The Association of Oil Companies of Montenegro (UNKCG) announced today that the amendments to the Draft Law on Energy, which relate to the introduction of fuel labeling, have no basis in regulations, standards, or practice of the European Union (EU).
They sent a letter to the members of the Committee on Economy, Finance and Budget of the Parliament of Montenegro and to the Chairman of that Committee, Boris Mugoš.
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"With deep respect for the institution you represent, as representatives of the people who are most responsible for fair and responsible laws, which will determine the future of our descendants, we ask you to consider with the utmost care the facts we point out on this occasion. We hereby wish to express our great dissatisfaction and irresponsible attitude that the Government of Montenegro has towards businessmen in the field of distribution of petroleum products as the largest source of income for the state budget, and to specifically and with arguments point out that the proposals, in the form of as many as 19 amendments (one entire chapter) to the Draft Law on Energy, which relate to the introduction of fuel labeling, have no basis in EU regulations, standards, or practice," the letter from the UNKCG signed by Secretary General Draško Striković states.
In the letter, they outlined "key points of contention and arguments regarding fuel labeling."
1. Lack of transparency and lack of public debate
The UNKCG said that the fuel marking procedure was not the subject of public debate, nor was it mentioned in the original draft of the Energy Law, nor in the basic Bill submitted to the Parliament.
"In the Draft Legal Solution, by introducing the proposed amendments, as many as 19, as one entire chapter, the complete form of the legal solution is changed, which did not undergo a public debate, nor was the industry informed about it. The Ministry of Energy did not provide the necessary and adequate explanations for the introduction of this procedure in the form of an Amendment," the letter from the UNKCG reads.
2. Unfounded claims about compliance with EU standards
The UNKCG said that the claim that fuel labeling is an obligation in the EU accession process is incorrect.
"No EU member state applies this type of fuel marking system, nor does such a requirement arise from EU directives. For example, neighboring Croatia has fuel marking (painting) exclusively for heating, agriculture, maritime commercial traffic due to lower excise duties, and it cannot be used as a fuel for road traffic, which is completely correct. The case is different with us, so the amount of excise duty is the same for all types of diesel, regardless of differences in application (agriculture, heating, etc.), which is devastating that agriculture does not have a reduced excise duty, except for biofuels, where the excise duty is lower, however, according to available data, no one has yet imported this derivative to the market," the UNKCG letter states.
3. Lack of analysis and explanation:
The UNKCG stated that there was a lack of analysis of the economic impact, costs to the economy and potential negative consequences.
"The planned additional revenues from the Government's Fiscal Strategy are roughly projected at around 5 million euros from marking, while the real cost of the marking procedure itself is at the expected level of around 7-10 million euros. While official indicators for 2024 show that excise duty collection increased by as much as 12,3% compared to 2023, which clearly indicates that there are no deviant phenomena, i.e. no illegal imports on the fuel market. The proposed marking method also entails new costs for the state administration, as well as numerous additional logistical costs for the economy, which is already overloaded with numerous levies and costs," the UNKCG letter states.
Negative impact on the economy
The UNKCG said that "the amendments ignore the negative consequences of fuel imports by road (importers find logistics significantly more difficult, costs increase, competitiveness decreases), which makes up a significant part of total imports, i.e. all companies that import fuel by road, except for one monopolistic company that has a monopoly over sea access to imports in the port of Bar."
"The proposed changes will increase import costs (transport, drivers, logistics, etc.) and thus significantly slow down the process of supplying consumers, creating unnecessary barriers and further endangering the vulnerable energy sector," the UNKCG said.
5. Lack of evidence of illegal trade
The UNKCG said that no concrete evidence, not even a single one, was presented about the alleged widespread illegal fuel trade by importers, due to the lack of alleged fuel smuggling.
