Eisa Abdul-Rahman Al Dosari.

“The current taxi tariffs of 1.6 dirham per kilometer, has now been increased to 1.71 dirham per kilometre; which works out as an increase of only 11 fils per each kilometre, i.e. 2.20 dirham per twenty kilometres. This increase, however, does not apply to meter starting tariff."

Al Dosari stressed that the move was not intended to generate additional profit either for the RTA, or the five franchise companies operating in the emirate.

The decision comes three days after two of the UAE’s largest petrol station operators, ENOC and Emarat, confirmed plans to ramp up the cost of diesel by 15 fils to AED2.90 per litre – the seventh cost hike since June 2009.

Last week, Emarat revealed that the firm was restructuring and required bank loans to help service around $519m of debt. 

Emarat chairman Obaid Humaid Al Tayer complained that the company could not increase the selling price of gasoline products without prior approval from the UAE cabinet, and that the difference between the cost and selling price was about one dirham a litre.

Analysts, however, have warned that the price hikes have come too late for many retailers, who have lost millions of dollars by selling fuel below its market value for years.

“My feeling - and this is really a personal opinion and in no way reflects Platts’ thinking - is that the current setup will not continue and not all retailers will survive and may need to either merge with another retailer or pack up,” Kate Dourian, the Middle East editor for Platts, told Arabian Business.

“The other option is that if you scrap subsidies entirely, you can then open up the retail sector to the foreign oil companies, which can participate if there are no anti-competitive issues to contend with.”

Fuel subsidies have formed part of the ‘social contract’ between Gulf governments and their local populations, and have been seen as a natural way to redistribute oil wealth.

“The cost of subsidies has not been very apparent so far, but if you start looking at it in terms of lost opportunity, you notice that they have encouraged their populations to over-consume,” said Sam Ciszuk, an energy analyst with IHS Global Insight.

“The per-capita energy usage is quite staggering bearing in mind the [Gulf states] don’t have a very high output compared to Western countries.”

 

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