"Therefore, the logical conclusion is that the alleged smuggling is being used as a cover - a fabricated reason for the unnecessary introduction of fuel marking. If there was any illegal trade in the previous period, it is possible that it was during the abolition of VAT and excise duty on fuels for highway construction, as well as for luxury foreign vessels at sea, which we clearly opposed, and pointed out that only such fuel should be placed under greater control and marked, and not fuels on which all duties have been paid in advance and before being put into circulation. It is absurd to think that someone would have a motive to smuggle fuels on which all duties have been paid upon import," said the UNKCG.
Fuel quality issue
According to the UNKCG, the quality of fuel in Montenegro is at a high level and in line with EU standards, which, they added, calls into question the claims of justification for marking in order to improve quality.
"There are no recorded violations of quality standards by importers, which can be easily verified by reviewing the records of the Customs Administration and other state authorities. As for the control and quality of fuel in Montenegro, the standard and quality of fuel are higher than the food we eat every day in relation to the appropriate standards," the letter states.
7. The issue of accredited laboratories:
The UNKCG said that there is only one accredited laboratory in Montenegro, in Podgorica, which could provide marking, which, they added, would create logistical chaos for importers by road, where it would be impossible to carry out marking at several different locations in different cities at the same time.
"This would create delays and slow down the entire process of putting fuel into circulation. The existence of only one accredited laboratory in our country would render public procurement procedures, the bid-determination commission meaningless, and would especially make it impossible to supervise marking control," they stated.
The UNKCG claim that "by proposing such amendments, the Government of Montenegro in a perfidious way wants to punish all companies that regularly and responsibly perform their work, and which contribute the most to the regular filling of the budget, all because of possible private interests of individuals or great ignorance, which would in this way enable someone to realize multi-million profit, and multi-million damage to the economy and citizens."
"In addition to these objections to the amendments to the proposed Energy Law, as responsible businessmen, we must also point out numerous business barriers that are essential for the survival and development of companies in this sector. The most prominent decades-old business barrier is the Regulation that determines the maximum retail prices of petroleum products, which has not changed in its essential form for more than 23 years, and which strictly fixes margins for this entire period, which is probably a precedent in the entire world. With numerous addresses, calls, urgencies, and evidence that we have submitted to the Government of Montenegro and the relevant ministry, we have clearly pointed out the necessity of changing the long-established parameters and costs that determine the maximum selling price of fuel in a price-limited market," the UNKCG said.
It also states that they have submitted and presented, with arguments and clear evidence, the official findings and opinion of a court expert in the financial field, who, according to the UNKCG, calculated that retail costs are significantly underestimated in relation to the costs recognized in the Regulation, and that therefore the survival of entrepreneurs in this field is questionable, let alone the addition of new barriers and costs, in the form of unnecessary fuel marking.
"Secondly, also as a very significant business barrier, we must highlight the unfavorable business environment in the petroleum products distribution market and the severely impaired competitiveness and abuse of the dominant position by the largest company (Jugopetrol AD), which is the only one with the monopoly privilege to import goods by sea, which we have repeatedly pointed out to various state bodies and the Agency for the Protection of Competition. For decades, we have been suffering from monopolistic behavior by this once state-owned company, which, due to such a dominant position, does not suit the development of other companies, as well as the strengthening of competitiveness in this market, and in what way would other branches of the economy of this country be strengthened and developed," said the UNKCG.
They called on Mugoša, because of all the above, to once again, with the utmost care and with a clear conscience, consider in detail all the starting assumptions and their objections, based on which the Government of Montenegro plans to introduce fuel marking.
"Based on all the above, we ask that these proposed amendments be rejected and that the proposer of the amendment be directed to open a dialogue and a public debate with business people in a renewed procedure, which is in accordance with the laws and practice of enacting laws in the EU, which we strive for. Also, as representatives of business people, we hereby express our readiness to participate in the debate before the Committee, in order to present the facts and objections to the proposed amendments in an argumentative and professional manner," said the UNKCG.
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